SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number: 0-22602
CONTINENTAL WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2909512
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
67 Walnut Avenue, Suite 103, Clark, N.J. 07066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 396-0018
Securities registered pursuant to Section 12(b) of the Act:
1) Common Stock, $.0006 par value
Title of Class
Securities registered pursuant to section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Revenue for the year ended December 31, 1995 were $47,815,275.
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on March 11, 1996: $120,524,257
Common Stock outstanding at March 11, 1996: 14,011,333 shares
Documents Incorporated by Reference
Docuemnts Form 10-KSB Reference
Portion of Continental Waste Industries, Inc. Part III, Items 10-13
Proxy Statement.
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PART I
ITEM 1. BUSINESS
General Development of Business
Continental Waste Industries, Inc. (the "Company") provides integrated solid
waste management services to residential, commercial and industrial customers
concentrated primarily in the eastern half of the United States. These services
include non-hazardous landfill disposal, solid waste collection, transfer
station operations and recycling programs. The Company conducts its operations
through 11 landfills, 8 waste collection operations, 13 transfer stations and 3
recycling facilities located in 10 states and in Costa Rica. Since its foudning
in 1988, the Company has experienced significant growth in revenues and
operating income due primarily to the acquisition of 29 solid waste service
businesses.
The Company's strategy is to have georgraphical diverse operations and
generally to pursue an integrated operational model whereby the Company seeks to
own or control both waste collection and disposal operations in each of the
local markets in which it competes. During 1995, approximately 56.1%of the waste
accepted by the Company's landfills was derived from Company collection
operations or delivered under contracts of more than one year in duration. The
Company's waste hauling and transfer operations currently dispose at Company
landfills more than 93.0% of the waste which they collect. This integration
strategy is intended to improve cost competiveness and mitigate operating risk
by reducing the dependence of the Company's landfills on waste streams from
unaffiliated haulers, and by reducing the exposure of the Company's collection
operations to disposal cost fluctuations at facilities owned by third parties.
The Company has grown rapidly both through acquisitions and through
internal expansion. The Company's recent acquisitions are taking the Company
into selected new markets in the eastern United States where it believes
attractive opportunities for growth and integration exist. In addition to its
base of operations in the Midwest and Mid-South, the Company is now serving
markets in South Carolina and central Florida and has announced potential
acquisitions in central New Jersey and upstate New York. Since January 1, 1995,
the Company has completed nine acquisitions representing approximately $15.0
million in estimated initial annual revenues.
The Company's future growth strategy is centered around landfill and collection
business acquisitions primarily within midsized regional markets in the United
States, as well as selected urban markets in Latin America. The Company pursues
a "hub and spoke" acquisition strategy involving the acquisition of landfills in
its target markets, as well as collection businesses and transfer stations which
control waste volumes that can be channeled into Company landfills. The Company
considers for acquisition both profitable and underperforming landfills and
collection businesses. The Company's internal growth objectives are centered
around a continuing landfill expansion program. The Company has approximately 34
million total tons of remaining disposal capacity permitted, or in various
stages of permitting, at its landfills. The Company also expects to achieve
internal growth by providing acquired businesses with access to capital,
internal landfill remediation and construction capabilities enchanced market
resources and credibility; expertise in regulatory and permitting matters; and
professional operating systems and financial controls. The Company seeks to
improve operating efficiencies and profitability at acquired businesses through
densifying collection routes, rationalizing operating and administrative costs,
and selectively increasing prices.
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BUSINESS
General
The Company provides integrated solid waste management services to
residential, commercial and industrial customers concentrated primarily in the
eastern half of the United States. These services include non-hazardouse
landfill disposal, solid waste collection, transfer station operations and
recycling programs. The Company conducts its operations through 11 landfills, 8
waste collection operations, 13 transfer stations and 3 recycling facilities
located in 10 states and in Costa Rica. Since its founding in 1988, the Company
has experienced significant growth in revenues and operating income, due
primarily to the acquisition of 29 solid waste service businesses.
Industry Overview
According to the Environmental Business Journal, an industry trade
publication, the U.S. non-hazardous solid waste collection and disposal industry
generated estimated revenues of approximately $31 billion in 1994. Industry
revenues are derived primarily from collection and hauling services, disposal
services (including landfilling and incineration) and processing/recycling
services. Landfilling is presently the most common means of, and the Company
believes it to be the lowest cost of, disposing municipal solid waste ("MSW"),
which consists primarily of refuse and garbage from residential, commercial and
industrial sources. In 1993, an estimated 62% of the MSW generated in the U.S.
was managed through landfill disposal, 22% was recycled (including composting)
and 16% was incinerated.
In recent years, the solid waste collection and disposal industry has
undergone a period of significant consolidation and integration. The Company
believes that this consolidation and integration has been caused primarily by
three factors: (i) increasing stringent environmental regulations and
enforcement resulting in increased capital requirements; (ii) the inability of
many smaller operators to achieve the economies of scale necessary to compete
effectively with large integrated solid waste services providers; and (iii) the
evolution of an industry competitive model which emphasizes providing both
collection and disposal/recycling capabilities. Despite the considerable
consolidation and integration that has occurred in the solid waste industry in
recent years, the Company believes the industry remains primarily regional in
nature and highly fragmented. The 'Environmental Business Journal' estimates
that one-third of industry revenue is accounted for by approximately 6,000
private, predominantely small, collection and disposal businesses; one-third by
municipal governments that provide collection and disposal services; and the
remainder by the publicly-traded solid waste companies.
As a result of the Subtitle D Regulations, which generally became effective
in October, 1993, the technical managerial and financial resources needed by
most companies to operate a solid waste business have grown significantly. The
increase in regulation has required, and will continue to require, commensurate
increases in technical sophistication and capital expenditures to meet new
standards for the construction and operation of landfills, transfer stations and
other solid waste facilities. As a result, the Company believes that many
private landfills are being sold to larger, better capitalized companies or have
reduced their tipping fees in order to attract greater waste volume prior to
their closure in anticipation of the full implementation of the Subtitle D
Regulations. In addition, many municipalities are opting to privatize their
collection and disposal services, due primarily to the ability of the private
sector to perform these operations more efficiently and economically.
Another factor expected to affect the solid waste industry is the
increasing mandate to separate and recycle selected commodities found in the
solid waste stream. This mandate is expected to reduce the volume of waste
disposed in landfills, but may provide additional revenues for collection and
processing operations. The ability of industry participants to engage profitably
in recycling operations will depend in large part on the further development of
markets for recycled products and the market prices available for recyclable
materials.
Growth Strategy
The Company's growth strategy is centered around landfill and
collection business acquisitions and a landfill capacity expansion program
primarily within mid-sized regional markets, as well as selected Latin American
markets.
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The Company pursues a "hub and spoke" acquisition strategy, involving the
acquisition of landfills in its target markets, as well as collection operations
around Company-owned landfills. The Company targets both profitable and under
performing landfills and collection businesses. The Company will also consider
acquiring recycling businesses in markets where these businesses can complement
the Company's solid waste management services. The Company believes it enhances
the productivity of acquired businesses through its expertise in regulatory and
permitting matters and through its internal landfill remediation and
construction capabilities. The Company also seeks to optimize the performance of
acquired businesses and existing disposal capacity by securing a captive waste
stream for each landfill site through an integrated network of collection
companies and transfer stations; through long-term disposal contracts; through
enhanced marketing initiatives; through the public contract bidding process;
through acquisitions of customer lists; and through other programs that reduce
dependence on waste volumes from unaffiliated haulers. The Company seeks to
improve operating efficiencies and profitability through densifying collection
routes, rationalizing operating and administrative costs, and selectively
increasing prices. The key elements of the Company's operating strategy include:
Vertical Integration. The Company seeks to maximize its profitability
by clustering its collection operations around a Company-owned landfill, thereby
eliminating the disposal costs otherwise paid to third party disposal
facilities. As a result, Company collection operators are less sensitive to
disposal price fluctuations at third party landfills and the Company's landfills
capture greater waste volumes.
Acquisitions.The Company actively seeks to acquire companies or assets
within its existing regional markets and, where appropriate, in new markets. The
Company believes it can identify disposal and collection operations for
acquisitions which provide attractive returns. The Company targets independent
landfill operators with strong local presence and/or customer lists and routes
and collection companies whose waste streams can be combined with those of the
Company and routed efficiently to Company-owned or operated landfills. See
"Acquisitions" below.
Market Prominence. The Company focuses its collection and transfer
operations in those markets where it has sufficient permitted landfill capacity
and can acquire or develop additional transfer stations and collection
operations which will provide the Company with significant market share. The
Company believes that it is currently one of the leading competitors in
virtually all of its markets, with the exception of the Chicago metropolitan
market.
Latin American Expansion. Heightened environmental awareness in many
Latin American countries has convinced the Company that significant expansion
opportunities exist in the Latin American non-hazardous waste service market.
The Company's strategy is targeted at governmental waste disposal and collection
services which are being privatized under long-term operating and management
contracts in large metropolitan markets in politically stable countries. In
areas where it provides long-term municipal contract services, the Company will
also pursue development of commercial and industrial collection and disposal
services to achieve maximum operating efficiencies. The Company's goal is to
enter foreign markets primarily through obtaining privatization contracts and
secondarily through joint ventures with local entities or by acquiring existing
waste collection and/or disposal businesses. See "--Latin American Operations"
below.
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Acquisitions
The Company completed five acquisitions in 1993, six acquisitions in 1994,
seven acquisitions in 1995, and two thus far in 1996 and is continually
evaluating additional prospects. The Company seeks to acquire landfills with
significant remaining permitted and/or potential disposal capacity and
collection operations that provide a steady stream of waste to the Company's
landfills or transfer facilities. There is no assurance that the Company will be
successful in locating or completing any additional acquisitions. The Company is
presently in preliminary discussions with a number of parties regarding the
acquisition of solid waste businesses or assets. These acquisition prospects
vary greatly in scale and character.
The Company has an experienced acquisition team, comprised of
operating, environmental, engineering, legal, financial and accounting
personnel, engaged in identifying and evaluating acquisition opportunities and
implementing the Company's acquisition program. The Company has established
review procedures for acquisition candidates, including operational,
environmental, engineering, legal and financial reviews. The environmental
review includes, where appropriate, investigation of geologic, hydrogeologic and
other site conditions, past and current operations (including types of waste
deposited), design and construction records, permits, regulatory compliance
history, regulatory agency records and analyses of soil, groundwater and air
samples and monitoring results.
In connection with its acquisitions, the Company sometimes utilizes
contingency payments that are based on the purchased entity achieving specific
development or permitting targets and/or royalties that are dependent upon
future revenues or volumes of waste. In establishing the purchase price for a
landfill, the Company considers the extent to which capital expenditures may be
required in order to comply with Subtitle D Regulations or other regulations.
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The table below provides a summary description of the Company's 29 completed
acquisitions:
<TABLE>
<CAPTION>
Operation Location Business Date Acquired
- ----------------------------------- --------------- ------------------ --------------
<S> <C> <C> <C>
1. Prichard Prichard, WV Landfill August 1989
2. Barker Brothers Waste Union City, TN Collection/Recycling January 1991
Northwest Tennessee Union City, TN Landfill January 1991
3. Homer Refuse Dyer County, TN Collection Route April 1991
4. Bluegrass Recycling & Transfer Barlow, KY Collection/Transfer August 1991
5. P.D.Q. Henry County, TN Collection Company March 1992
6. Commercial Waste Mayfield, KY Collection/Transfer April 1992
Mayfield Cleanup Mayfield, KY Collection Route April 1992
7. Forest Lawn Three Oaks, MI Landfill May 1992
8. Jones Waste Services Southeastern MO Collection Company August 1992
9. CWI of Illinois Mt. Vernon, IL Transfer Stations October 1992
Marion, IL
10. Southern Illinois Regional DeSoto, IL Landfill January 1993
11. CWI of Missouri Southeastern MO Collection/Transfer July 1993
12. Beardsley Trash Southeastern MO Collection Route September 1993
13. Torrez Sanitation Southeastern MO Collection Route October 1993
14. Allstate Waste Southeastern MO Collection Route December 1993
15. SEMO Waste Southeastern MO Collection Route January 1994
16. Gila Bend Regional Gila Bend, AZ Development Project March 1994
17. CWI of Illinois Sparta, IL Transfer Station April 1994
18. United Refuse Fort Wayne, IN Landfill July 1994
Jamax Corporation Terre Haute, IN Collection Company July 1994
Yaw Hill Terre Haute, IN Landfill July 1994
Springfield Environmental Mt. Vernon, IN Construction and July 1994
Demolition Landfill
19. WPP Continental Alajuela, Costa Rica Collection August 1994
Los Mangos Alajuela, Costa Rica Landfill August 1994
20. Randolph County Landfill Randolph Co., IL Collection Company October 1994
& Salvage Co.
21. Larry's Disposal Brazil, IN Collection/Recycling April 1995
22. ASCO Sanitation Corinth, MS Collection Company May 1995
23. Terre Haute Recycling Terre Haute, IN Recycling July 1995
24. Gilliam Sanitation Southeastern MO Collection/Recycling July 1995
Gilliam Transfer Southeastern MO Transfer Station July 1995
25. Anderson Refuse Anderson, IN Collection Company August 1995
MV Dulworth Anderson, IN Transfer Station August 1995
26. Procesa Continental (1) Mexico City, Mexico Collection Company August 1995
Landfill Engineering
27. Northeast Sanitary Landfill Eastover, SC Landfill October 1995
28. Holland Excavating Co. DeLand, FL Construction and March 1996
Demolition Landfill
29. Schofield Winter Haven, FL Construction and March 1996
Demolition Landfill
</TABLE>
(1) Sold in March 1996.
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<PAGE>
Revenue Breakdown
The following table sets forth the amount and percentage of the
Company's consolidated revenue derived from its landfill, waste collection and
waste brokerage activities for each year in the five year period ended December
31, 1995.
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993 1992 1991
----------- ------------ ------------ ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Landfill
operations(a) $25,941 54.3% $17,790 61.9% $ 8,918 55.0% $ 6,448 48.3% $2,224 26.2%
Waste
collection(b) 21,874 45.7 10,938 38.1 6,185 38.2 4,434 33.2 1,888 22.2
Waste brokerage -- -- -- -- 1,101 6.8 2,466 18.5 4,376 51.6
------- ----- ------- ----- ------- ----- ------- ----- ----- ----
Total revenue . $47,815 100.0% $28,728 100.0% $16,204 100.0% $13,348 100.0% $8,488 100.0%
------- ----- ------- ------ ------- ------ ------- ------ ------ -----
</TABLE>
(a) Represents fees charged to dispose of waste at the Company's landfills
(including fees charged to the Company's collection operations).
(b) Includes revenue attributable to the Company's transfer stations and
recycling programs, but excludes the portion of collection revenue attributable
to disposal charges for waste collected by the Company and disposed of at the
Company's landfills.
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Landfill Operations
Landfill operations accounted for 54.3%of the Company's total revenue for
the year ended December 31, 1995. The Company currently owns and operates eleven
solid waste landfills permitted to receive non-hazardous waste and one landfill
operation permitted for construction and demolition dry waste. The Company has
approximately 899 acres permitted or in various stages of permitting approval.
This represents potential additional disposal capacity of at least 34 million
tons of waste. The Company accepted approximately 1.7 million tons of solid
waste at its operating landfills for the year ended December 31, 1995. The waste
streams that are permitted to be received at each of these landfills include MSW
and certain special wastes, some of the most common of which are asbestos,
solidified sludge, and petroleum-contaminated soils. The tipping fee associated
with these waste types is typically higher than those associated with MSW. The
types of special waste accepted at each site and the procedure for permitting at
each landfill varies based on the specific state regulations for special waste.
The Company has committed substantial resources to design and construct
each of its landfills and expand existing landfills to substantially meet all
applicable environmental regulations, including the new Subtitle D Regulations.
The Company believes that the increased capital commitment necessary to comply
with these regulations will cause many smaller independent landfill operators
(including some municipalities) to either: (i) raise prices to fund the capital
requirements; (ii) eventually cease operations; or (iii) sell their operations.
For the year ended December 31, 1995, approximately 56.1% of the waste
disposed of at the Company's landfills was generated by the Company's collection
and transfer station operations or delivered by customers that had a contract of
more than one year in duration.
The table below provides additional information pertaining to the
eleven landfills that the Company owns and operates:
Total Acreage
Landfill Location Owned
- -------------------------------------------------------------------
Forest Lawn Three Oaks, MI 141
Victory Environmental Terre Haute, IN 461
United Refuse Fort Wayne, IN 270
Southern Illinois Regional DeSoto, IL 147
Northwest Tennessee Union City, TN 386
Prichard Prichard, WV 339
Springfield Environmental Mt. Vernon, IN 54
Los Mangos Alajuela, Costa Rica 41
Northeast Sanitary Eastover, SC 73
Holland Excavating DeLand, FL 31
Schofield Winter Haven, FL 88
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Landfill Operations. A non-hazardous waste landfill is a facility
located on suitable land and operated under a permit according to strict
governmental regulations. A landfill site must have certain geological and
hydrogeological properties and design features that restrict the possibility of
environmental pollution. The Company has designed and implemented its own
technical standards and operating procedures designed to optimize airspace
utilization and to comply with the various rules and regulations regarding
landfills.
The Company has a standard procedure for waste disposal at each
landfill that it operates. Following the arrival of a collection vehicle, a
gatekeeper and the driver complete and sign an account record that indicates the
tipping fee, based on the weight or volume of waste to be disposed at the site,
and the method of payment.
Once the customer account has been processed, the gatekeeper directs
the collection vehicle driver to the "working face" of the active cell of the
landfill. Landfill employees visually inspect the waste for obvious indications
of the presence of hazardous or other unacceptable materials. Assuming no
hazardous or unacceptable materials are observed, landfill employees use heavy
equipment to spread in layers and to compact the waste in order to contain the
waste within the smallest practical area. As the landfill receives more waste
throughout the day, this process is repeated. At the end of each working day,
landfill employees spread dirt or other acceptable cover material over the waste
to comply with applicable permits. Successive layers of waste and cover material
are then placed in the cell until the cell has been filled to the permitted
elevation. At such time, a closure cap of impermeable clay or synthetic material
is constructed over the area. A network of contiguous cells is developed until
the permitted acreage is consumed.
The Company's landfills are subject to periodic unannounced inspection
by state and local authorities. In addition, to the extent they are present,
leachate collection, methane gas and groundwater monitoring systems are
inspected by the authorities which also review the daily operations log book,
waste compaction and coverage, and the dirt, dust and waste on the site and
surrounding roadways. The Company works with authorities to remedy any
deficiencies found during an inspection. If serious violations are found or if
deficiencies are not remedied, the Company may incur fines or be required to
close the site. Although the failure to comply with such regulations may result
in the imposition of fines on the Company or in the denial or revocation of
necessary permits or licenses, in the opinion of management, based on all
available information, the Company will not be subject to material liability as
a result of any non-compliance. The Company believes its operations comply in
all material respects with all existing environmental regulations in effect in
the jurisdictions in which the Company operates.
Suitable properties for landfill facilities have become increasingly
difficult to obtain because of land scarcity, local resident opposition and
expanding governmental regulation. The scarcity of sites and increased volume of
waste have resulted in intensive use of existing municipal solid waste
landfills. The Company's goal of maintaining at least ten years of airspace in
its disposal operation is and will continue to be materially dependent on its
ability to purchase, lease or obtain operating rights for additional acreage and
to obtain the necessary permits from regulatory authorities to operate such
acreage. Although the Company has taken action to acquire suitable unpermitted
acreage, there can be no assurance that additional acreage can be acquired, that
any acquired acreage can be permitted or that existing facilities can continue
to be operated. Management believes that the facilities currently available to
the Company are sufficient to service the Company's current operations for the
foreseeable future. The Company intends to seek new permits or modifications to
existing permits when needed for additional landfill capacity.
Permitting and Construction. The Company intends to continue to pursue
the process of obtaining permits for new disposal facilities and for expansion
of existing facilities in various states. The permitting process is expensive,
and normally takes two to three years to complete. In evaluating a site for
disposal facility development, the Company reviews numerous factors including
the available acreage, area demographics and estimated demand for a disposal
facility, local zoning regulations, the proximity of the site to large
residential areas and the accessibility of the site via major thoroughfares.
The engineering plan and the environmental study of a site are key
components of the application to permit a disposal facility. Disposal facility
engineering typically includes design of the overall site and buffer areas, the
access routes to the site and roads within the site, the receiving areas, the
operating cells, the leachate collection and treatment systems, the siting and
design of groundwater monitoring wells and the methane gas monitoring system and
the development of comprehensive closure and post-closure plans.
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Although the permitting process varies from state to state, the
following summary (which is not intended to be a statement of the actual law of
any one state) sets forth the typical steps in the permitting process.
Local Approval. In most instances, some form of local zoning
or planning approval is required to permit a disposal facility. This
process usually requires satisfying city or county zoning regulations
through a separate application process to a zoning or planning board.
Local ordinances normally do not permit a disposal facility within any
zone without obtaining a "special use permit" or "special exception" to
the zoning ordinance. An applicant generally files various reports and
drawings which describe the project and public hearings are held. In
most instances, significant, organized community opposition will be
present and many local zoning authorities will consider community
opposition in deciding whether to grant a zoning permit. Local zoning
authorities may take steps designed to prohibit the development of new
disposal facilities. Generally, both the applicant and any opposition
have the right to appeal any decision. Although not always required,
the local zoning approval process is usually completed prior to
applying for a state permit.
State Approval. Most states require an applicant to prove that
a potential disposal facility will meet or exceed state regulations
regarding disposal facility siting and design. States generally
consider the technical merits of an application, particularly such
matters as geology, hydrogeology, ecology, archeology, soil
characteristics, groundwater flow, surface drainage, the presence of,
or location relative to, airports, wetlands and local water supply
systems and the adequacy of local road systems.
Engineering consultants design the project within the
requirements set by the state. This design is reviewed by state
officials, comments are issued and revisions are made by the applicant.
Once the design is approved, public notice is given and a hearing held.
Depending on the issues presented at the hearing, an applicant may wait
nine months or more before receiving a decision. Both the applicant and
any opposition generally have the right to appeal the decision.
Landfill Development Project
The Company presently pursues new landfill development on a limited basis
and does not intend to devote substantial resources to such development.
Gila Bend, Arizona (southwestern Arizona). In March 1994, the Company
purchased from WPP Services, Inc. a landfill development project located in Gila
Bend, Arizona. This development project currently involves, among other things,
various geological studies on the site and work on permitting portions of the
site. In connection with this project, the Company has obtained: (i) an option
to purchase approximately 1,200 acres of land to construct a solid waste
landfill; (ii) an annexation agreement for the option land with the City of Gila
Bend; and (iii) a Host Community Agreement with the City of Gila Bend. Upon
final permitting of the landfill project, the Company has a put option to sell
the project to USA Waste Services, Inc. ("USA") for the sum of $5.0 million plus
reimbursement for land purchase costs.
Waste Collection
The Company provides solid waste collection services to approximately
185,000 residential and 15,000 commercial and industrial customers. With the
exception of customers in Mississippi, all of these customers are served by
Company-owned landfills into which virtually all Company collected waste is
channeled. Collection services accounted for 45.7% of the Company's total
revenue for the year ended December 31, 1995.
The Company's collection operations primarily serve small metropolitan
and rural markets and have grown through acquiring and integrating new
collection routes. The Company generally purchases and continues to operate
under the tradenames of the acquired businesses. Through marketing of the local
name, additional market penetration, enhanced service and price increases, the
Company has been able to expand the revenue base of acquired operations.
The regional general managers are given autonomy, within corporate policy
guidelines, to encourage development of the local operations. The Company's
centralized management information systems provide the regional managers more
time to devote to marketing and operating responsibilities. Regional managers
are responsible for marketing local services, maintaining public relations,
supervising the local sales force, maintaining equipment in accordance with
planned maintenance schedules, hiring and training the hourly labor force and
implementing the Company's safety programs and other operating procedures.
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<PAGE>
Commercial and Industrial Services and Transfer Stations
Revenue from the Company's commercial and industrial collection services
and transfer stations represented 57.9% of the collection service revenue for
the year ended December 31, 1995. The Company's commercial customers generally
utilize containers, ranging in size from one to eight cubic yards, which are
provided to the customer by the Company as part of its service contract.
Commercial collection enables the Company to increase revenue and improve
equipment utilization within an existing market area. Commercial services are
typically provided under contracts with terms of one to three years. Fees are
determined by such factors as collection frequency and container volume
capacity.
To service industrial customers, the Company provides a 20 to 40 cubic
yard roll-off waste container for placement at the customer's site and periodic
transport to a disposal facility. These services are performed either according
to an agreed schedule or upon customer request, and fees are negotiated on an
individual contract basis. These services may be provided on a temporary basis,
such as at a construction site. Fees charged for these services are based upon
frequency of collection, volume or weight of the waste and the distance traveled
by the Company's truck. In addition, the Company rents waste compactors to large
industrial customers as part of the Company's roll-off container service for a
fixed monthly fee. To date, no single industrial customer has provided a
material amount of the Company's collection service revenue. The Company has
implemented an aggressive marketing program in an effort to obtain additional
contracts for the collection and disposal of industrial, non-hazardous waste
streams.
At transfer stations, solid waste collected from individual customers
in Company-owned vehicles or waste delivered by unaffiliated haulers is unloaded
and compacted and reloaded to larger Company-owned vehicles and transported,
primarily to Company-owned landfills. The Company operates transfer stations in
Marion, Mt. Vernon and Sparta, Illinois; Anderson, Indiana; Potosi and Ste.
Genevieve, Missouri; Paris, Covington, Union City and McKenzie, Tennessee; and
Mayfield, Barlow and Paducah, Kentucky. The Company has also permitted a
transfer station in Jackson, Missouri and has also received local approval for a
transfer station in Sandoval, Illinois.
Residential Services
The Company's residential collection services represented 35.6% of
collection services revenue for the year ended December 31, 1995. Residential
collection services are typically provided either on a subscription basis, in
which the individual household contracts directly with the Company, or on a
county or municipal contract basis, in which the Company contracts with the
county or municipality to collect from all residences within a specified area.
The Company's management believes subscription residential service operations
generally require less capital investment than municipal contracts but more
management and administrative resources. These administrative costs include the
daily production of route sheets, the direct billing of customers and the
maintenance of bad debt collection and tracking systems.
A large residential subscription base allows the Company to absorb the
costs associated with the commencement or loss of a municipal residential
collection contract in a market where the Company has a subscription customer
base. Municipal contracts provide consistent cash flow during the contract
period and require less administration because individual billing and debt
collection systems are not necessary and because all residents within the area
are served. The Company is currently a party to 58 governmental contracts,
ranging from less than $1,000 to over $150,000 of collection service revenue
per month. These contracts are typically competitively bid and have initial
terms of one to five years.
Recycling
In some of its collection markets, the Company also operates recycling
facilities or other recycling operations. The Company's three municipal
recycling facilities are located in Union City, Tennessee; Festus, Missouri; and
Terre Haute, Indiana. The Company also composts and recycles certain waste
products at one of its Florida facilities. The material recovered for recycling
by the municipal recycling facilities include paper, cardboard, plastic,
aluminum, ferrous metals and wood. In 1995, the Company realized revenues of
approximately $.8 million from the sale of recyclable commodities.
-11-
<PAGE>
Latin American Operations
The Company owns and operates the only private non-hazardous waste landfill
operation in Costa Rica and a related waste collection operation. The Company
holds municipal contracts to serve residential and commercial customers in San
Jose, Alajuela and Heredia, the first, second and sixth largest cities in Costa
Rica, a nation of three million persons. The Company's expansion plans in Costa
Rica include: expanding commercial and industrial container service, which are
presently virtually non-existent; the siting, constructing and operating of
transfer stations to replace municipally-operated open dumps; and the public
bidding for and negotiating to secure landfill operations and management
agreements with governmental units. The Company holds twelve municipal contracts
in Costa Rica to provide collection and disposal services to approximately
80,000 households and commercial customers.
The Company anticipates that its Costa Rican operations can achieve
significant growth through a carefully coordinated program of participation in
the government's efforts to privatize municipal solid waste collection, transfer
and disposal services for both residential and commercial customers. The
Company's goal is to enter into selected Latin American urban markets primarily
through obtaining privatization contracts and secondarily through joint ventures
with local entities or by acquiring existing waste collection and/or disposal
businesses. The Company believes that economic development in many Latin
American countries and the trend towards privatizing waste collection services
and economic development in many Latin American countries has heightened public
awareness of environmental matters and alerted governments to the need for
improvement in sanitary services and pollution control.
Most Latin American countries have not enacted laws regulating the
environment to the same extent as those presently operative in the United
States. Further, while some Latin American countries have promulgated
regulations for operating and permitting existing and new solid waste disposal
facilities, the government infrastructure for the enforcement of such new
regulations is often missing or ineffective. Therefore, many Latin American
cities still operate open dumps or below-standard disposal sites next to or near
environmentally-sensitive areas, such as rivers, aquifers or residential
development areas.
The Company believes it is likely, however, that many countries,
including Costa Rica, will increase both environmental regulation and
enforcement effectiveness over the next several years, and that this trend will
increase the need for proven providers of waste management services who
understand and can comply with such regulations. Landfills conforming to such
regulations will need to be constructed and permitted, and collection operations
that meet governmental standards will be needed to service commercial,
industrial and residential customers.
The Company presently anticipates that, based upon its largely in-house
expertise and experience in developing, permitting and operating landfills and
collection companies in the United States, this expected period of growing
regulation and enforcement will provide significant opportunities for waste
management companies that have acquired footholds in Latin America to expand
their operations, as the market for such qualified services increases.
Marketing
The responsibility and control over marketing at each of the Company's
domestic landfill regions rests primarily with each regional manager. Each
regional manager develops and implements marketing and sales strategies in
direct coordination with senior management. Depending upon the size of the
region and its customer mix, each regional manager is assisted in marketing by
local Company sales representatives. Larger commercial accounts are contacted on
a periodic basis depending on their specific needs. Company salespersons call on
prospective customers in a specified geographic territory, usually within an
area where the Company's radio or print media advertising provides coverage.
Customer awareness of the Company and its services is enhanced by support of
civic groups, sponsoring local sports teams, and participation in community
activities. Municipal contract bids are normally prepared in draft form by the
regional manager and then compared to contract estimates developed at
headquarters to ensure that separate and independent viewpoints are combined to
achieve the most responsive public contract bid possible.
-12-
<PAGE>
Competition
The solid waste collection and disposal industry is highly competitive
and requires substantial labor and capital resources. The Company competes with
large national waste management companies as well as numerous local and regional
companies of varying sizes and financial resources, with competition varying by
locality and by type of service rendered. The national waste management
companies and certain large regional waste management companies have
significantly greater resources than the Company. The Company also competes with
those counties and municipalities that maintain their own waste collection or
disposal operations. These municipalities may have financial advantages due to
their access to tax revenues and tax-exempt financing.
The Company competes primarily on the basis of price and service. The
Company believes that pricing in many of its markets is at a relatively low
level in comparison to other regions in the United States.
The Company may find itself in competition with operators which are
contemplating landfill operations at sites for which the permitting process has
not yet begun. The Company is not able to predict where permitting initiatives
for competing landfills may be successful. Competition in the disposal industry
may also be affected by the increasing national emphasis on recycling and other
waste reduction programs, which may reduce the volume of waste deposited in
landfills.
The Company provides a portion of its residential collection services
under county and municipal contracts. As is generally the case in the industry,
these contracts are subject to periodic competitive bidding. There is no
assurance that the Company will be the successful bidder in the future and will
be able to retain these contracts.
Liability Insurance and Bonding
The Company does not carry, and does not expect to carry for the
foreseeable future, significant insurance coverage for environmental liability
because the Company believes that the cost for such insurance is not economical.
The Company carries a broad range of insurance coverage for the protection of
its assets and operations, including workers compensation, automobile, general
liability, fire and contractor's equipment. The Company does not carry insurance
which would reimburse it for any loss of earnings incurred as a result of an
interruption of its operations.
The Company is required, from time to time, to provide financial
assurance in connection with contracts or projects with governmental entities
and, to a lesser extent, private sector customers. In addition to bid
performance bond requirements, existing or proposed legislation in various
jurisdictions requires or will require the posting of substantial bonds or the
provision of other financial assurances concerning the closure, post-closure
monitoring and corrective activities of certain waste disposal facilities. To
date, the Company has satisfied these financial responsibility requirements by
posting deposits of cash and/or securities or bank letters of credit. The
Company expects that it will be able to satisfy any additional bonding
requirements through a combination of cash deposits, securities, and bank
letters of credit. If the Company were unable to obtain surety bonds or letters
of credit in sufficient amounts or at reasonable rates, it might be precluded
from entering into additional municipal collection contracts or obtaining or
retaining landfill operating permits.
-13-
<PAGE>
Environmental Regulation Affecting the Company and Its Operations
The Company is subject to extensive and evolving environmental laws and
regulations. These regulations are administered by the EPA and various other
federal, state and local environmental, zoning, health and safety agencies, many
of which periodically inspect the Company's operations to monitor compliance
with these laws and regulations.
The Company's operation of landfills, transfer stations, recycling
centers and other waste-related facilities subjects it to operational,
monitoring, site maintenance, closure and post-closure obligations which are
complex and costly. Governmental authorities have the power to enforce these
obligations and to obtain injunctions, revoke operating permits, require
corrective actions or impose civil or criminal penalties in case of violations.
In addition, almost all of the Company's operating facilities are required to
obtain state, local and federal permits in order to operate. Particularly in
connection with the Company's existing landfills, it is often necessary to
expend considerable time, effort and money to maintain existing permits and to
obtain new permits required to increase the capacity of these landfills.
The Company's businesses are significantly affected by federal, state,
and local environmental laws and corresponding state laws and related
regulations and enforcement practices. Because the business in which the Company
is engaged is intrinsically connected with the protection of the environment and
the potential discharge of materials into the environment, a material portion of
the Company's expenditures are, directly or indirectly, related to compliance
with environmental laws.
The principal regulations applicable to the Company's operations
include the following:
The Resource Conservation and Recovery Act. RCRA is a federal statute that
regulates the generation, treatment, storage, handling, transportation and
disposal of hazardous and non-hazardous wastes and requires states to develop
programs to insure the safe disposal of solid wastes. On October 9, 1991, the
EPA promulgated Solid Waste Disposal Facility Criteria for Landfills under the
Subtitle D Regulations. The Subtitle D Regulations, which were first proposed in
August 1988, became effective in October 1993, and include location
restrictions, facility design standards, operating criteria, closure and
post-closure requirements, financial assurance requirements, groundwater
remediation standards and corrective action requirements. The Subtitle D
Regulations require, with limited exceptions, that new landfill units meet
stringent liner criteria designed to keep leachate out of groundwater and have
extensive collection systems to carry away leachate for treatment prior to
disposal. Groundwater wells must also be installed at virtually all landfills to
monitor groundwater quality and, indirectly, the leachate collection system
operation. The Subtitle D Regulations also require, where threshold test levels
are present, that methane gas generated at landfills be controlled in a manner
that will protect human health and the environment. The Subtitle D Regulations
apply to all solid waste landfill cells that received waste after October 9,
1991, and, with limited exceptions, all landfills were required to meet these
requirements by October 9, 1993, except that the financial assurance
requirements do not become effective until April 9, 1997, and groundwater
monitoring requirements are phased in over a period ending October 9, 1996.
Landfills that are not in compliance with the Subtitle D Regulations on the
applicable date of implementation must close.
State by state implementation schedules for the Subtitle D Regulations
vary. In some states, various state-level provisions allow landfills which do
not comply with the Subtitle D Regulations to remain operating for a limited
period of time. The failure of a state or other regulatory agency to enforce
these regulations vigorously or consistently may give an advantage to the
Company's competitors to the extent that competing facilities do not comply with
Subtitle D Regulations.
-14-
<PAGE>
The Comprehensive Environmental Response, Compensation, and Liability
Act of 1980. CERCLA established a regulatory and remedial program intended to
provide for the investigation and cleanup of facilities from which there has
been, or is threatened, a release of any hazardous substance into the
environment. CERCLA's primary mechanism for remedying such problems is to impose
strict joint and several liability for cleanup of facilities on current owners
and operators of the site, former owners and operators of the site at the time
of the disposal of the hazardous substances, as well as the generators of the
hazardous substances and the transporters who arranged for disposal or
transportation of the hazardous substances. The costs of CERCLA investigation
and cleanup can be very substantial. Liability under CERCLA does not depend upon
the existence or disposal of "hazardous waste" but can also be founded upon the
existence of even very small amounts of the numerous "hazardous substances"
listed by the EPA, many of which can be found in household waste. If the Company
were found to be a responsible party for a CERCLA cleanup, either at one of the
Company's owned or operated facilities, or at a site where waste transported by
the Company has been stored or disposed of, the enforcing agency could hold the
Company completely responsible for all investigative and remedial costs even if
others may also be liable. CERCLA also authorizes the imposition of a lien in
favor of the United States upon all real property subject to or affected by a
remedial action for all costs even if others may also be liable. The Company's
ability to obtain reimbursement from others for their allocable share of such
costs would be limited by the Company's ability to find other responsible
parties and prove the extent of their responsibility and by the financial
resources of such other parties. In the past, legislation has been introduced in
Congress to limit the liability of municipalities and others under CERCLA as
generators and transporters of municipal solid waste. If such legislation were
to pass, it would limit the Company's ability to seek full contribution from
municipalities for CERCLA cleanup costs even if the hazardous substances that
were released and caused the need for cleanup at one of the Company's facilities
were generated by or transported to the facility by a municipality. Other
federal legislation proposing to amend CERCLA may also be considered by Congress
this fall. Although the various proposed bills differ in their approach, they
all generally relax CERCLA's liability scheme for entities that cannot be proven
to have actively contributed to contamination of a property. This legislation
could have a material adverse effect on the Company's business and financial
condition.
The Federal Water Pollution Control Act (the "Clean Water Act"). The
Clean Water Act establishes rules regulating the discharge of pollutants into
groundwater, streams, or other surface waters from a variety of sources,
including solid waste disposal sites. If wastewater from a landfill is to be
discharged, the Clean Water Act requires that the landfill apply for and obtain
discharge permits, conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in those discharges. The permit
program has recently been expanded to include storm water discharges from
landfills and other disposal sites that receive, or in the past received,
industrial waste. In addition, if development may alter or affect "wetlands," a
permit may have to be obtained before development may commence. This requirement
is likely to affect the construction or expansion of many solid waste disposal
sites. The Clean Water Act provides civil, criminal and administrative penalties
for violations of its provisions.
Continued funding for implementation of RCRA, CERCLA, and the Clean
Water Act may be acted upon by Congress this year. It is possible that each of
these laws may be changed in ways that may have a material adverse effect on the
Company's business and financial condition.
The Clean Air Act. The Clean Air Act provides for regulation, through
state implementation of federal requirements, of the emission of air pollutants
from certain landfills based upon the date of the landfill construction and
volume per year of emissions of regulated pollutants. The EPA has proposed new
source performance standards regulating air emissions of certain regulated
pollutants (methane and non-methane organic compounds) from municipal solid
waste landfills. The EPA may also issue regulations controlling the emissions of
particular regulated air pollutants from municipal solid waste landfills.
Landfills located in areas with air pollution problems may be subject to even
more extensive air pollution controls and emission limitations. In addition, the
EPA has issued standards regulating the disposal of asbestos-containing
materials.
-15-
<PAGE>
State and Local Regulation. Each state in which the Company now operates,
or may operate in the future has laws and regulations governing the generation,
storage, treatment, handling, transportation and disposal of solid and hazardous
waste, water and air pollution and, in most cases, the siting, design,
operation, maintenance, closure and post-closure maintenance of landfills and
transfer stations. In addition, many states have adopted "Superfund" statutes
comparable to, and in some cases more stringent than, CERCLA. These statutes
impose requirements for investigation and cleanup of contaminated sites and
liability for costs and damages associated with such sites, and in some cases
provide for the imposition of liens on property owned by responsible parties.
Furthermore, many counties and municipalities also have ordinances, local laws
and regulations affecting Company operations. These include zoning and health
measures that limit solid waste management activities to specified sites or
activities, flow control provisions that direct the delivery of solid wastes to
specific facilities, laws that grant rights to establish franchises for
collection services and then put out for bid the right to provide collection
services, and bans or other restrictions on the movement of solid wastes into a
county or municipality.
In addition, in order to develop, operate and expand solid waste
management facilities, it is generally necessary to obtain and maintain in
effect one or more operating permits as well as zoning, environmental and other
land use permits. These permits and approvals are difficult and time-consuming
to obtain and are frequently subject to opposition by local elected officials or
citizens. Facility operating permits may be subject to revocation, and it may be
necessary to periodically renew the permit. Revocation or renewal of a permit
may reopen opportunities for opposition to the permit. Loss of an operating
permit would require that the affected facility be shut down until the permit is
renewed or reissued, and this could have a material adverse effect on the
Company's business and financial condition.
Certain permits and approvals may limit the types of waste that may be
accepted at a landfill or the quantity of waste that may be accepted at a
landfill during a given time period. In addition, certain permits and approvals,
as well as certain state and local regulations, may limit a landfill to
accepting waste that originates from specified geographic areas or seek to
restrict the import of out-of-state waste or otherwise discriminate against
out-of-state waste. Generally, restrictions on the import of out-of-state waste
have not withstood judicial challenge. However, proposed federal legislation
would give individual states greater authority to restrict the amount of
out-of-state waste that could be imported for disposal and would require states,
under certain circumstances, to reduce the amounts of waste exported to other
states. If this or similar legislation is enacted, states in which the Company
operates landfills could act to limit or prohibit the import of out-of-state
waste. Such state actions could adversely affect the Company's landfills within
those states that receive a significant portion of waste originating from
out-of-state, although Company landfills that have entered into host agreements
with the county or region in which they are located prior to the effective date
of the legislation may be exempted from such controls to some extent.
In addition, certain states and localities may for economic or other
reasons restrict the export of waste from their jurisdiction or require that a
specified amount of waste be disposed of at facilities within their
jurisdiction. Recently, the United States Supreme Court held unconstitutional,
and therefore invalid, a local ordinance that sought to impose flow controls on
taking waste out of the locality. However, certain state and local jurisdictions
continue to seek to enforce these restrictions. In addition, the aforementioned
proposed federal legislation would allow states and localities to impose certain
flow control restrictions. These restrictions could result in the volume of
waste going to landfills being reduced in certain areas, which may adversely
affect the Company's ability to operate its landfills at their full capacity
and/or affect the prices that can be charged for landfill disposal services.
These restrictions may also result in higher disposal costs for the Company's
collection operations. Although some of the Company's operations may have
limited protection from the effects of such legislation through agreements with
their host counties or regions, such legislation could have a material adverse
effect on the Company's business and financial condition.
-16-
<PAGE>
There has been an increasing trend at the state and local level to
mandate and encourage waste reduction at the source and waste recycling and to
prohibit the disposal of certain types of solid wastes, such as yard wastes, in
landfills. The enactment of regulations reducing the volume and types of wastes
available for transport to and disposal in landfills could affect the Company's
ability to operate its facilities at their full capacity and may have a material
adverse effect on the Company's business and financial condition.
Latin American Environmental Regulations. The Company's operations in
Latin America are subject to a variety of national and local regulations for
governing, operating and permitting existing and new solid waste collection and
disposal facilities. The Company believes it is likely that governments in Latin
America will increase environmental regulation and enforcement over the next
several years based generally on heightened environmental awareness in these
countries. The Company is presently not able to determine what effect such
increased regulation may have on its operations in Latin America.
Employees
The Company has approximately 725 employees, 715 of which are employed
full-time in the United States and Costa Rica, of which approximately 28 persons
are management. Approximately 120 persons are employed in Costa Rica. A total of
41 employees of the Company are subject to a collective bargaining agreement.
The Company believes its relations with its employees to be satisfactory.
-17-
<PAGE>
ITEM 2. PROPERTIES
The Company leases its executive office, located at 67 Walnut Avenue, Suite 103,
Clark, New Jersey. The principal landfills, transfer stations and hauling
properties at December 31, 1995, are:
Type of Owned or
Location Facility Leased
Three Oaks, MI Landfill * Owned
Union City, TN Landfill * Owned
DeSoto, IL Landfill * Owned
Prichard, WV Landfill * 2/3 Ownership **
Costa Rica Landfill * Owned
Fort Wayne, IN Landfill * Owned
Terre Haute, IN Landfill */Collection &
Hauling/Recycling Owned
Eastover, SC Landfill * 85% Owned
Springfield, IN Landfill * Owned
Mayfield, KY Transfer Station/
Collection & Hauling Owned
McKenzie, TN Transfer Station Owned
Marion, IL Transfer Station Leased ***
Barlow, KY Transfer Station/
Collection & Hauling Owned
Ste. Genevieve, MO Transfer Station/
Collection & Hauling Owned
Paris, TN Transfer Station Leased ***
Mt. Vernon, IL Transfer Station Owned
Union City, TN Transfer Station/Collection
& Hauling/Recycling Owned
Sparta, IL Transfer Station Leased ***
Covington, TN Transfer Station Owned
Festus, MO Recycling Leased ****
Anderson, IN Transfer Station/Collection
& Hauling Owned
Potosi, MO Transfer Station Owned
Paducah, KY Transfer Station Owned
Savannah, TN Collection & Hauling Owned
* See "Item 1. Business - Landfill Operations" for further details concerning
the Company's landfills.
** The landfill operating company is 2/3 owned by the Company. The Company
owns 100% of the realty on which the Prichard Landfill operates.
*** Marion, IL -- Leased for $1.00 per year from the City of Marion, with
expiration date of May 1996, subject to renewal at the Company's option
for an additional five years.
Paris, TN -- Leased for $1.00 per year from the City of Paris, with
expiration date of December 1999, subject to renewal at the Company's
option for an additional five years.
Sparta, IL -- Thirty-year lease expiring in 2024.
**** Festus, MO -- Leased on a month to month basis for 10% of recyclables
billed through this recycling center. There is also a 4% fee on aluminum
can revenue.
-18-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
A local citizens' group has filed objections to issuance of a renewal
permit for the Company's United Refuse landfill near Fort Wayne, Indiana. The
Company believes the objections are without merit and intends to vigorously
defend the permit. However, if the Company is not successful in such defense, it
could result in revocation or adverse modification of the permit, and this could
have a material adverse effect on the Company's business and financial
condition.
The Company is currently involved in certain other routine legal and
administrative proceedings. All such proceedings arose in the ordinary course of
business, and the Company believes that although the outcome of such proceedings
cannot be predicted with certainty, the cost of settlements or judgments arising
from such proceedings will not have a material adverse effect on the Company's
business and financial condition. However, a significant judgment against the
Company or the imposition of a significant fine or penalty in the future could
have a material adverse effect on the Company's business and financial
condition.
In the normal course of its business and as a result of the extensive
governmental regulation of the waste industry, the Company periodically may
become subject to various other judicial and administrative proceedings
involving federal, state or local agencies, or in some cases citizens groups. In
these proceedings, an agency or a citizens group may seek to impose fines on the
Company or to revoke, or to deny renewal of, an operating permit held by the
Company or to deny issuance of a new permit to the Company. Even a temporary
loss of a material operating permit could have a material adverse effect on the
Company's business and financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 28, 1995, the Company held a special meeting of its stockholders to
consider and vote upon the following:
1) Adopt the Outside Director Stock Option Plan;
2) Increase authorized common shares from 10,000,000 to 20,000,000;
and
3) Increase authorized common shares from 20,000,000 to 40,000,000
and reduce the par value from $.001 per share to $.0006 per share
to effect a 5 for 3 split in the Company's issued common stock.
The vote for the three resolutions mentioned above was:
Yes No Abstentions
Proposal #1 4,785,967 157,730 1,975
Proposal #2 4,910,297 33,900 1,475
Proposal #3 4,204,973 739,224 1,475
-19-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock is included for quotation on the Nasdaq National
Market under the symbol "CONT". The following table sets forth the quarterly
high and low closing bid prices per share for the common stock for the periods
indicated. All of the amounts reported by Nasdaq have been restated to effect a
December 28, 1995 5 for 3 stock split on the Company's common stock.
High Bid Low Bid
Fiscal Year 1993 (Units)(1)
First Quarter............................... $ 1.80 $ 1.80
Second Quarter.............................. $ 2.10 $ 1.80
Third Quarter............................... $ 3.60 $ 2.10
Fourth Quarter.............................. $ 4.20 $ 3.60
Fiscal Year 1994
First Quarter (Units)(1).................... $ 4.20 $ 4.20
First Quarter (Common Stock)................ $ 5.03 $ 4.20
Second Quarter.............................. $ 5.55 $ 4.95
Third Quarter............................... $ 5.93 $ 4.95
Fourth Quarter.............................. $ 6.30 $ 5.40
Fiscal Year 1995
First Quarter............................... $ 6.53 $ 5.55
Second Quarter.............................. $ 7.20 $ 6.00
Third Quarter............................... $ 9.90 $ 6.83
Fourth Quarter ............................. $ 11.41 $ 9.91
(1) Prior to January 13, 1994, the Company's shares of common
stock and warrants to purchase common stock were traded as a
unit (the "Units") in the over-the-counter market. All such
warrants have either expired or been exercised; currently the
Company has no publicly-traded class of warrants.
The last reported bid price for the common stock on March 11, 1996 was
$10.63 per share. The number of record holders of the common stock at March 11,
1996 was 101. This number does not include an indeterminate number of
stockholders whose shares are held by brokers in "street name."
The Company has not paid, and does not anticipate paying in the
foreseeable future, dividends on the common stock. The Company is restricted
from paying dividends pursuant to the terms of the Credit Facility.
-20-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial
information derived from the audited consolidated financial statements of the
Company and selected consolidated operating data for the years indicated.
Certain factors that affect the comparability of the information set forth in
the following table are described in the notes thereto. In addition, the data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Consolidated Financial
Statements of the Company and the related notes thereto included elsewhere
herein.
<TABLE>
Year Ended December 31,
--------------------------------------------
<CAPTION>
(Restated
See Note 1)
1995(d) 1994 1993 1992 1991
-------- -------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data: (a)
Revenue ................................. $ 47,815 $ 28,728 $16,204 $13,348 $8,488
Operating expenses ...................... 22,182 13,422 8,603 7,988 6,428
General and administrative expenses ..... 7,915 4,737 2,067 1,860 861
Depreciation and amortization ........... 6,863 3,802 2,606 1,805 434
Office closing charge ................... 3,264 -- -- -- --
-------- -------- ------- ------- ------
Income from operations ................ 7,591 6,767 2,928 1,695 765
Interest expense ........................ 2,659 1,881 1,303 891 180
Other income (expenses), net ............ 205 (126) 49 107 26
-------- -------- ------- ------- ------
Income before income taxes and
extraordinary gain .................. 5,137 4,760 1,674 911 611
Provision for income taxes .............. 2,135 2,132 721 222 159
-------- -------- ------- ------- ------
Income before extraordinary gain ...... 3,002 2,628 953 689 452
Extraordinary gain, net of income taxes . -- 357 -- -- --
-------- -------- ------- ------- ------
Net income ............................ 3,002 2,985 953 689 452
Preferred stock dividends earned (b) .... -- -- 130 411 211
-------- -------- ------- ------- ------
Income available to common stockholders $ 3,002 $ 2,985 $ 823 $ 278 $ 241
-------- -------- ------- ------- ------
-------- -------- ------- ------- ------
Earnings Per Share Data: (a)
Primary earnings per share:
Income before extraordinary gain ...... $ 0.25 $ 0.39 $ 0.21 $ 0.10 $ 0.17
Extraordinary gain, net of income taxes -- 0.05 -- -- --
-------- -------- ------- ------- ------
Net income $ 0.25 $ 0.44 $ 0.21 $ 0.10 $ 0.17
-------- -------- ------- ------- ------
-------- -------- ------- ------- ------
Fully diluted earnings per share:
Income before extraordinary gain ...... $ 0.25 $ 0.34 $ 0.19 $ 0.10 $ 0.17
Extraordinary gain, net of income taxes -- 0.05 -- -- --
-------- -------- ------- ------- ------
Net income $ 0.25 $ 0.39 $ 0.19 $ 0.10 $ 0.17
-------- -------- ------- ------- ------
-------- -------- ------- ------- ------
Primary weighted average shares ......... 11,979 6,858 3,950 2,795 1,402
Fully diluted weighted average shares ... 12,115 7,613 4,739 2,795 1,402
Other Data: (a)
EBITDA (c) .............................. $ 17,718 $ 10,569 $ 5,534 $ 3,500 $1,199
</TABLE>
-21-
<PAGE>
December 31,
---------------------------------------------
(Restated
See Note 1)
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(In thousands)
Balance Sheet Data: (a)
Cash and cash equivalents.. $ 3,483 $ 4,677 $ 1,062 $ 1,153 $ 711
Total assets............... 124,221 88,878 35,257 32,277 9,456
Total debt................. 25,421 25,348 15,404 16,057 3,853
Total stockholders' equity. 70,271 37,025 9,060 6,549 3,503
(a) The Company's revenues, expenses, assets and liabilities have been
significantly affected by the number and timing of serveral
acquisitions made by the Company during the periods presented. See
Note 3 of the Notes to Consolidated Financial Statements of the
Company and the notes related thereto included elsewhere herein.
(b) Dividends on the Company's Series A preferred shares and Series B
preferred shares were suspended in April 1993 by agreement with the
holders thereof. In connection with the Company's public offering in
November 1994, all outstanding shres of preferred stock were redeemed
and exchanged for shares of common stock plus warrants to purchase
shares of common stock. No preferred stock is currently outstanding.
(c) EBITDA reflects income from operations adjusted to remove the $1.5
million office closing charge plus depreciation and amortization.
EBITDA and is relevant to an understanding of the Company's
performance because it reflects the Company's ability to generate cash
flows sufficient to service fixed obligations. EBITDA should not be
considered an alternative to: (i) operating income (as determined in
accordance with generally accepted accounting principles) as an
indicator of the Company's operating performance; or (ii) cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity.
(d) On December 31, 1995, two employment agreements were terminated which
prompted the Company to close its administrative office in
Indianapolis, Indiana and to write-off certain related Victory
contracts.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in connection with the Consolidated
Financial Statements of the Company and related notes thereto and "Selected
Financial Data" included elsewhere herein.
General
The Company's landfill operations earn revenue from disposal fees
(known as "tipping fees"), which are generally billed on either a bi-weekly or
monthly basis. The Company's landfills receive solid waste from its own
collection companies as well as from independent haulers. Tipping fees earned by
the Company's landfills from its own collection operations are considered
intercompany revenue and are eliminated from the Company's consolidated
collection revenue.
The Company's revenue from waste collection consist of fees from
residential, commercial and industrial collection and transfer station
customers. A significant portion of the Company's residential collection
services are provided on a contract basis in which the Company contracts with a
county or municipal authority to collect from all residents in a specified area.
These contracts, which are usually competitively bid, generally have terms of
one to five years and provide consistent cash flow during the term of the
contract since the Company is paid regularly by the municipality or its
residents. The Company also provides residential collection services on a
subscription basis in which the Company contracts directly with the individual
household. Subscription customers are billed in advance and the fee typically
does not vary with the volume of solid waste collected. Residential subscription
customers provide the Company with a stable source of revenue and an efficient
means to utilize the Company's resources, including its equipment, manpower and
automated reporting systems. The Company selectively bids for county or
municipal contracts in areas near those where it already provides subscription
residential collection services and in new markets.
-22-
<PAGE>
The Company also serves commercial and industrial customers in its
residential collection markets, and derives a substantial portion of its
collection revenues from these customers. Commercial and industrial waste
streams improve operating efficiencies and provide additional volume for the
Company's landfills. Commercial and industrial contracts, which typically have
terms of one to three years, are individually negotiated and are typically
billed monthly.
Operating expenses for landfill operations include labor, equipment costs,
the amortization of landfill site development costs, legal and administrative
costs of ongoing environmental compliance, site maintenance and accruals for
future closure and post-closure maintenance costs. Operating expenses for
collection operations include direct labor, fuel, equipment maintenance and
tipping fees paid to third-party landfills.
Engineering, legal, permitting, construction and other costs directly
associated with the development of new landfills and expansions of existing
landfills, together with associated interest, are capitalized and, upon receipt
of all necessary operating permits, are amortized based on utilization of
available airspace. The Company charges against earnings any unamortized
capitalized expenditures and advances (net of any portion that the Company
estimates will be recoverable through sale or otherwise) relating to any
operation that is permanently shut down, any pending acquisition that is not
consummated, and any landfill development or expansion project that is not
successfully completed. The Company accrues the estimated landfill closure and
post-closure maintenance costs expected to be incurred upon and subsequent to
the closing of existing operating landfill areas ratably in relation to the
airspace consumed. The Company believes its landfills are in substantial
compliance with the existing standards for landfill operation and closure in
each of the states in which it operates, and the Company believes that it has
adequately accrued for landfill closure and post-closure costs.
General and administrative expenses include management salaries, clerical
and administrative overhead, royalties to former owners, costs associated with
the Company's sales force, and community relations expenses. Indirect project
development costs, such as executive and corporate overhead, public relations
and other corporate services are expensed as incurred.
The Company is required, from time to time, to post bid and/or
performance bonds in connection with contracts or projects with government
entities and, to a lesser extent, private sector customers. In addition to bid
and performance bond requirements, existing or proposed legislation in various
jurisdictions requires or will require the Company to provide financial
assurance covering closure, post-closure monitoring and corrective activities,
if necessary, of certain waste disposal facilities. In this respect, the Company
has various performance bonds and letters of credit outstanding as of December
31,1995, aggregating approximately $6.0 million. These instruments are not
reflected in the accompanying consolidated financial statements. In addition,
the Company maintains separate escrow accounts to reserve funds necessary to pay
for estimated future closure and post-closure costs. These funds are reflected
as other assets on the Company's consolidated balance sheets. In some cases, a
regulatory agency controls the escrow account and will release amounts to the
Company upon receipt of written evidence that the Company will use the funds to
pay for direct closure or post-closure expenses. Closure funds in
Company-controlled accounts aggregated approximately $3.7 million as of December
31, 1995. As of December 31, 1995, the amount in state-controlled funds
aggregated approximately $0.8 million.
The Company's business is affected by general economic and seasonal
conditions. An economic downturn could result in a reduction in the volume of
waste disposed at the Company's operations and/or the price that the Company can
charge for its services. The Company's revenue may also be adversely affected by
severe weather conditions. This is primarily attributable to: (i) the volume of
waste relating to construction and demolition activities and activities relating
to the remediation of contaminated soils tending to increase in the spring and
summer months; and (ii) the volume of industrial and residential waste in the
regions where the Company operates tending to decrease during the winter months.
Particularly harsh weather conditions may result in the temporary suspension of
certain of the Company's operations.
-23-
<PAGE>
Results of Operations
The following table presents, for the years indicated, the percentage
relationship which the various items bear to total revenue:
Year Ended December 31,
------------------------
(Restated
See Note 1)
1995 1994 1993
------ ------ ------
Revenue.............................................. 100.0% 100.0% 100.0%
Costs and expenses:
Operating expenses................................. (46.4) (46.7) (53.1)
General and administrative expenses................ (16.5) (16.5) (12.7)
Depreciation and amortization...................... (14.4) (13.3) (16.1)
Office closing charge.............................. (6.8) - -
------ ----- ------
Income from operations........................... 15.9 23.5 18.1
Other income (expenses):
Interest expense................................... (5.6) (6.6) (8.0)
Other income (expenses), net....................... 0.5 (0.4) 0.1
------ ----- ------
Income before income taxes and extraordinary gain 10.8 16.5 10.2
Provision for income taxes........................... (4.5) (7.4) (4.3)
------- ------ ------
Income before extraordinary gain................. 6.3% 9.1% 5.9%
====== ===== =====
Year Ended December 31, 1995 (Restated) Compared to Year Ended December 31, 1994
(Restated)
Revenue: Revenue increased by $19.1 million, or 66.4% from $28.7 million to
$47.8 million. The increase in revenue was primarily due to the acquisition of
Victory in July 1994 (which accounted for $7.8 million of the increase), the
acquisitions of a Costa Rica landfill and hauling operation during the third
quarter of 1994, two hauling and collection companies in the second quarter and
two in the third quarter of 1995, a recycling facility in the third quarter of
1995 and a landfill in the fourth quarter of 1995, as well as increased waste
collection. As a percentage of total revenue collection operations grew from
38.1 % in 1994 to 45.7% in 1995.
Operating Expenses: Such expenses increased by $8.8 million, from $13.4
million to $22.2 million, but decreased slightly as a percentage of revenue from
46.7% to 46.4%. The percentage decrease was primarily due to the economies of
scale in the Company's landfill operations achieved through higher activity
levels. The dollar increase was primarily due to the above mentioned
acquisitions.
General and Administrative Expenses: General and administrative expenses
increased by $3.2 million from $4.7 million to $7.9 million, and remained
constant as a percentage of revenue at 16.5%. The dollar increase was primarily
due to the above mentioned acquisitions and increased compensation expense.
Depreciation and Amortization: Depreciation and amortization expenses
increased by $3.1 million, from $3.8 million to $6.9 million. The increase was
due to the above mentioned acquisitions and increased capital expenditures.
Office Closing Charge: The Company closed the former headquarters of
Victory in Indianapolis, Indiana and recorded a related $3.3 million pretax
charge for such closing. The major components of the charge include (i) the
severance package costs for two officers of the Company who previously were
owners of Victory including the write off of unamortized prepaid compensation
costs and (net of the reversal of the value of previously recorded stock options
to be issued pursuant to these officers' employment agreements), (ii) costs
related to future contractual payments to be made under several agreements in
place at the time the Company acquired Victory, (iii) the write off of certain
office equipment and (iv) other costs, such as lease obligations and severance
pay to office employees, related to the closure of the office.
Interest Expense: Interest expense increased from $1.9 million to $2.7
million. The increase was due primarily to increased levels of debt assumed or
incurred in the acquisition of Victory, the other previously mentioned
acquisitions and the financing of capital expenditures.
-24-
<PAGE>
Provision for Income Taxes: The provision for income taxes remained
constant at $2.1 million. The Company's effective income tax rate decreased from
44.8% to 41.5% due to the reduced impact of non-deductible amortization of
intangible assets.
Income Before Extraordinary Gain: The Company's income before extraordinary
gain increased by $.4 million from $2.6 million to $3.0 million.
Extraordinary Gain: The Company recorded a $357,000 million after-tax
extraordinary gain on the early extinguishment of certain debt at a discount in
1994.
Net Income: For the reasons described above, the Company's net income
remained constant at $3.0 million.
Year Ended December 31, 1994 (Restated) Compared to Year Ended December 31, 1993
Revenue: Revenue increased by $12.5 million, or 77.3%, from $16.2 million
to $28.7 million. The increase in revenue was primarily due to the acquisition
of Victory in July 1994 (which accounted for $6.9 million of the increase),
increased landfill activity and $1.9 million from a transfer station and hauling
company acquired in the second half of 1993. Offsetting these increases was an
absence of $1.1 million of revenue from the Company's waste brokerage business
which ceased operations as of December 31, 1993.
During 1993, the Company earned revenue of $1.4 million, or 8.7%, of the
Company's total revenue, from a single customer. This customer was acquired by a
competitor of the Company in 1993 and the Company stopped doing any substantial
business with this customer in June 1993. Despite the loss of revenues from this
customer, the Company was still able to increase total revenues as discussed
above. No customer accounted for greater than 10% of the Company's revenue in
1994 or 1993.
Operating Expenses: Such expenses increased by $4.8 million, from $8.6
million to $13.4 million but decreased as a percentage of revenue from 53.1% to
46.7%. The percentage decrease was primarily attributable to improved economies
of scale in the Company's landfill operations achieved through higher activity
levels. Additionally, the acquisition of Victory led to an increase in the
proportion of the Company's revenue derived from landfill operations which tend
to incur lower operating expenses as a percentage of revenue than waste
collection and other non-landfill operations.
General and Administrative Expenses: General and administrative expenses
increased by $2.6 million from $2.1 million to $4.7 million, and increased as a
percentage of revenue from 12.7% to 16.5%. The increases were due to increased
corporate staffing levels and increased professional fees.
Depreciation and Amortization Expenses: Depreciation and amortization
expenses increased by $1.2 million, from $2.6 million to $3.8 million. The
increase was due to the above mentioned acquisitions and increased capital
expenditures.
Interest Expense: Interest expense increased from $1.3 million to $1.9
million. The increase was due to increased levels of debt assumed in the
acquisition of Victory.
Provision for Income Taxes: The provision for income taxes increased by
$1.4 million, from $721,000 to $2.1 million, primarily as a result of a higher
income level in 1994.
Income Before Extraordinary Gain: The Company's income before extraordinary
gain increased by $1.6 million from $953,000 to $2.6 million.
Extraordinary Gain: The Company recorded a $357,000 after-tax extraordinary
gain on the early extinguishment of certain debt at a discount in 1994.
Net Income: For the reasons described above, the Company's net income
increased by $2.0 million from $953,000 to $3.0 million.
Liquidity and Capital Resources The Company's cash applications consist
principally of working capital, payments of principal and interest on its
outstanding indebtedness, capital expenditures and acquisitions. At December 31,
1995, the Company had a working capital deficit of $2.0 million compared to a
surplus of $5.2 million at December 31, 1994. Cash and cash equivalents balances
were $3.5 million at December 31, 1995 versus $4.7 million at December 31, 1994.
The decrease in working capital is primarily due to short-term debt incurred or
assumed in the 1995 business acquisitions, increased income taxes payable and a
larger portion of accrued landfill closure costs recorded as a current
liability.
-25-
<PAGE>
Cash Flows From Operating Activities: During 1995, 1994 and 1993, net cash
provided by operating activities was $8.6 million, $5.2 million and $3.7
million, respectively. Cash flows from operating activities have increased
primarily due to higher earnings (before the effect of noncash charges).
Cash Flows From Investing Activities: During 1995, 1994 and 1993, the
Company made cash capital expenditures of approximately $19.7 million, $12.8
million and $3.5 million, respectively, primarily for landfill expansions and
equipment additions. The Company made cash expenditures for a landfill
development project of $297,000 and $1.5 million in 1995 and 1994, respectively.
For the previously mentioned acquisitions and an investment purchase the Company
paid, net of cash acquired, $6.7 million, $475,000 and $18,000 in 1995, 1994 and
1993, respectively. Additionally, the Company spent $948,000 in 1995 to acquire
the remaining interest in Victory and its subsidiary. The Company expects cash
capital expenditures of approximately $18.0 million to $20.0 million during
1996, primarily for existing landfill expansion and equipment additions.
Cash Flows From Financing Activities: During December 31, 1995, 1994 and
1993, cash flows from financing activities were $20.4 million, $13.4 million and
($1.3 million), respectively.
On March 28, 1995, the Company entered into the Credit Facility with
LaSalle National Bank. Borrowing under the Credit Facility refinanced certain
existing indebtedness and provided additional funds for the growth and operation
of the Company. The Credit Facility has been subsequently syndicated to include
the Bank of America and the First National Bank of Boston. Borrowings under the
Credit Facility bore a weighted average interest rate of 9.18% during 1995.
In the first quarter of 1996, the Company and the lenders amended the
Credit Facility (the "Amended Credit Facility") effective as of January 1, 1996
with covenants effective as of December 31, 1995. The Amended Credit Facility
expires in January 1999 and is secured by all corporate assets and a pledge of
the stock of all subsidiaries. As amended, each borrowing under the Amended
Credit Facility bears interest based on the Company's leverage ratio, as
defined, of funded debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA"). If the leverage ratio is 2.0 to 1 or less, then the
interest rate is, at the Company's option, prime or LIBOR plus 1.5% and the fee
on outstanding letters of credit is .75%. If the leverage ratio falls between
2.01 to 2.5 compared to 1, then the interest rate is prime plus .5% or LIBOR
plus 1.75% and the fee on outstanding letters of credit is 1.0%. If the leverage
ratio falls between 2.51 and 3.0 compared to 1, then the interest rate is prime
plus 1.0% or LIBOR plus 2.0% and the fee on outstanding letters of credit is
1.5%. If the leverage ratio is greater than 3.0 to 1, then the interest rate is
prime plus 1% or LIBOR plus 2.5% and the fee on outstanding letters of credit is
2.0%. The Amended Credit Facility includes provisions for letters of credit up
to $10.0 million. The Company will also pay a 0.5% fee on the average unused
portion of the Amended Credit Facility. As of December 31, 1995, $23.6 million
of unused credit under this Facility remained available.
Under the terms of the Amended Credit Facility, the Company is required to
meet certain covenants regarding, among other things, financial position and
results of operations. Based on the Company's December 31, 1995 financial
position and results of operations, the Company was in compliance with such
covenants. The terms of the Amended Credit Facility impose restrictions that
affect, among other things, the Company's ability to (i) incur additional
indebtedness, (ii) create liens on assets, (iii) sell assets, (iv) engage in
mergers, acquisitions or consolidations, (v) make investments, (vi) pay
dividends or make distributions and (vii) engage in certain transactions with
affiliates and subsidiaries.
The Amended Credit Facility also contains subjective covenants providing
that the Company would be in default if, in the judgment of the lenders, there
is a material adverse change in the financial condition of the Company.
Management is not aware of, nor does it anticipate, any facts, events or
occurrences which could reasonably be expected to have a material adverse effect
on the operations of the Company that would cause the lenders to demand
repayment of the amounts borrowed under the Amended Credit Facility prior to its
termination.
-26-
<PAGE>
In October 1995, the Company and certain of its stockholders completed a
public offering of 3,780,680 Shares (3,292,760 Shares were sold by the Company
and 487,920 Shares were sold by certain stockholders of the Company). The
Company received approximately $30.1 million of net proceeds from the sale. The
proceeds were used to reduce the outstanding indebtedness under the Credit
Facility which provided the Company with renewed borrowing capacity under the
Credit Facility for future acquisitions, capital expenditures and general
corporate purposes.
The Company believes that cash on hand, cash from operating activities,
additional borrowings under the Amended Credit Facility and the issuance of
additional debt as permitted by the Credit Facility will be sufficient to: (i)
finance its planned 1996 and 1997 development projects and capital expenditures;
(ii) meet its 1996 and 1997 operating cash requirements; and (iii) meet expected
debt service obligations during 1996 and 1997.
It is the policy of the Company to accrue the estimated landfill closure and
post-closure maintenance costs expected to be incurred upon and subsequent to
the closing of existing operating landfill areas ratably in relation to the
airspace consumed. Such costs will principally include costs for the final cap
and cover of the landfill area, management of leachate, groundwater monitoring
and general area maintenance.
The Company constructs landfill cells with an average useful disposal life of
two to three years. This construction policy usually results in partial or total
cell closure within two to five years of a cell first accepting waste. Closure
requirements and post-closure care requirements are governed by various state
regulatory agencies and are typically a component of the landfills operating
permit. All of the Company's operatinglandfills are required to provided 30
years of post-closure care. Closure costs are determined by many factors
including total acreage to be closed, composition of the closure cap, on-site
availability of materials and others. While management estimates such future
costs for each landfill site, such estimates of the amount and timings are fixed
or reliably determinable. Accordingly, the Company's estimate of these costs in
current dollars is inflated at a rate of 4% until the expected time of payment
and then discounted to present value at 8%.
The Company provides for such discounted costs ratably as the airspace in each
cell is consumed. The resulting accrued landfill closure costs are not reduced
by funds set aside by the Company, either voluntarily or by statute, to pay for
such costs. Such funding, if appropriate, is recorded as a long-term asset. Had
the Company not discounted this liability, the amounts recorded would have been
increased by approximately $12.8 million as of December 31, 1995. Total
estimated closure and post-closure costs to be spent after December 31, 1995,
inflated as described above, are approximately $50.4 million of which
approximately $1.6 million, on average, is expected to be expended each year
over the next five years.
In March 1996, the Company sold its 72% interest in Procesa Continental
S.A. de C.V. which encompassed all of the Company's Mexico City operations,
for approximately $2.6 million.
In March 1996, the Company purchased two construction and demolition
landfills in Central Florida for approximately $5.3 million.
On March 29, 1996, the Company decided to temporarily suspend operations at
its Prichard, West Virginia landfill. The Company will evaluate whether to
re-open or to dispose of the facility.
-27-
<PAGE>
Quarterly Results
The following table sets forth unaudited summary financial information for the
eight quarters ended December 31, 1995. All amounts are in thousands, except per
share data.
<TABLE>
Three Months Ended
<CAPTION>
March 31, June 30, Sept 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1994 1994 1994 1994 1995 1995 1995 1995
(Restated (Restated (Restated (Restated (Restated (Restated
See Note 1) See Note 1) See Note 1) See Note 1) See Note 1) See Note 1)
-------- -------- -------- -------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue .............. $4,374 $5,388 $9,373 $9,593 $ 9,708 $10,770 $12,965 $14,372
Income from
operations(a)....... $ 832 $1,292 $2,134 $2,509 $ 2,147 $ 2,697 $ 3,097 ($350)
Fully diluted earnings
per share before
extraordinary gain(a) $ 0.05 $ 0.09 $ 0.10 $ 0.10 $ 0.08 $ 0.10 $ 0.12 ($0.03)
Fully diluted weighted
average number of
shares ............. 5,658 6,105 7,590 10,176 11,304 11,438 11,507 14,382
</TABLE>
(a) The Company's revenues, expenses, assets and liabilities have been
significantly affected by the number and timing of serveral
acquisitions made by the Company during the periods presented. See
Note 3 of the Notes to Consolidated Financial Statements of the
Company and the notes related thereto included elsewhere herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements included herein beginning on Page F-1.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-28-
<PAGE>
PART III
The information required by Part III is incorporated by reference to the
Company's definitive proxy statement in connection with its 1995 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission within
120 days following the end of the Company's fiscal year ended December 31, 1995.
If such proxy statement is not so filed, such information will be filed as an
amendment to this Form 10-KSB within 120 days following the end of the Company's
fiscal year ended December 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements
See accompanying Index to Consolidated Financial Statements.
(a) (3) Exhibits
See accompanying Index to Exhibits.
(b) Reports on Form 8-K
On August 28, 1995, the Company filed a report on Form 8-K under "Item 2.
Acquisition or Disposition of Assets" and "Item 7. Financial Statements and
Exhibits." The historical and proforma financial information required under
"Item 7. Financial Statements and Exhibits" was filed on October 11, 1995.
On October 27, 1995, the Company filed a report on Form 8-K under "Item 5. Other
Events" and "Item 7. Financial Statements and Exhibits." No financial statements
were filed.
(c) Exhibits
See accompanying Index to Exhibits.
(d) Financial Statement Schedules
All schedules have been omitted since the required information is not
significant, is included in the consolidated financial statements or notes
thereto or is not applicable.
-29-
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- ------- ----------------------------------------------------------- ---------
3.1 Certificate of Incorporation of Continental Waste Industries,
Inc. (incorporated by reference to Exhibit 3.1 to the Annual
Report on Form 10-KSB of Continental Waste Industries, Inc. filed
on March 31, 1994, Commission File No. 0-22602).
3.2 By-Laws of Continental Waste Industries, Inc. (incorporated by
reference to Exhibit 3.2 to the Annual Report on Form 10-KSB of
Continental Waste Industries, Inc. filed on March 31, 1994,
Commission File No. 0-22602).
3.3 Amendment to Certificate of Incorporation of Continental Waste
Industries, Inc., dated November 1, 1994 (incorporated by
reference to Exhibit 3.3 to the Registration Statement on Form
SB-2 of Continental Waste Industries, Inc. filed on November 4,
1994, Commission File No. 33-84130).
3.4 Amendment 2 to Certificate of Incorporation of Continental Waste
Industries, Inc., dated December 28, 1995.
4.1 Warrant of First Analysis Corporation (incorporated by reference
to Exhibit 4.4 to the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on November 4, 1994,
Commission File No. 33-84130).
4.2 Warrant of Raymond James & Associates, Inc. (incorporated by
reference to Exhibit 4.3 to the Registration Statement on Form
SB-2 of Continental Waste Industries, Inc. filed on November 4,
1994, Commission File No. 33-84130).
9 Shareholders' Agreement among Carlos E. Aguero, Thomas A. Volini,
Apex Investment Fund Limited Partnership, Environment Venture
Fund Limited Partnership, The Productivity Fund Limited
Partnership, Continental Waste Industries, Inc. and Bret R.
Maxwell (incorporated by reference to Exhibit 9 to the
Registration Statement on Form SB-2 of Continental Waste
Industries, Inc. filed on November 4, 1994, Commission File No.
33-84130.
10.1 Employment Agreement between Continental Waste Industries, Inc.
and Thomas A. Volini (incorporated by reference to Exhibit 10.1
to Form SB-2 filed on September 12, 1995, Commission File No.
33-62589).
10.2 Employment Agreement between Continental Waste Industries, Inc.
and Carlos E. Aguero (incorporated by reference to Exhibit 10.2
to Form SB-2 filed on September 12, 1995, Commission File No.
33-62589).
10.3 Employment Agreement between Continental Waste Industries, Inc.
and Michael J. Drury (incorporated by reference to Exhibit 10.3
to Form SB-2 filed on September 12, 1995, Commission File No.
33-62589).
10.4 Credit Agreement by and among LaSalle National Bank as agent, the
Lenders Signatory or Parties Thereto and Continental Waste
Industries, Inc. and its Subsidiaries (incorporated by reference
to Exhibit 10.8 to Form SB-2 filed on September 12, 1995,
Commission File No. 33-62589).
-30-
<PAGE>
Exhibit Index (Continued)
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- ------ ------------------------------------------------------ ---------
10.5 First Amendment to Credit Agreement by and among LaSalle National
Bank as agent, the Lenders Signatory or Parties Thereto and
Continental Waste Industries, Inc. and its Subsidiaries
(incorporated by reference to Exhibit 10.6 to Form SB-2 filed on
September 12, 1995, Commission File No. 33-62589).
10.6 Second Amendment to Credit Agreement by and among LaSalle
National Bank as agent, the Lenders Signatory or Parties thereto
and Continental Waste Industries, Inc. and its Subsidiaries
(incorporated by reference to Exhibit 10 to the Current
Report on Form 8-K of Continental Waste Industries, Inc.filed
on October 27, 1995, Commission File No. 0-22602).
10.7 Third Amendment to Credit Agreement by and among LaSalle National
Bank as agent, the Lenders Signatory or Parties Thereto and
Continental Waste Industries, Inc. and its Subsidiaries.
10.8 Stock Purchase Agreement Among Continental Waste Industries,
Inc., Camelford Holdings, Ltd. and Salcott Holdings, Ltd.
(incorporated by reference to Exhibit 2 to the Current Report on
Form 8-K of Continental Waste Industries, Inc. filed on July 15,
1994, Commission File No. 0-22602).
10.9 Agreement for Exchange of Stock Among Continental Waste
Industries, Inc., Dallas C. Schnitzius and G. Michael Shannon
(incorporated by reference to Exhibit 2 to the Current Report on
Form 8-K of Continental Waste Industries, Inc. filed on July 15,
1994, Commission File No. 0-22602).
10.10 Purchase Agreement between Continental Waste Industries, Inc.
and Timothy J. Salopek and Catherine Salopek for the purchase of
WPP Services, Inc. (incorporated by reference to Exhibit 10.9 to
the Registration Statement on Form SB-2 of Continental Waste
Industries, Inc. filed on November 4, 1994, Commission File No.
33-84130).
21 Subsidiaries of Continental Waste Industries, Inc.
23.1 Consent of Arthur Andersen LLP.
-31-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: December 13, 1996
CONTINENTAL WASTE INDUSTRIES, INC.
(Registrant)
By: /S/ THOMAS A. VOLINI
Thomas A. Volini
Chairman of the Board and
Chief Operating Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated this 13th day of December, 1996.
/S/ THOMAS A. VOLINI Chairman of the Board and
Thomas A. Volini Chief Operating Officer
/S/ CARLOS E. AGUERO Director, President and
Carlos E. Aguero Chief Executive Officer
/S/ BRET R. MAXWELL
Bret R. Maxwell Director
/S/ DONALD H. HAIDER
Donald H. Haider Director
/S/ RICHARD J. CARLSON
Richard J. Carlson Director
/S/ MICHAEL J. DRURY Senior Vice President and
Michael J. Drury Chief Financial Officer
-32-
<PAGE>
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC.
ANNUAL REPORT ON FORM 10-KSB
ITEM 8, ITEM 14(a) (1) AND (2) AND ITEM 14(d)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
<PAGE>
FORM 10-KSB -- ITEM 14(a) (1) AND (2)
CONTINENTAL WASTE INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of Continental Waste
Industries, Inc. and subsidiaries are included in Item 8:
Report of Independent Public Accountants............................F-3
Consolidated Balance Sheets -- As of December 31, 1995 and 1994
(Restated - See Note 1).............................................F-4
Consolidated Statements of Income -- For the years ended
December 31, 1995, 1994 (Restated - See Note 1)and 1993 ...........F-5
Consolidated Statements of Stockholders' Equity -- For the years
ended December 31, 1995, 1994 (Restated - See Note 1) and 1993 .....F-6
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1995, 1994 (Restated - See Note 1) and 1993...........F-7
Notes to Consolidated Financial Statements..........................F-8
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Continental Waste Industries, Inc.:
We have audited the accompanying consolidated balance sheets of CONTINENTAL
WASTE INDUSTRIES, INC. (a Delaware corporation) and SUBSIDIARIES as of December
31, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995 as restated - see Note 1. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Continental Waste
Industries, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 20, 1996 (except with respect to the matter
discussed in Note 1, as to which the
date is December 11, 1996)
F-3
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1995 and 1994
ASSETS
1995 1994
(Restated - See Note 1)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents................$ 3,483,154 $ 4,677,237
Accounts and notes receivable, net....... 8,169,121 5,295,770
Prepaid expenses......................... 2,458,141 3,214,902
Deferred income taxes.................... 377,447 523,752
------------- ------------
Total current assets................... 14,487,863 13,711,661
------------- -------------
PROPERTY AND EQUIPMENT, at cost:
Land, landfill sites and improvements.... 59,427,605 48,472,232
Buildings and improvements............... 4,423,169 2,426,922
Vehicles and equipment................... 32,827,833 19,127,148
Office furniture and equipment........... 618,413 692,514
------------- -------------
97,297,020 70,718,816
Less--Accumulated depreciation and ..... 14,215,696 7,941,916
amortization ------------- -------------
Net property and equipment........... 83,081,324 62,776,900
------------- -------------
OTHER ASSETS:
Excess cost over fair value of net
assets acquired, net.................. 14,614,475 6,471,632
Agreements not to compete, net........... 1,164,493 1,245,368
Cash held in escrow...................... 3,749,038 1,121,220
Land purchase option..................... 1,000,000 1,000,000
Other.................................... 6,124,138 2,551,247
---------- ------------
Total other assets................... 26,652,144 12,389,467
---------- ------------
$124,221,331 $88,878,028
============ ===========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
(Restated - See Note 1)
------------ ----------
CURRENT LIABILITIES:
Notes payable ..............................$ 2,117,500 $ -
Current maturities of long-term debt........ 2,528,741 856,731
Accounts payable............................ 2,543,768 2,908,686
Income taxes payable........................ 3,244,662 1,454,678
Other accrued liabilities................... 6,042,677 3,338,848
------------ ----------
Total current liabilities............... 16,477,348 8,558,943
------------ ----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities..... 20,774,991 24,491,315
Deferred income taxes....................... 7,160,625 8,432,804
Accrued landfill closure costs, less
current portion........................... 6,748,474 6,647,577
Other long-term liabilities................. 2,788,640 3,722,788
------------ ----------
Total long-term liabilities............ 37,472,730 43,294,484
------------ ----------
COMMITMENTS AND CONTINGENCIES:................
STOCKHOLDERS' EQUITY:
Common stock, $.0006 par value, 40,000,000
and 16,666,666 shares authorized in 1995
and 1994, 14,089,742 and 10,335,540 shares
issued in 1995 and 1994, respectively..... 8,454 6,201
Additional paid-in capital................. 63,063,241 32,455,361
Retained earnings.......................... 7,671,657 4,669,588
Treasury stock (79,375 and 18,450 common
shares at cost in 1995 and 1994,
respectively)............................. (472,099) (106,549)
------------ ----------
Total stockholders' equity............ 70,271,253 37,024,601
------------ -----------
$124,221,331 $88,878,028
============ ===========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these balance sheets.
F-4
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
(Restated - See Note 1)
-------- -------- ----------
REVENUE $47,815,275 $28,728,298 $16,203,848
COSTS AND EXPENSES:
Operating expenses...................... 22,181,707 13,421,788 8,603,304
General and administrative expenses..... 7,915,790 4,736,856 2,066,668
Depreciation and amortization........... 6,863,120 3,802,461 2,605,576
Office closing charge................... 3,264,000 - -
----------- ---------- ---------
Income from operations.............. 7,590,658 6,767,193 2,928,300
----------- --------- ---------
OTHER INCOME (EXPENSES):
Interest expense........................(2,658,912) (1,881,173) (1,303,110)
Other, net.............................. 205,006 (125,878) 48,671
----------- ----------- -----------
Other income (expense), net...........(2,453,906) (2,007,051) (1,254,439)
----------- ----------- -----------
Income before income taxes and
extradorinary gain................ 5,136,752 4,760,142 1,673,861
PROVISION FOR INCOME TAXES................(2,134,683) (2,131,659) (721,070)
---------- ---------- ---------
Income before extraordinary gain.... 3,002,069 2,628,483 952,791
EXTRAORDINARY GAIN, net of $280,280 of
income taxes......................... - 356,720 -
---------- ---------- ---------
Net income..........................$ 3,002,069 $ 2,985,203 $ 952,791
=========== =========== ==========
EARNINGS PER SHARE:
Primary:
Income before extraordinary gain...... $0.25 $0.39 $0.21
Extraordinary gain.................... - 0.05 -
---------- ---------- ---------
Net income.......................... $0.25 $0.44 $0.21
=========== ========== =========
Fully diluted:
Income before extraordinary gain...... $0.25 $0.34 $0.19
Extraordinary gain.................... - 0.05 -
---------- ---------- ---------
Net income.......................... $0.25 $0.39 $0.19
========== ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-5
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Series A Series B Additional
Preferred Preferred Common Paid-in Retained Treasury
Stock Stock Stock Capital Earnings Stock
---------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 ......$2,642,120 $ 2,379,000 $2,178 $ 664,595 $ 861,584 $ --
Net income .................... -- -- -- -- 952,791 --
Preferred stock dividends
declared .................... -- -- -- -- (129,990) --
Finet Acquisition ............. -- -- 267 698,225 -- --
Exchange of common stock for
preferred stock ............. (243,992) -- 43 243,949 -- --
Additional common stock issued
in Finet Acquisition ........ -- -- 133 745,447 -- --
Issuance of common stock ...... -- -- 44 244,001 -- --
---------- ------------ ------ ------------ ---------- ---------
BALANCE, December 31, 1993 ...... 2,398,128 2,379,000 2,665 2,596,217 1,684,385 --
Net income (Restated - See
Note 1) .................... -- -- -- -- 2,985,203 --
Issuance of common stock, net
of offering costs ........... -- -- 2,184 16,517,493 -- --
Conversion of preferred stock
into common stock ...........(2,398,128) -- 425 2,397,703 -- --
Redemption of preferred stock . -- (2,379,000) -- -- -- --
Warrants exercised for common
stock ....................... -- -- 137 1,233,673 -- --
Victory Waste Acquisition ..... -- -- 746 9,230,769 -- --
Issuance of warrants and option
as obligation settlements ... -- -- -- 165,000 -- --
Purchase of treasury stock .... -- -- -- -- -- (106,549)
Common stock issued for
acquired businesses ......... -- -- 44 314,506 -- --
---------- ------------ ------ ------------ ---------- ---------
BALANCE, December 31, 1994
(Restated - See Note 1) ...... -- -- 6,201 32,455,361 4,669,588 (106,549)
Net income (Restated - See
Note 1) .................... -- -- -- -- 3,002,069 --
Issuance of common stock, net of
offering costs .............. -- -- 2,007 30,376,294 -- --
Common stock issued for acquired
businesses and investment ... -- -- 99 1,099,671 -- --
Cancellation of previously
recorded stock options ...... -- -- -- (2,016,000) -- --
Issuance of common stock and
warrants as obligation
settlements ................. -- -- 108 925,193 -- --
Purchase of treasury stock .... -- -- -- -- -- (365,550)
Warrants and options exercised
for common stock ............ -- -- 39 222,722 -- --
--------- ------------ ------ ------------ ---------- ---------
BALANCE, December 31, 1995
(Restated - See Note 1) ...... $ -- $ -- $8,454 $63,063,241 $7,671,657 $(472,099)
======== ============ ====== =========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-6
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
(Restated - See Note 1)
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 3,002,069 $ 2,985,203 $ 952,791
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization................... 6,863,120 3,802,461 2,605,576
Office closing charge........................... 3,264,000 - -
Extraordinary gain, net of income taxes......... - (356,720) -
Provision (benefit) for deferred income taxes... (1,218,365) 845,404 552,786
Compensatory options, warrants and common shares 1,063,819 364,836 -
Changes in operating assets and liabilities, net
of effect of business acquisitions--
Accounts and notes receivable, net.......... (2,261,776) (1,283,722) (891,621)
Prepaid expenses............................ (1,406,557) (289,984) (116,310)
Other assets................................ (1,208,643) (480,112) (207,065)
Accounts payable............................ (829,354) 483,638 656,657
Income taxes payable........................ 1,789,984 650,544 68,797
Accrued landfill closure costs.............. (1,302,103) 712,941 129,586
Other accrued liabilities................... 834,240 (2,229,541) (14,543)
------------ ----------- -----------
Net cash provided by operating............ 8,590,434 5,204,948 3,736,654
activities ------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................(19,680,791) (12,826,591) (3,485,177)
Landfill development project additions.............. (296,937) (1,514,547) -
Cash paid for businesses and investment,
net of cash acquired.............................. (6,664,520) (475,000) (18,087)
Cash paid for common and preferred stock
of minority interest.............................. (948,482) - -
Cash acquired in businesses purchased with stock.... - 323,633 699,707
(Increase) decrease in cash held in escrow, net
of effect of business acquisitions................ (2,627,818) (483,873) 324,410
------------ ----------- -----------
Net cash used in investing activities...........(30,218,548) (14,976,378) (2,479,147)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under revolving lines 16,400,000 (240,000) (160,000)
of credit
Issuance of long-term debt.......................... 782,000 13,496,468 4,030,355
Payments on long-term debt..........................(26,074,009) (14,659,801) (5,105,108)
Issuance of common stock, net of offering costs..... 30,378,301 16,369,800 64,015
Deferred financing costs paid....................... (909,472) (119,946) (133,565)
Redemption of Series B preferred stock.............. - (2,379,000) -
Preferred stock dividends paid...................... - (208,164) (44,620)
Warrants and options exercised for common stock..... 222,761 1,233,810 -
Purchase of treasury stock.......................... (365,550) (106,549) -
------------ ----------- -----------
Net cash provided by (used in) financing 20,434,031 13,386,618 (1,348,923)
activities ------------ ----------- -----------
Net increase (decrease) in cash and cash........ (1,194,083) 3,615,188 (91,416)
equivalents
CASH AND CASH EQUIVALENTS, beginning of year.......... 4,677,237 1,062,049 1,153,465
------------ ----------- -----------
CASH AND CASH EQUIVALENTS, end of year................ $ 3,483,154 $ 4,677,237 $ 1,062,049
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-7
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 1 - Organization:
Basis of Presentation:
On September 9, 1993, Continental Waste Industries, Inc. ("Former
Continental") was acquired by (the "Finet Acquisition") Finet, Inc.
("Finet"). Finet was a public corporation which had no operations. The
acquisition has been recorded in accordance with generally accepted
accounting principles as a reverse acquisition under the purchase
method. The consolidated financial statements presented herein for the
year ended December 31, 1993, include only the financial results of
Former Continental through September 8, 1993, with all Former
Continental share and per share information being adjusted by the
conversion rate at which such shares were converted into Finet shares.
The consolidated financial information for the periods subsequent to
September 8, 1993 include the results of both Continental Waste
Industries, Inc. and Finet in their consolidated form. As part of the
acquisition, Finet changed its name to Continental Waste Industries,
Inc. (the "Company"). The Company changed its state of incorporation
from New York to Delaware on February 28, 1994.
On December 28, 1995, the Company effected a 5 for 3 stock split of
its common stock. All common share information has been restated for
all periods to reflect the 5 for 3 stock split. As a result of the
restatement, presented per share and weighted average share
information is not comparable to amounts disclosed in documents
previously filed with the Securities and Exchange Commission. The
Company's $.0006 par value common stock is hereinafter referred to as
Shares.
Operations: The Company provides integrated solid waste management
services to residential, commercial and industrial customers
concentrated primarily in the eastern half of the United States. These
services include nonhazardous landfill disposal, solid waste
collection, transfer station operations and recycling programs. The
Company also provides solid waste management services in Costa Rica.
The Company conducts its domestic solid waste operations in Indiana,
Michigan, Missouri, Illinois, Kentucky, Tennessee, South Carolina,
Mississippi and West Virginia. The Company operates primarily in
smaller metropolitan markets and in rural areas, although some sites
are economically accessible from Chicago and other large cities. At
December 31, 1995, the Company owned and operated a total of nine
landfills, eight waste collection operations, thirteen transfer
stations and three municipal recycling facilities.
The Company's previously filed 1994 and 1995 financial statements have
been restated herein to reflect certain costs as compensatory rather
than as consideration paid in a business acquisition. The income
statement effect of this restatement was as follows:
1994 1995
------------------ ---------------------
As previously As previously
filed As restated filed As restated
General and administrative
expenses $4,484,856 $4,736,856 $ 6,882,790 $7,915,790
Office Closing charge --- --- $ 1,500,000 $3,264,000
Income from operations 7,019,193 6,767,193 10,387,658 7,590,658
Income before income taxes
and extraordinary gain 5,012,142 4,760,142 7,933,752 5,136,752
Net income 3,124,357 2,985,203 4,636,636 3,002,069
Primary earnings per share 0.45 0.44 0.38 0.25
Fully-diluted earnings per share 0.41 0.39 0.38 0.25
The restatement's effect on total stockholders' equity was a decrease of
$121,154 to $37,024,601 as of December 31, 1994 and a decrease of $1,773,721 to
$70,271,253 as of December 31, 1995.
In addition to the above restatement, the Company also reclassified certain
landfill cell development costs which were previously reflected as a component
of prepaid expenses into land, landfill site and improvements. Such amounts were
$3,763,908 and $4,420,587 as of December 31, 1994 and 1995, respectively.
F-8
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 2 - Summary of Significant Accounting Policies:
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
Cash Equivalents:
The Company considers those investments which are highly liquid in
nature and have an original maturity of three months or less at the
date of purchase to be cash equivalents.
Revenue and Receivables:
The Company recognizes revenue upon receipt of waste at the Company's
facilities. Landfill revenues are reported net of certain governmental
taxes which are collected from customers and remitted to the
governments primarily to assure proper closure and post-closure of the
landfill sites. The Company grants credit to the majority of its
customers on terms which range from fifteen to forty days. Potential
loss amounts associated with the granting of credit are included in
management's estimate of the allowance for doubtful accounts. It is
not the policy of the Company to require collateral from its customers
in order to obtain credit.
Property and Equipment:
Property and equipment is stated at cost less accumulated depreciation
and amortization. Depreciation and amortization is computed on a
straight-line basis over the estimated useful lives as follows:
Estimated
Asset Description Useful Lives
-------------------------------- --------------
Buildings and improvements 19 to 32 Yrs.
Vehicles and equipment 2 to 12 Yrs.
Office furniture and equipment 5 to 7 Yrs.
Repairs and maintenance costs are expensed as incurred, while major
renewals and betterments are capitalized. Repair and maintenance costs
in 1995, 1994 and 1993 were $2,091,625, $1,046,946 and $569,480,
respectively. Gains or losses on retirements and disposals of property
and equipment are reflected in current operations.
Landfill sites represent costs to develop individual landfill cells
for usage which are capitalized as incurred and are amortized as the
airspace in each cell is consumed. Fully amortized cells are written
off in the period in which the cell accepts its last receipt of waste.
Landfill site improvement costs include design, licensing and
construction costs necessary to make the cell ready for receipt of
waste. Interest costs are also capitalized while development
activities are undertaken to prepare cells for their intended use.
Interest costs capitalized in 1995, 1994 and 1993 were $457,250,
$224,345 and $114,240, respectively.
Excess Cost Over the Fair Value of Net Assets Acquired:
The excess cost over the fair value of net assets acquired
("goodwill") is amortized on a straight-line basis over twenty-five to
thirty years. Such costs are reflected net of accumulated amortization
of $1,395,054 and $831,642 at December 31, 1995 and 1994,
respectively. Amortization expense was $563,412, $317,026 and $255,428
in 1995, 1994 and 1993, respectively. Should events or circumstances
occur subsequent to the acquisition of a business which bring into
question the realizable value or impairment of the related goodwill,
the Company will evaluate the remaining useful life and balance of
goodwill and make appropriate adjustments. The Company's principal
considerations in determining impairment include the strategic benefit
to the Company of the particular business and the current and expected
future operating income levels of that particular business.
F-9
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 2 - Summary of Significant Accounting Policies: (Continued)
Agreements Not to Compete:
Agreements not to compete represent the cost of obtaining such
agreements pursuant to various business acquisitions. Such costs are
amortized over the term of the related agreement, typically five to
ten years. Some such terms do not commence until after certain
consulting arrangements have terminated. Such costs are reflected net
of amortization of $250,758 and $204,205 at December 31, 1995 and
1994, respectively. Amortization expense in 1995, 1994 and 1993 was
$55,248, $57,899 and $64,674, respectively.
Landfill Closure Costs:
It is the policy of the Company to accrue the estimated landfill
closure and post-closure maintenance costs expected to be incurred
upon and subsequent to the closing of existing operating landfill
areas ratably in relation to the airspace consumed. Such costs will
principally include costs for the final cap and cover of the landfill
area, management of leachate, groundwater monitoring and general area
maintenance.
The Company constructs landfill cells with an average useful disposal
life of two to three years. This construction policy usually results
in partial or total cell closure within two to five years of a cell
first accepting waste. Closure requirements and post-closure care
requirements are governed by various state regulatory agencies and are
typically a component of the landfills operating permit. All of the
Company's operating landfills are required to provided 30 years of
post-closure care. Closure costs are determined by many factors
including total acreage to be closed, composition of the closure cap,
on-site availability of materials and others. While management
estimates such future costs for each landfill site, such estimates of
the amount and timings of such costs are fixed or reliably
determinable. Accordingly, the Company's estimate of these costs in
current dollars is inflated at a rate of 4% until the expected time of
payment and then discounted to present value at 8%.
The Company provides for such discounted costs ratably as the airspace
in each cell is consumed. The resulting accrued landfill closure costs
are not reduced by funds set aside by the Company, either voluntarily
or by statute, to pay for such costs. Such funding, if appropriate, is
recorded as a long-term asset. Had the Company not discounted this
liability, the amounts recorded would have been increased by
approximately $12.8 million as of December 31, 1995. Total estimated
closure and post-closure costs to be spent after December 31, 1995,
inflated as described above, are approximately $50.4 million of which
approximately $1.6 million, on average, is expected to be expended
each year over the next five years.
Translation of Foreign Currency:
The Company translates the financial statements of its foreign
subsidiaries in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 52, "Foreign Currency Translation." The
cumulative translation adjustment and translation loss were immaterial
to the consolidated financial statements.
Land Purchase Option:
The $1,000,000 land purchase option is an option to purchase 200 acres
of land adjacent to the Company's Forest Lawn Landfill in Three Oaks,
Michigan. Forty acres of the 200 acres have already been approved by
Berrien County for landfill use and 110 acres have been similarly
approved for composting of waste and various other related activities.
The expiration date of the option is October 16, 2000. The option must
be exercised prior to the expiration date or the date on which the 40
acres of the 200 acres is licensed by the State of Michigan to receive
solid waste for disposal, whichever occurs first. The exercise price
of this option is $4,250,000.
F-10
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 2 - Summary of Significant Accounting Policies: (Continued)
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reporting amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
New Accounting Pronouncements:
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" was issued in March 1995 and
is to be adopted by the Company in 1996. This new pronouncement
establishes standards on when to review long-lived assets and certain
identifiable intangible assets for impairment and how to measure that
impairment. Management has not determined the impact, if any, that
adoption of this standard will have on the Company's financial
position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in
October 1995 and is to be adopted by the Company in 1996. This new
pronouncement establishes financial accounting and reporting standards
for stock-based employee compensation plans and requires a fair value
based method to determine the compensation cost of such plans.
Management has not determined if the Company will adopt the accounting
method prescribed by the new standard or if it will, as allowed by the
standard, only provide supplemental pro forma disclosure of the effect
of such adoption. Management has not determined the effect of adopting
the prescribed accounting on the Company's financial position or
results of operations.
Reclassifications:
Certain amounts in previously issued financial statements have been
reclassified to conform to 1995 classifications.
Note 3 - Business Combinations:
In January 1993, the Company purchased a landfill disposal business
from a current stockholder and Chairman of the Company's Board of
Directors, Thomas A. Volini, for one Share and the assumption of
$214,000 notes payable by Mr. Volini to the previous business owner.
On September 9, 1993, the Company completed the Finet Acquisition.
Finet issued 3,660,050 Shares in exchange for all of Former
Continental's issued and outstanding common shares, 72,107 Shares in
exchange for certain Former Continental Series A preferred shares and
196,708 Shares and a cash payment of $44,620 as payment of accrued
dividends on Former Continental Series A preferred shares and
indebtedness to certain stockholders. Finet sold 25,000 Shares for
$.0006 per share and issued 425,200 Series A preferred shares and
118,950 Series B preferred shares in exchange for certain issued and
outstanding Former Continental Series A and Series B preferred shares.
Former Continental common shares were converted into Finet common
shares at a 1 for 4.458705 per share conversion rate. Former
Continental Series A preferred stock was converted into Finet Series A
preferred stock at a 1 for 2.675223 per share conversion rate. Former
Continental Series B preferred stock was converted into Finet Series B
preferred stock on a 1 for 1 basis.
In July 1994, the Company acquired approximately 73% of the issued and
outstanding stock of Victory Waste Incorporated ("Victory") for
831,425 Shares. Since July 1994, the Company has issued 482,854 Shares
and $948,482 in cash to acquire the remaining interest in Victory and
its subsidiary.
F-11
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 3 - Business Combinations: (Continued)
In conjunction with the Victory acquisition, two former directors and
officers of Victory entered into employment agreements with the
Company which included a provision for payment in Shares contingent
upon the net income of Victory for the year ended December 31, 1995.
Based on such income, management estimates the Company will issue
22,740 Shares to each officer. Such Shares are reflected as
outstanding as of December 31, 1995. Such deemed issuance increased
general and administrative expense by $529,000. The officers will also
receive 52,778 Shares each if certain permits are issued for a certain
landfill.
These employment agreements also provided for the annual issuance of
stock options with an aggregate fair market value of $2,520,000. As
these options were contractually issuable, the Company recorded
prepaid compensation costs for their full value and an increase to
additional paid in capital as of the acquisition date. The prepaid
compensation costs were to be amoritzed ratably over the five year
term of the employment agreements. In June 1995, $504,000 of such
value was granted in the form of stock options. On December 31, 1995,
both employees terminated their agreements with the Company each in
exchange for $600,000 of cash paid in January 1996 and a $500,000
non-interest bearing note due in two installments maturing in January
1997 and 1998. The termination of these agreements prompted the
Company to close its administrative office in Indianapolis, Indiana,
and to write-off certain related Victory contracts as described in
Note 4 - Office Closing Charge. Due to the cancellation of the
employment agreements under which the aforementioned stock options
were to be issued, the Company included the unamortized compensatory
options to the office closing charge and fully expensed the $1,764,000
unamortized balance of the prepaid compensation costs in such charge.
In August 1994, for $700,000, the Company purchased the only
privately-owned, non-hazardous waste landfill operation in Costa Rica.
The definitive agreements provide for the assumption of the
residential and commercial collection contracts of certain cities. The
Company paid half of the purchase price during the first year
following the acquisition with the remainder payable over a seven year
period in equal quarterly payments without interest.
From January 1, 1995 to August 15, 1995, the Company expanded its
operations through the acquisition of six businesses engaged in waste
management operations. The aggregate of these business acquisitions
was significant to the Company. These entities included ASCO
Sanitation, Inc., Larry's Disposal, Inc., Terre Haute Recycling, Inc.,
Gilliam Sanitation, Inc./Gilliam Transfer, Inc., Anderson Refuse
Company, Inc./M.V. Dulworth, and a 72% interest in Procesa Continental
S.A., de C.V. The aggregate purchase price of these businesses was
$8.9 million, plus the assumption or refinancing of $2.1 million of
debt and $0.6 million of future contingent payments. The purchase
prices were paid by issuing 164,846 Shares with a market value of $1.1
million at the time of issuance, paying $5.8 million of cash obtained
from the Company's $45 million credit facility (the "Credit Facility")
and issuing $2.0 million of notes payable to the sellers.
In October 1995, the Company purchased, through one of its
subsidiaries, a sanitary landfill in Richland County, South Carolina
("Richland"). The acquiring subsidiary, which is 85% owned by the
Company, was organized recently to make acquisitions of landfills and
related solid waste management operations and to pursue privatization
and public-private partnership opportunities in the Southeastern
United States. The Company has an option to acquire the remaining 15%
of the subsidiary for approximately $2.4 million of common stock of
the Company. The Company, on behalf of its subsidiary, paid $2.4
million in cash and notes, and assumed $1.1 million of debt for
Richland. As a condition of the landfill purchase, a South Carolina
collection company has entered into, among other things, a 10-year
put-or-pay disposal contract with the Company to provide a minimum of
300 tons of waste per day, and a 120-day disposal contract for 500
tons of waste per day, with a right of first refusal to the Company
for a long-term extension.
F-12
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 3 - Business Combinations: (Continued)
The following table summarizes the pro forma operating results in 1994
and 1993 as if Victory had been acquired as of the beginning of the
applicable year (and as if Victory acquired G.E.M. Environmental
Management, Inc. ("GEM") and GEM acquired several businesses as of
January 1, 1993), and the pro forma operating results in 1995 as if
the 1995 business acquisitions (including the acquisition of the
minority interests in Victory and GEM and excluding Richland) occurred
on January 1, 1995.
1995 1994 1993
----------- ----------- -----------
Pro forma revenue.................... $54,167,940 $46,866,140 $28,913,757
=========== =========== ===========
Pro forma income before
extraordinary gain................. $ 2,877,875 $ 2,461,386 $ 577,890
=========== =========== ===========
Pro forma net income................. $ 2,877,875 $ 2,818,106 $ 577,890
=========== =========== ===========
Pro forma primary earnings per
share before extraordinary gain....$ 0.24 $ 0.36 $ 0.08
=========== =========== ===========
Pro forma fully diluted earnings per
share before extraordinary gain... $ 0.24 $ 0.33 $ 0.08
=========== =========== ===========
The pro forma operating results include each acquiree's
pre-acquisition results of operations for the indicated years with
adjustments to reflect amortization of goodwill, additional
depreciation on the increases to the fair market value of fixed
assets, interest expense on the acquisition borrowings, the effect of
income taxes thereon and the issuance of Shares in such acquisitions.
The pro forma information given above does not purport to be
indicative of the results that actually would have been obtained if
the operations were combined during the periods presented and is not
intended to be a projection of future results or trends.
Excluding the acquisitions described above, the Company also acquired
in 1994 and 1993 the common stock, net assets (consisting primarily of
hauling equipment) or customer routes of various independent hauling
operations for cash, notes and Shares. The effect on consolidated
operating results and financial condition from these acquisitions was
not material.
All of the above acquisitions were accounted for as purchases and,
accordingly, the purchase price, in some cases based on the estimated
market value of the Shares issued as consideration, was allocated to
the related assets acquired and liabilities assumed based upon their
estimated fair values at the date of acquisition. Those estimated fair
values have been adjusted as of December 31, 1995. Future adjustments,
if any, will be made prior to the one year anniversary of the related
acquisition and are not expected to be material. Operating results of
acquired businesses have been included in the consolidated financial
statements from the date of acquisition.
In March 1996, the Company purchased two construction and demolition
landfills in central Florida for approximately $5.3 million.
In March 1996, the Company sold its 72% interest in Procesa
Continental S.A. de C.V., which encompassed all of the Company's
Mexico City operations, for approximately $2.6 million in cash.
F-13
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 4 - Office Closing Charge:
Concurrent with the termination of the two officers' employment
agreements, the Company closed its Victory headquarters in
Indianapolis, Indiana and recorded a related $3,264,000 pretax charge
for such closing. The major components of the charge include
approximately (i) $2,237,000 severance package costs for the two
officers including the write-off of unamortized prepaid compensation
costs and (net of the reversal of the value of previously recorded
stock options to be issued pursuant to the employment agreements),
(ii) costs related to future contractual payments to be made under
several agreements in place at the time the Company acquired Victory,
(iii) the write off of certain office equipment and (iv) other costs,
such as lease obligations and severance pay to office employees,
related to the physical closure of the office.
Note 5 - Earnings Per Share:
Earnings per share information presented herein for 1993 reflect the
conversions described in Note 3 related to the Finet Acquisition and
for all years reflect the effect of the stock split described in Note
1.
Earnings per share for the years ended December 31, 1995 and 1994 were
computed based on the following weighted average common and common
equivalent shares:
<TABLE>
<CAPTION>
1995 1994 1995 1994
Primary Primary Fully Diluted Fully Diluted
---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average common and common
equivalent shares:
Shares outstanding....................... 11,277,572 6,275,485 11,277,572 6,275,485
Dilutive stock options, warrants and
convertible Series A preferred stock.... 701,828 530,918 731,735 1,197,605
Contingent shares and options related to
the Victory acquisition................ - 51,347 105,556 140,031
---------- --------- ------------ ---------
11,979,400 6,857,750 12,114,863 7,613,121
========== ========= ========== =========
</TABLE>
Primary earnings per share for the year ended December 31, 1993 was
based upon the weighted average number of common and common equivalent
shares outstanding during such year and income available to common
stockholders. Common equivalent shares for that year resulted from
dilutive stock options and warrants. Primary weighted average common
and common equivalent shares for the year ended December 31, 1993 was
3,950,085. Income available to common stockholders excludes dividends
declared on the Company's preferred stock. No such dividends were
declared in 1995 or 1994.
Fully diluted earnings per share for 1993 are similarly computed but
include the dilutive effect of the Company's convertible Series A
preferred stock. Fully dilutive weighted average common and common
equivalent shares were 4,739,270 for the year ended December 31, 1993.
The Series A preferred stock converted into Shares in November 1994.
F-14
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 6 - Allowance for Doubtful Accounts:
The following table reflects the activity of the allowance for
doubtful accounts for the years ended December 31, 1995, 1994 and
1993:
Charged to
Balance Costs and
Beginning Expense Balance
of Year Accounts Deductions End of Year
--------- --------- ---------- ----------
Year ended December 31, 1995 $360,000 $ 95,000 $ (59,000) $396,000
Year ended December 31, 1994 $102,000 $ 368,000 $(110,000) $360,000
Year ended December 31, 1993 $ 77,000 $ 50,000 $ (25,000) $102,000
Note 7 - Accrued Liabilities:
Current accrued liabilities as of December 31, 1995 and 1994,
consisted of the following:
1995 1994
---------- -----------
Accrued landfill closure costs $1,769,823 $ 221,174
Accrued local landfill taxes . 819,866 904,143
Unearned revenue ............. 1,507,019 766,423
Other accrued liabilities .... 1,945,969 1,447,108
---------- ----------
$6,042,677 $3,338,848
---------- ----------
---------- ----------
Unearned revenue primarily represents quarterly or monthly billings in
advance of service.
Note 8 - Debt:
The $2,117,500 of notes payable as of December 31, 1995, consist of
non-interest bearing promissory notes of $1,537,000 (paid on January
1, 1996) to the sellers of three of the 1995 acquired businesses and a
$580,500 note due in March 1996 which was assumed in one of the 1995
business acquisitions. This note has an interest rate of 9.75%.
Long-term debt, including capital lease obligations which are not
material, at December 31, 1995 and 1994 consisted of the following:
1995 1994
----------- -----------
Credit Facility ................................ $16,400,000 $ --
Notes payable to LaSalle National Bank ("LNB").. -- 8,843,750
Notes payable to banks and finance companies.... 2,124,370 9,107,310
Notes payable to individuals and companies ..... 4,779,362 7,396,986
----------- -----------
23,303,732 25,348,046
Less current maturities .............. 2,528,741 856,731
----------- -----------
$20,774,991 $24,491,315
----------- -----------
----------- -----------
F-15
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 8 - Debt: (Continued)
Of the various notes payable to LNB as of December 31, 1994, the
proceeds from one such loan were used to retire $3.5 million of notes
and accrued interest due to certain individuals at a discount. This
early retirement of debt resulted in an extraordinary gain, net of
related expenses and income taxes of $356,720. Related to this
transaction, the Company also issued warrants to purchase 33,333
shares of common stock currently at a price of $5.40 per share to the
note holders. The warrants expire in 1997.
On March 28, 1995, the Company entered into the Credit Facility with
LNB which expires in March 1998. Borrowing under the Credit Facility
refinanced certain existing indebtedness and provided additional funds
for the operation of the Company. The Credit Facility has been
subsequently syndicated to include the Bank of America and the First
National Bank of Boston. Borrowings under the Credit Facility bore a
weighted average interest rate of 9.18% during 1995 with a weighted
average interest rate of 9.05% on outstanding loans as of December 31,
1995.
The Company deferred approximately $909,000 of costs incurred in
obtaining the Credit Facility. Such costs are being amortized over the
term of the Facility. Such accumulated amortization was $258,000 as of
December 31, 1995.
In the first quarter of 1996, the Company and the lenders amended the
Credit Facility (the "Amended Credit Facility") effective as of
January 1, 1996 with covenants effective as of December 31, 1995. The
Amended Credit Facility expires in January 1999 and is secured by all
corporate assets and a pledge of the stock of all subsidiaries. As
amended, each borrowing under the Amended Credit Facility bears
interest based on the Company's leverage ratio, as defined, of funded
debt to earnings before interest, taxes, depreciation and
amortization. If the leverage ratio is 2.0 to 1 or less, then the
interest rate is, at the Company's option, prime or LIBOR plus 1.5%
and the fee on outstanding letters of credit is .75%. If the leverage
ratio falls between 2.01 to 2.5 compared to 1, then the interest rate
is prime plus 0.5% or LIBOR plus 1.75% and the fee on outstanding
letters of credit is 1.0%. If the leverage ratio falls between 2.51
and 3.0 compared to 1, then the interest rate is prime plus 1.0% or
LIBOR plus 2.0% and the fee on outstanding letters of credit is 1.5%.
If the leverage ratio is greater than 3.0 to 1, then the interest rate
is prime plus 1% or LIBOR plus 2.5% and the fee on outstanding letters
of credit is 2.0%. The Amended Credit Facility includes provisions for
letters of credit up to $10.0 million. The Company will also pay a
0.5% fee on the average unused portion of the Amended Credit Facility.
As of December 31, 1995, $23.6 million of unused credit under this
facility remained available.
Notes payable to banks and finance companies have principal amounts
payable monthly through May 1999, bear interest at rates from 4.8% to
26.6% and are secured by certain land and buildings, vehicles,
equipment and accounts receivable.
Notes payable to individuals and companies have principal amounts
payable monthly, quarterly, semi-annually and annually through
February 2002, bear interest at rates from 0% to 9.75% and are secured
by certain land, vehicles and equipment.
Under the terms of the Amended Credit Facility, the Company is
required to meet certain covenants regarding, among other things,
financial position and results of operations. Based on the Company's
December 31, 1995 financial position and results of operations, the
Company was in compliance with such covenants. The terms of the
Amended Credit Facility impose restrictions that affect, among other
things, the Company's ability to (i) incur additional indebtedness,
(ii) create liens on assets, (iii) sell assets, (iv) engage in
mergers, acquisitions or consolidations, (v) make investments, (vi)
pay dividends or make distributions and (vii) engage in certain
transactions with affiliates and subsidiaries.
F-16
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 8 - Debt: (Continued)
The Amended Credit Facility also contains subjective covenants
providing that the Company would be in default if, in the judgment of
the lenders, there is a material adverse change in the financial
condition of the Company. Management is not aware of, nor does it
anticipate, any facts, events or occurrences which could reasonably be
expected to have a material adverse effect on the operations of the
Company that would cause the lenders to demand repayment of the
amounts borrowed under the Amended Credit Facility prior to its
termination.
Principal payments on long-term debt, based on scheduled maturities
after the amendment described above, are due as follows during the
years ending December 31:
1996 $ 2,528,741
1997 2,362,055
1998 1,134,542
1999 16,832,576
2000 231,005
After 2001 214,813
-----------
$23,303,732
-----------
-----------
Note 9 - Common Stock:
In June 1993, Former Continental issued 12,988 Shares with an
aggregate value of $6,236 in settlement of outstanding liabilities and
sold 17,593 Shares to current stockholders for $64,000.
On October 12, 1993, as a result of the Finet Acquisition, the Company
issued 4,398,310 Shares in replacement of previously outstanding Finet
common shares, including the 3,953,865 Shares issued to Former
Continental stockholders in the Finet Acquisition. Subsequent to the
Finet Acquisition in 1993, an additional 43,217 Shares with an
aggregate value of $173,810 were issued as settlement of outstanding
liabilities. Pursuant to the 5 for 3 stock split, on December 28, 1995
the Company's authorized Shares were increased to 40,000,000 from
10,000,000 (unadjusted).
In November 1994, the Company and certain stockholders completed a
public offering of 2,556,027 Shares (2,333,333 Shares were sold by the
Company and 222,694 Shares were sold by certain stockholders of the
Company). The Company received approximately $11.6 million of net
proceeds from the sale of which approximately $3.1 million was used to
redeem all of the outstanding Series B preferred shares and pay
related accrued interest and dividends. The remaining $8.5 million
became available for general corporate purposes.
Concurrent with the public offering, in order to eliminate the accrual
of any further dividends on the Series A preferred stock, the Series A
preferred stockholders agreed to and have converted the 425,200 Series
A preferred shares into 708,667 Shares. The Company, in consideration
of the conversion, issued warrants to purchase 71,093 Shares at an
exercise price of $5.70 to the holders of the Series A preferred
shares. The warrants expire in 1999.
F-17
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 9 - Common Stock: (Continued)
Had this public offering, the redemption of the Series B preferred
shares and payment of related accrued interest and dividends and the
conversion of the Series A preferred stock and related issuance of
warrants occurred on January 1, 1994, earnings per share after the
extraordinary gain in 1994 would have been $0.38. Only the portion of
the public offering (605,373 Shares) which was necessary to fund the
redemption and related payment was considered for purposes of this pro
forma earnings per share disclosure.
During 1995 and 1994, the Company issued 179,448 Shares and 1,308,203
Shares, respectively, in private placements or in settlement of
certain compensation, debt or service fee obligations. The aggregate
value of such issuances was $925,301 in 1995 and $4,919,946 in 1994.
In 1995, the Company issued 164,846 Shares as consideration paid in
two business acquisitions and an investment purchase with an aggregate
value of $1,099,770. In 1994, the Company also issued 72,458 Shares as
consideration paid in two business acquisitions with an aggregate
value of $314,550.
See Note 3 for a description of the Victory Waste acquisition and the
resulting 1,314,279 Shares issued at an aggregate value of $6,696,999
over 1995 and 1994.
In October 1995, the Company and certain of its stockholders completed
a public offering of 3,780,680 Shares (3,292,760 Shares were sold by
the Company and 487,920 Shares were sold by certain stockholders of
the Company). The Company received approximately $30.1 million of net
proceeds from the sale. The proceeds were used to reduce the
outstanding indebtedness under the Credit Facility which provided the
Company with renewed borrowing capacity under the Credit Facility for
future acquisitions, capital expenditures and general corporate
purposes. Had this public offering and reduction in outstanding
indebtedness occurred on January 1, 1995, earnings per share would
have been $0.38.
Note 10 - Preferred Stock:
On October 27, 1993, as a result of the Finet Acquisition, the Company
authorized 644,200 new shares of preferred stock of which 425,200 of
such shares were designated as Series A preferred stock with a par
value of $5.64 per share, 119,000 of such shares were designated as
Series B preferred stock with a par value of $20.00 per share, and
100,000 of such shares were designated as additional preferred stock
with a par value of $.001 per share. The 425,200 shares of Series A
preferred stock and 118,950 shares of Series B preferred stock were
issued in replacement of the then outstanding shares of Former
Continental Series A and Series B preferred stock, respectively. By
agreement of the holders of the preferred stock, dividends on such
stock had been suspended since April 1, 1993. None of the 100,000
shares of additional preferred stock has been issued as of December
31, 1995.
In November 1994, all of the Series A preferred stock was converted
into Shares and all of the Series B preferred stock, including related
accrued interest and dividends, were retired with a portion of the
proceeds from the public offering described in Note 9.
F-18
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 11 - Stock Options and Warrants:
Incentive Stock Options:
Prior to June 1995, the Board of Directors adopted a policy of issuing
annual stock options to selected employees. The issuance and amount of
such stock option grants were reviewed annually by the Board of
Directors and such grants were solely in its discretion. Options were
granted at an exercise price equal to the then prevailing market value
as determined by the Board of Directors. Granted options vest in equal
percentages over a three year period commencing on the date of the
grant and expire five years from such date. No future options will be
granted under this arrangement.
In June 1995, the Company adopted a 1995 Employee Stock Option Plan
(the "1995 Plan") for all officers and employees. The 1995 Plan
provides for the granting of options to purchase not more than an
aggregate of 166,667 Shares. The 1995 Plan is administered by the
Stock Option Committee appointed by the Board of Directors. Upon
granting options under the 1995 Plan, the Stock Option Committee, at
its discretion, determines the type of option (incentive or
non-qualified), the exercise price (not less than 100% of the fair
market value for incentive stock options), the vesting period and
manner, and the expiration (not to exceed five years from the date of
grant) of such option. As of December 31, 1995, no options have been
granted under the 1995 Plan.
Director Stock Options:
Prior to December 31, 1995, the Board of Directors adopted a policy of
issuing stock options to certain directors. Granted options vest
immediately and expire from 5 to 10 years from date of grant. The
options were granted at an exercise price equal to the then prevailing
market value as determined by the Board of Directors except for
certain issuances in May 1994 which were granted at less than market
value and resulted in a $57,150 charge.
In December 1995, the Company adopted a 1995 Stock Option Plan for
Outside Directors (the "Director Plan"). The Director Plan provides
for the granting of options to purchase not more than an aggregate of
166,667 Shares. Upon election to the Company's Board of Directors,
each new outside director will receive an option to purchase 8,334
Shares. Upon adoption of the Director Plan, all three outside
directors received an option to purchase an additional 8,334 Shares.
Three days following the date of each Annual Meeting of the
Stockholders of the Company, each outside director will receive an
option to purchase an additional 8,334 Shares. Options are granted at
an exercise price equal to the then prevailing market value. All
options vest after one year from the date of grant and expire on the
earlier of 10 years from such date or 1 year from the date the
director ceases to be an outside director of the Company. As of
December 31, 1995, there were 141,665 Shares available under this
plan.
F-19
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 11 - Stock Options and Warrants: (Continued)
The following table summarizes certain information regarding stock
options during the years ended December 31, 1995, 1994 and 1993:
Employee Plans Director Plans
-------------------------- -----------------------
Shares Price Range Shares Price Range
Under Per Under Per
Option Share Option Share
--------- ---------------- -------- -------------
Balance, December 31, 1992 31,367 $ 1.12 2,230 $ 3.38
Granted 98,086 $ 1.34 319,752 $ 2.36 - $ 3.38
Cancelled (2,969) $ 1.12 - $ 1.34 -
------- --------------- ------- ---------------
Balance, December 31, 1993 126,484 $ 1.12 - $ 1.34 321,982 $ 2.36 - $ 3.38
Granted 77,340 $ 4.50 - $ 5.40 25,000 $ 6.15
Cancelled (6,756) $ 1.34 - $ 4.50 -
------- -------------- ------- ---------------
Balance, December 31, 1994 197,068 $ 1.12 - $ 5.40 346,982 $ 2.36 - $ 6.15
Granted 25,000 $ 5.70 25,000 $11.14
Exercised (14,842) $ 1.12 - $ 1.34 -
Cancelled (1,237) $ 1.34 - $ 4.50 -
-------- -------------- ------- ---------------
Balance, December 31, 1995 205,989 $ 1.12 - $ 5.70 371,982 $ 2.36 - $11.14
-------- -------------- ------- ---------------
-------- -------------- ------- ---------------
Vested options:
December 31, 1993 54,812 321,982
-------- -------
-------- -------
December 31, 1994 106,760 346,982
-------- -------
-------- -------
December 31, 1995 155,453 371,982
-------- -------
-------- -------
Warrants:
In connection with the Finet initial public offering, Finet sold
detachable redeemable warrants to purchase up to 333,333 Shares. A
majority of those warrants were exercised in the fourth quarter of
1994 or the first quarter of 1995. Remaining warrants have expired.
Also in connection with the Finet initial public offering, Finet sold
to its underwriter, for $20.00, warrants to purchase from Finet an
aggregate of 33,333 Shares. These warrants are exercisable at a price
of $3.60 per share for a four-year period which commenced in October
1992. During 1995, 26,667 warrants have been exercised into 26,667
Shares. As of December 31, 1995, 6,666 warrants remain outstanding.
In January 1994, the Company issued warrants to purchase 33,333 Shares
at an exercise price of $5.40 per share. See Note 8 for further
description. No such warrants have been exercised or cancelled.
In November 1994, the Company issued warrants to purchase 71,093
Shares at an exercise price of $5.70 per share. See Note 9 for further
description. No such warrants have been exercised or cancelled.
F-20
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 11 - Stock Options and Warrants: (Continued)
In November 1994, the Company issued warrants to its primary
underwriter in connection with the public offering described in Note
9. The warrants allow for the purchase of 83,334 Shares at an exercise
price of $7.98 per share and expire in 1999. No such warrants have
been exercised or cancelled.
During 1994, the Company issued warrants to certain officers as
consideration for compensatory services, as settlement of outstanding
debt and as payment for certain equipment purchases. The warrants
issued in 1994 allow for the purchase of an aggregate of 92,593 Shares
at an exercise price of $2.36 per share and expire in 1999.
Compensation expense of $30,819 and $12,850 was recorded as these
warrants vested in 1995 and 1994, respectively. No such warrants have
been exercised or cancelled.
Note 12 - Landfill Development Project:
In March 1994, the Company purchased from WPP Services, Inc. a
landfill development project located in Gila Bend, Arizona. This
development project currently involves, among other things, various
geological studies on the site and work on permitting portions of the
site. In connection with this project, the Company has obtained: (i)
an option to purchase approximately 1,200 acres of land to construct a
solid waste landfill; (ii) an annexation agreement for the option land
with the City of Gila Bend; and (iii) a Host Community Agreement with
the City of Gila Bend. Upon final permitting of the landfill project,
the Company has a put option to sell the project to USA Waste
Services, Inc. ("USA") for the sum of $5.0 million plus reimbursement
for land purchase costs.
Note 13 - Income Taxes:
The Company, except for its two-thirds owned subsidiary, Prichard
Landfill Corporation ("Prichard"), reports taxes on a consolidated
basis for federal tax purposes and by legal entity for state income
tax purposes. Income taxes are provided at statutory rates based on
income reported for financial statement purposes. A summary of income
tax expense is shown below:
1995 1994 1993
---------- ---------- ---------
Taxes currently payable:
Federal $2,604,903 $1,052,016 $125,884
State 748,145 234,239 42,400
Prepaid and deferred taxes (1,218,365) 845,404 552,786
---------- ---------- ---------
$2,134,683 $2,131,659 $721,070
========== ========== ========
F-21
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 13 - Income Taxes: (Continued)
The table below reconciles the differences between the statutory
federal income tax rate and the Company's effective income tax rate:
1995 1994 1993
---------- ---------- ----------
Statutory federal income tax...... $1,746,496 $1,657,983 $559,861
State income taxes, net of the
federal income tax benefit...... 304,088 290,188 76,865
Nondeductible amortization........ 146,741 90,331 73,619
Change in valuation allowance..... 39,807 (25,020) 47,165
Others, net....................... (102,449) 118,177 (36,440)
---------- ---------- ----------
Reported provision for income taxes $2,134,683 $2,131,659 $721,070
========== ========== =========
Deferred tax benefits and obligations result from the differences in
the timing of the recognition of certain income and expense items for
financial and tax accounting purposes. The sources of these
differences and the related tax effects were as follows:
December 31, 1995 December 31, 1994
------------------------- ---------------------
Benefits Obligations Benefits Obligations
---------- ------------ --------- ----------
Property basis differences....$ -- $(9,547,449) $ -- $(10,736,103)
Reserves for landfill site.... 1,928,361 -- 1,976,134 --
closure costs
Office closing charge accrual. 409,365 -- -- --
Credit carryforwards.......... 92,930 -- 175,543 --
Nondeductible bonus accruals.. 68,163 -- 136,325 --
Other nondeductible accruals.. 372,716 -- 524,509 --
Other, net.................... -- (107,264) 14,539 --
---------- ------------ ---------- ------------
Total.....................$2,871,535 $(9,654,713) $2,827,050 $(10,736,103)
========== ============ ========== =============
In the consolidated balance sheets, these deferred benefits and
deferred obligations are classified as deferred income tax assets or
deferred income tax liabilities based on the classification of the
related asset or liability for financial reporting. A deferred tax
liability or asset that is not related to an asset or liability for
financial reporting, including deferred tax assets related to
carryforwards, are classified according to the expected reversal date
of the temporary difference. Credit carryforwards primarily consist of
net operating losses subject to various limitations under the current
tax laws. Credit carryforwards as of December 31, 1995 expire, if
unused, in 2008.
Valuation allowances of $139,094 and $99,287 as of December 31, 1995
and 1994, respectively, have been recorded to offset credit
carryforwards and the entire net deferred tax assets related to
Prichard. As of December 31, 1995, no other valuation allowances are
deemed necessary as management expects to be able to benefit from all
other recognizable future tax deductions.
F-22
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 14 - Commitments and Contingencies:
The Company is subject to extensive and evolving environmental and
land use laws and regulations which have become increasingly stringent
in recent years as a result of greater public interest in protecting
the environment. These laws and regulations affect the Company's
business in many ways and will continue to impose substantial costs on
the Company. Such laws and regulations dictate extensive permitting,
landfill design, operation and closure requirements, impose civil or
criminal penalties on the Company for violations thereof, impose
liability on the Company for environmental damage caused by the
Company and in certain circumstances, limit the type, quantity and
source of the waste streams that the Company manages. Additionally,
any reduction in enforcement or relaxation of environmental
regulations could have a material adverse effect on the Company's
business and financial condition.
The Company is sometimes required to post bid and/or performance bonds
in connection with contracts or projects with government entities and,
to a lesser extent, private sector customers. In addition to bid and
performance bond requirements, existing legislation in various
jurisdictions requires or will require the posting of substantial
bonds or the provision of other financial assurances covering the
closure, post-closure monitoring and corrective activities of certain
waste disposal facilities. In this respect, the Company has various
performance bonds and letters of credit outstanding as of December 31,
1995, aggregating to $6.0 million. These instruments are not reflected
in the accompanying consolidated financial statements.
The Company also maintains five separate escrow funds to accumulate
money necessary to pay for estimated future closure and post-closure
costs. These funds are reflected as long-term assets on the
accompanying consolidated balance sheets. In some cases, a regulatory
agency controls the escrow account and will release withdrawals to the
Company upon written evidence of permitted closure or post-closure or
of expenditures paid in such an effort. In the fourth quarter of 1995,
the Company recorded $460,000 of revenue at its Forest Lawn Landfill
in Three Oaks, Michigan upon receiving clarification of certain state
regulations. The State of Michigan will return to the Company half of
the dump taxes collected upon the Company fulfilling all closure and
post-closure requirements. These costs were previously subtracted from
revenue.
A local citizens' group has filed objections to issuance of a renewal
permit for the Company's United Refuse landfill near Fort Wayne,
Indiana. The Company believes the objections are without merit and
intends to vigorously defend the permit. However is the Company is not
successful in such defense, it could result in revocation or adverse
modification of the permit, and this could have a material adverse
effect on the Company's business and financial condition.
The Company is involved in various legal proceedings and litigation
arising in the ordinary course of business. In the opinion of the
Company's management and legal counsel, the outcome of such
proceedings and litigation will not materially affect the Company's
financial position or results of operations.
The Company does not carry, and does not expect to carry for the
foreseeable future, significant insurance coverage for environmental
liability because the Company believes that the cost for such
insurance is not economical. Accordingly, if the Company were to incur
liability for environmental damage, its financial condition could be
materially adversely affected.
Rental expense amounted to $692,794, $503,005 and $168,325 in 1995,
1994, and 1993, respectively. Future minimum payments under
noncancellable leases are less than $250,000 annually. The Company's
Union City, Tennessee collection and hauling business property was
purchased for $450,000 in April 1995 from Obion Realty, Inc.
("Obion"). The Company leased this property on a month-to-month basis,
at the rate of $3,100 per month prior to purchasing it. Obion is owned
primarily by certain officers of the Company.
The Company purchases material from Mid-America Lining Co. which is
partially owned by certain officers of the Company. Such purchases
aggregated $1,755,091 in 1995 and $391,278 in 1994.
F-23
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 15 - Supplemental Cash Flows and Non-Cash Transactions Disclosure:
1995 1994 1993
---------- ------------ -----------
Cash paid during year for:
Interest, net of interest capitalized... $2,440,379 $ 1,969,891 $1,308,792
Income taxes............................ 1,218,011 441,105 46,206
---------- ------------ -----------
---------- ------------ -----------
Business acquisitions and investment
(excluding Finet):
Shares issued........................... $1,099,770 $ 6,476,049 $ -
Issuable common stock and options....... - 550,008 -
Notes and other payables issued to
sellers ............................... 3,796,240 1,222,500 290,091
Receivables forgiven.................... - 100,000 -
Cash paid............................... 6,664,520 475,000 81,846
---------- ------------ -----------
Total consideration paid.............. 11,560,530 8,823,557 371,937
Assets received....................... 17,518,297 33,658,649 1,108,784
---------- ------------ -----------
Liabilities assumed................... $5,957,767 $24,835,092 $ 736,847
---------- ------------ -----------
---------- ------------ -----------
Conversion of Series A preferred stock
into shares............................ $ - $ 2,398,128 $ -
--------- ------------ ----------
--------- ------------ ----------
Shares and warrants issued in settlement
of certain obligations.................. $ 925,301 $ 314,885 $ 180,000
--------- ------------ ----------
--------- ------------ ----------
Property received in settlement
of accounts receivable.................. $ - $ - $ 716,000
--------- ------------ ----------
--------- ------------ ----------
Finet Acquisition:
Cash acquired........................... $ - $ - $ 856,212
Shares issued in replacement of
preferred stock....................... - - 243,992
Shares issued in settlement of
amounts due to certain stockholders... - - 750,000
--------- ------------ ----------
--------- ------------ ----------
F-24
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 16 - Fair Market Value of Financial Instruments:
Unless otherwise indicated below, the fair value of the Company's
financial instruments approximates their carrying value. No quoted
market values are available unless otherwise indicated.
Estimated
Description Fair Market Value Carrying Value
- --------------------------------------- ------------------ -----------------
Investment in unaffiliated company..... $ 597,750 $ 561,382
Cash held in escrow.................... 3,749,038 3,749,038
Land purchase option - Francis Property 1,000,000 1,000,000
Option to acquire remaining 15% of
South Carolina subsidiary............ -- --
Notes payable.......................... (2,117,500) (2,117,500)
Long-term debt, with current maturities (23,303,732) (23,303,732)
The estimated fair market value of (i) the investment in unaffiliated
company is based on that company's quoted market price per share, (ii)
the cash held in interest-bearing escrow accounts is based on current
rates of interest available to the Company for similar cash
investments on similar terms, (iii) the land purchase option is based
on management's estimate of the current value of similar land in
similar geographical areas and (iv) debt is based on borrowing rates
currently available to the Company for borrowings with similar terms
and maturities.
The option to acquire the remaining 15% of the South Carolina
subsidiary was granted to the Company in conjunction with the original
formation of such subsidiary. As the option price approximates the
value of the remaining 15% interest (estimated by management), no
market value is assigned to the option.
Note 17 - Subsequent Event (Unaudited):
During June 1996, the Company entered into an Agreement and Plan of
Merger with Republic Industries, Inc. ("Republic"), pursuant to which
the parties will enter into a business combination for which each
share of the Company's common stock will be exchanged for 0.8 shares
of Republic's common stock. The proposed transaction, which is
intended to be accounted for as a pooling-of-interests business
combination, is subject to the approval of regulators and Company
shareholders and other customary terms and conditions.
F-25
Certificate of Amendment to
Certificate of Incorporation
of
Continental Waste Industries, Inc.
Continental Waste Industries, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Company"),
DOES HEREBY CERTIFY THAT:
FIRST: That a meeting of the Company's Board of Directors, resolutions were
duly adopted setting forth a proposed amendment of the Company's Certificate of
Incorporation (the "Certificate"), declaring the proposed amendment to be
advisable and calling a meeting of the Company's stockholders for consideration
thereof. The resolution setting forth the proposed amendment is a follows:
RESOLVED, that the Certificate be amended by
changing the first sentence of Article Fourth,
Clause (a) so that, as amended, the sentence shall
be and read as follows:
The aggregate number of shares which the Company shall be authorized to
issue: (a) 40,000,000 shares of common stock, $.0006 par value ("Common") and
(b) (1) 425,200 shares of Series Preferred Stock, $5.64 par value ("Series A
Preferred"), (2) 119,000 shares of Series B Preferred Stock, $20.00 par value
("Series B Preferred") and (3) 100,000 additional shares of Preferred Stock
$.001 par value (the "Blank Check Preferred"), for an aggregate total of 664,200
shares of preferred stock.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of the Company was duly called and held,
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware and Section 2.3 of the Company's Bylaws, at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendment.
THIRD: That the amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Carlos E. Aguero, its President, and Jeffrey E. Levine, its Senior Vice
President, this 28th day of December, 1995.
By: /s/ Carlos E. Aguero
Carlos E. Aguero, President
Attest: /s/ Jeffrey E. Levine
Jeffrey E. Levine, Senior Vice President
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made as of
January 31, 1996, by and among LaSalle National Bank, a national banking
association with its principal offices located in Chicago, Illinois, as agent
for the Lenders hereunder (the "Agent"), various financial institutions which
are, or may become, signatories or parties hereto (individually, a "Lender" and
collectively, the "Lenders"), and Continental Waste Industries, Inc., a Delaware
corporation ("CWI"), together with its Subsidiaries, which currently consist of
Barker Brothers, Inc., a Tennessee corporation, Barker Brothers Waste, Inc., a
Tennessee corporation, Berrien County Landfill, Inc., a Michigan corporation,
Bluegrass Recycling & Transfer Company, a Kentucky corporation, Commercial Waste
Disposal, Inc., a Kentucky corporation, Covington Waste, Inc., a Tennessee
corporation, CWI of Illinois, Inc., an Illinois corporation, CWI of Missouri,
Inc., a Missouri corporation, CWI Venture, Inc., a New Jersey corporation, FLL,
Inc., a Michigan corporation, G.E.M. Environmental Management Inc., a Delaware
corporation, Gila Bend Regional Landfill, Inc., an Arizona corporation,
Greenfield Environmental Development Corp., a Delaware corporation, Jamax
Corporation, an Indiana corporation, Karat Corp., a New Jersey corporation,
Midwest Material Management, Inc. an Indiana corporation, Northwest Tennessee
Disposal Corporation, a Tennessee corporation, Prichard Landfill Corporation, a
West Virginia corporation, Sandy Hollow Landfill Corp., a West Virginia
corporation, Sanifill, Inc., a Tennessee corporation, Southern Illinois Regional
Landfill, Inc., an Illinois corporation, South Trans, Inc., a New Jersey
corporation, Springfield Environmental, Inc., a Delaware corporation,
Springfield Environmental, Inc., an Indiana corporation, Triple G Landfills,
Inc., an Indiana corporation, United Refuse Co., Inc., an Indiana corporation,
Victory Environmental Services, Inc., a Delaware corporation, Victory Waste
Incorporated, a California corporation, WPP Continental de Costa Rica S.A., a
Costa Rican corporation, WPP Services, Inc., an Ohio corporation, ASCO
Sanitation, Inc., a Mississippi corporation, Gilliam Transfer, Inc., a Missouri
corporation, Anderson Refuse Co Inc, an Indiana corporation, Terre Haute
Recycling, Inc., an Indiana corporation, CWI Mexican Ventures, S.A. de C.V., a
Mexican corporation, NationsWaste, Inc., a Delaware corporation and Northeast
Sanitary Landfill, Inc., a South Carolina corporation, (individually, CWI and
any of said other corporations may be referred to herein as a "Borrower," and
collectively are sometimes referred to as the "Borrowers").
WITNESSETH:
WHEREAS, the Borrowers and the Lenders have previously entered into that certain
Credit Agreement dated as of March 28, 1995, as amended by a First Amendment to
Credit Agreement dated June 6, 1995, and a Second Amendment to Credit Agreement
dated October 5, 1995 (as so amended, the "Credit Agreement," with terms used
but not otherwise defined herein being used with the same meanings as therein
defined), whereunder Lenders have made certain Loans to Borrowers;
WHEREAS, the Borrowers have requested certain modifications
to the Credit Agreement and the Lenders are willing to agree to
such modifications upon the terms and conditions set forth
herein;
NOW, THEREFORE, for and in consideration of the foregoing premises and of
the mutual agreements, promises and covenants contained herein, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Loan Documents. The Credit Agreement and all of the Loan Documents are
hereby amended such that all references therein to the Credit Agreement or any
other Loan Documents are hereby deemed to include this Amendment and the
amendments to the Credit Agreement and the Loan Documents contained herein.
2. Section 1.A. Definition of Termination Date. The definition of
"Termination Date" at Section 1.A. of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
"Termination Date" means January 31, 1999.
3. Section 1.A. Definitions of Applicable Margins. Effective as of January
1, 1996, the definitions of "Applicable L/C Margin," "Applicable LIBOR Margin,"
and "Applicable Margin" at Section 1.A. of the Credit Agreement are hereby
deleted in their entirety and replaced with the following:
"Applicable L/C Margin," for purposes of determining the Letter of Credit
fees due from the Borrowers under Section 4.D hereof, means initially 0.75% (the
"Normal L/C Margin"), provided however that the Normal L/C Margin shall be
subject to quarterly adjustment based on the following:
Leverage Ratio Applicable L/C Margin
Less than 2.0 to 1 0.75%
2.01 to 1 through 2.50 to 1 1.0%
2.51 to 1 through 3.0 to 1 1.5%
Greater than 3.0 to 1 2.0%
"Applicable LIBOR Margin," for purposes of determining the
interest rate on a LIBOR Loan, means initially 1.5% (the "Normal
LIBOR Margin"), provided however that the Normal LIBOR Margin
shall be subject to quarterly adjustment based on the following:
Leverage Ratio Applicable LIBOR Margin
Less than 2.0 to 1 1.5%
2.01 to 1 through 2.50 to 1 1.75%
2.51 to 1 through 3.0 to 1 2.0%
Greater than 3.0 to 1 2.5%
"Applicable Margin," for purposes of determining the interest rate on a
Prime Rate Loan, means initially 0.0% (the "Normal Margin"), provided however
that the Normal Margin shall be subject to quarterly adjustment based on the
following:
Leverage Ratio Applicable Margin
Less than 2.0 to 1 0%
2.01 to 1 through 2.50 to 1 0.5%
2.51 to 1 through 3.0 to 1 1.0%
Greater than 3.0 to 1 1.0%
4. Section 2.B(a) Letters of Credit. Section 2.B(a) of the Credit Agreement
is hereby deleted in its entirety and replaced by the following:
"(a) General Terms. Subject to all of the terms and conditions hereof,
the Commitment may be availed of in the form of Letters of Credit, provided
that the aggregate outstanding amount of Letter of Credit Utilization by
the Borrowers hereunder shall in no event exceed the lesser of (aa) the
unused amount of the Commitments or (bb) $10,000,000. The Letters of Credit
shall be issued by the Agent, but each Lender shall be obligated
toreimburse the Agent for a pro rata share of the amount of each draft
drawn thereunder and, accordingly, each Letter of Credit shall be deemed to
utilize the Commitments of all Lenders pro rata in accordance with the
respective amounts thereof. For all purposes of this Agreement, each
Existing Letter of Credit shall be deemed to be a Letter of Credit issued
hereunder."
5. Section 8.A.1 Financial Covenants.
(a) Sections 8.A.1(a) and 8.A.1(b) of the Credit Agreement are
hereby deleted in their entirety.
(b) Section 8.A.1.(c) of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
"(c) The Borrowers' Consolidated ratio of (a) EBITDA to (b)
Interest Expense, as determined as of the end of each quarter of CWI's
Fiscal Year for the period of the four fiscal quarters then ending,
shall at all times exceed 4.0 to 1.0."
(c) Section 8.A.1(e) of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
"(e) The Borrowers' Consolidated ratio of (a) interest- bearing
Debt to (b) EBITDA (referred to herein as the "Leverage Ratio"), as
determined as of the end of each quarter of CWI's Fiscal Year for the
period of the four fiscal quarters then ending, shall not be greater
than the following ratios at any time during the following periods:
Ratio Period Ending
3.00 to 1.0 December 31, 1995 to, and including,
December 31, 1996;
2.75 to 1.0 March 31, 1997 to, and including,
December 31, 1997;
2.50 to 1.0 March 31, 1998, and at all times
thereafter."
6. Section 8.B.2. Debt and Capital Expenditures. Section 8.B.2 of the
Credit Agreement is hereby deleted in its entirety and replaced with the
following:
"(a) The Borrowers shall not, directly or indirectly, create, assume,
incur, suffer to exist, guarantee, become or be liable for or with respect
to any manner of obligations, liabilities, indebtedness or other Debt
whatsoever to any Person, except with respect to: (i) the Obligations
hereunder; (ii) Subordinated Debt up to $6,000,000 on terms acceptable to
Lenders in their sole discretion; (iii) existing Debt indicated on Schedule
8.B.2 hereto (to the extent such existing Debt is repaid, additional Debt
may not be incurred); (iv) current liabilities and accounts payable arising
or accruing in the ordinary course of business (other than a guaranty or
indebtedness for borrowed money, an extension of credit or deferred
purchase price of property not otherwise permitted hereunder); (v)
contingent Debt for any draws at any time made on outstanding instruments
as Financial Assurance; (vi) contingent Debt with respect to any Interest
Rate Contracts with the Agent or Lenders; (vii) Debt assumed or incurred in
or in connection with any merger or acquisition permitted under Section
8.B.3; (viii) purchase money Debt incurred in connection with Capital
Expenditures permitted under the following paragraph; (ix) Debt up to
$10,000,000 outstanding at any one time incurred in connection with the
financing of certain existing and future leasing obligations (provided
however, that notwithstanding the foregoing, all obligations for capital
leases shall remain subject to subsection (b) below); and (x) other Debt up
to $5,000,000 outstanding at any one time, including reimbursement
obligations incurred by any Borrower in connection with the issuance of
Industrial Revenue Bonds.
(b) The Borrowers shall not make Capital Expenditures in excess of
2.75 times Borrowers' depreciation and amortization charges for the period
of the four fiscal quarters then ending; provided however that this Section
8.B.2(b) shall not apply to assets acquired by the Borrowers in accordance
with all of the terms and provisions of Section 8.B.3 of the Credit
Agreement; and provided further that notwithstanding the foregoing,
Borrowers shall not make any Capital Expenditures in excess of Two Million
Five Hundred Thousand Dollars ($2,500,000) in the aggregate during any one
Fiscal Year with respect to greenfield landfill projects (unpermitted
sites)."
7. Section 8.B.3. Mergers and Acquisitions. Section 8.B.3 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:
"8.B.3. Fiscal Year, Name Changes, Mergers and Acquisitions. No
Borrower shall (i) change its Fiscal Year or its corporate name or without
prior written notice to Agent and only after all necessary or desirable
Financing Statements have been duly and properly filed and recorded
maintaining Agent's first priority perfected liens and security interests
on and in the Collateral, adopt an assumed corporate name, (ii) consolidate
or merge with any Person, (iii) acquire any stock in, or acquire all or
substantially all of the assets or properties of, any Person, or (iv)
create any Subsidiaries; provided, however, that notwithstanding the
foregoing, and subject to the conditions set forth below, the following are
permitted: (a) any Borrower may merge with any other Borrower, so long as
CWI is the surviving corporation in any merger involving it and any other
Borrower, and provided also that in any merger involving any Borrower the
stock of which has been pledged to the Agent, the Agent shall have or
obtain a first priority security interest in the stock of the surviving
Borrower in such merger; (b) a Borrower may merge with any Person other
than another Borrower, so long as the Borrower is the surviving corporation
in any such merger and no Default or Event of Default would result
therefrom immediately after giving effect thereto; (c) any Borrower may
acquire stock in a New Subsidiary, or acquire all or substantially all of
the assets or properties of, any Person, or create a New Subsidiary,
provided that no Default or Event of Default would result therefrom
immediately after giving effect thereto and that the provisions of Section
8.A.13, if applicable, are complied with; provided, further, that any
transaction described in (b) and (c) above that involves an acquisition
must also meet each of the following requirements or conditions:
(1) The Borrowers' Historical Pro Forma Interest Coverage Ratio,
considering the acquisition involved and as demonstrated to the
reasonable satisfaction of the Agent, is at least 3.00 to 1.00;
(2) The acquisition must be of a Person engaged primarily in the
nonhazardous solid waste industry;
(3) If the acquisition involves a Landfill or disposal and
treatment facility, it shall be subject to the Borrowers' standard due
diligence review, the results of which are acceptable to the Agent and
the Lenders in their sole discretion;
(4) Any acquisition for which the total consideration exceeds
$7,500,000 must receive the written approval of all of the Lenders (to
be granted or not granted by the Lenders in their sole and complete
discretion). For purposes of this Section, "consideration" means the
total purchase price (including cash expended, Debt incurred, and
liabilities incurred or assumed) paid or to be paid, but in any event
does not include any portion of the purchase price paid or payable in
the form of common stock or Subordinated Debt (permitted under Section
8.B.2(a)) of CWI or out of the proceeds of any public offering of the
common stock of CWI;
(5) If the acquisition involves consideration in excess of
$3,000,000 and involves assets or a business primarily located outside
of the United States of America, the prior written approval of all of
the Lenders (to be granted or not granted by the Lenders in their sole
and complete discretion) thereto must be obtained.
(6) The acquisition must have received the prior written approval
of the board of directors or other equivalent governing body of the
Person to be acquired.
8. Conditions.
8.A. Delivery of Documents as Conditions Precedent. The delivery of
each of the following documents, each of which shall be satisfactory to the
Agent in substance and form, by on or behalf of the Borrowers to the Agent
shall constitute separate and distinct conditions precedent to the
effectiveness of this Amendment:
8.A.1. A copy of this Amendment duly executed by Borrowers.
8.A.2. In form and substance satisfactory to the Agent, any other
documents which the Agent may reasonably request from or to be delivered by
the Borrowers from time to time to effect the intent of this Amendment and
the Loan Documents.
8.B. Amendment Fee. The Borrowers shall pay to the Agent for the
ratable account of the Lenders an amendment fee equal to one-tenth of one
percent of the Commitment ($45,000).
9. Representations; Warranties; Covenants. To induce the Agent and the
Lenders to execute this Amendment, the Borrowers jointly and severally represent
and warrant that, as of the date hereof:
(i) the representations and warranties set forth in
the Credit Agreement, including, without
limitation, those set forth in Section 7
thereof, and in the Loan Documents to which any
Borrower is a party, are true and correct;
(ii) the covenants and agreements set forth in the
Credit Agreement, including, without limitation,
those set forth in Section 8 thereof as amended
hereby, and in the other Loan Documents to which
any Borrower is a party, are not currently being
breached and are inviolate;
(iii) no Default or Event of Default currently exists
under the Credit Agreement or any Loan Documents
and is continuing; and
(iv) the Borrowers have taken all corporate action
necessary to enter into and authorize the
execution and delivery of this Amendment and the
other Loan Documents to be executed and
delivered hereunder.
10. Reimbursement for Costs. As further inducement for the Agent and the
Lenders to execute this Amendment, the Borrowers agree to reimburse the Agent
for any costs or expenses any such party may incur in connection with the
negotiation and drafting of this Amendment, including all attorneys' fees.
11. Governing Law; Successors and Assigns. This Amendment has been
executed, delivered and accepted in and shall be deemed to have been made under
and shall be governed by and construed in accordance with the internal laws of
the State of Illinois without regard to its conflict of law rules. This
Amendment shall be binding upon Borrowers and their respective successors and
assigns and shall inure to the benefit of Agent, the Lenders and their
respective successors and assigns; provided, however, that Borrowers shall not
have the right to assign their rights or interests hereunder or under the Credit
Agreement without the prior written consent of Agent.
12. Release. Borrowers, for and on behalf of their successors and assigns,
hereby release, forever discharge and agree to hold harmless Agent and each
Lender, and their respective successors and assigns, from any and all claims,
actions or causes of action heretofore arising in any manner under, pursuant to
or with respect to the Credit Agreement or the Loan Documents or Agent's or any
Lender's administration or actions under, pursuant to or with respect to the
Credit Agreement or the Loan Documents and from any suit or proceeding relating
to the foregoing at any time against Agent or any Lender.
13. Amendment; Ratification; No Waiver. The Credit Agreement and the other
Loan Documents to which any Borrower is a party are hereby amended in all other
respects to give effect to the foregoing amendments and agreements and, as so
amended, shall remain in full force and effect and shall continue to constitute
the valid and binding obligations of the Borrowers enforceable in accordance
with their respective terms. This Amendment shall not be deemed to constitute or
shall not be construed as a waiver of any rights, remedies, collateral or other
security of or granted to the Bank under the foregoing or of any Event of
Default or other default or breach which has occurred and is continuing
thereunder as of the date hereof.
14. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original hereof and all of which
together shall constitute one and the same document.
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders have caused
their respective officers, thereunto duly authorized, to execute this Amendment
as of the date first above written.
BORROWERS:
CONTINENTAL WASTE INDUSTRIES, INC.
By:______________________________
Name: Jeffrey E. Levine
Title: Senior Vice President
BARKER BROTHERS, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
BARKER BROTHERS WASTE, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
BERRIEN COUNTY LANDFILL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
BLUEGRASS RECYCLING & TRANSFER
COMPANY
By:
Name: Jeffrey E. Levine
Title: Vice President
COMMERCIAL WASTE DISPOSAL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
COVINGTON WASTE, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
CWI OF ILLINOIS, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
CWI OF MISSOURI, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
CWI VENTURE, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
FLL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
G.E.M. ENVIRONMENTAL MANAGEMENT, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
GILA BEND REGIONAL LANDFILL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
GREENFIELD ENVIRONMENTAL DEVELOPMENT CORP.
By:
Name: Jeffrey E. Levine
Title: Vice President
JAMAX CORPORATION
By:
Name: Jeffrey E. Levine
Title: Vice President
KARAT CORP.
By:
Name: Jeffrey E. Levine
Title: Vice President
MIDWEST MATERIAL MANAGEMENT, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
NORTHWEST TENNESSEE DISPOSAL CORPORATION
By:
Name: Jeffrey E. Levine
Title: Vice President
PRICHARD LANDFILL CORPORATION
By:
Name: Jeffrey E. Levine
Title: Vice President
SANDY HOLLOW LANDFILL CORP.
By:
Name: Jeffrey E. Levine
Title: Vice President
SANIFILL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
SOUTHERN ILLINOIS REGIONAL LANDFILL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
SOUTH TRANS, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
SPRINGFIELD ENVIRONMENTAL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
SPRINGFIELD ENVIRONMENTAL, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
TRIPLE G LANDFILLS, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
UNITED REFUSE CO., INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
VICTORY ENVIRONMENTAL SERVICES, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
VICTORY WASTE INCORPORATED
By:
Name: Jeffrey E. Levine
Title: Vice President
WPP CONTINENTAL DE COSTA RICA S.A.
By:
Name: Jeffrey E. Levine
Title: Vice President
WPP SERVICES, INC.
By:
Name: Jeffrey E. Levine
Title: Vice President
ASCO SANITATION, INC.
By:______________________________
Name: Jeffrey E. Levine
Title: Vice President
GILLIAM TRANSFER, INC.
By:_______________________________
Name: Jeffrey Levine
Title: Vice President
ANDERSON REFUSE CO INC
By:________________________________
Name: Jeffrey Levine
Title: Vice President
TERRE HAUTE RECYCLING, INC.
By:_________________________________
Name: Jeffrey Levine
Title: Vice President
CWI MEXICAN VENTURES, S.A. de C.V.
By:_________________________________
Name: Jeffrey Levine
Title: Vice President
NATIONSWASTE, INC.
By:_________________________________
Name: Jeffrey Levine
Title: Vice President
NORTHEAST SANITARY LANDFILL, INC.
By:_________________________________
Name: Jeffrey Levine
Title: Vice President
AGENT:
LASALLE NATIONAL BANK, as Agent
By:
Name: Mike Foster
Title: Senior Vice President
Address: 120 South LaSalle Street
Chicago, Illinois 60603
Telephone: 312-904-2791
Telecopy: 312-904-8544
LENDERS:
LASALLE NATIONAL BANK
120 South LaSalle Street By:
Chicago, Illinois 60603 Name: Mike Foster
Title: Senior Vice President
Telephone: 312-904-2791
Telecopy: 312-904-8544
Amount of Commitment: $15,000,000
THE FIRST NATIONAL BANK OF BOSTON
100 Federal Street By:
Boston, MA 02106 Name:
Title:
Telephone: 617-434-4295
Telecopy: 617-434-2160
Amount of Commitment: $15,000,000
BANK OF AMERICA ILLINOIS
231 South LaSalle Street By:
Chicago, Illinois 60603 Name:
Title:
Telephone: 312-828-8363
Telecopy: 312-828-1974
Amount of Commitment: $15,000,000
CONTINENTAL WASTE INDUSTRIES, INC.
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
Name State of Incorporation
Anderson Refuse Co., Inc. Indiana
ASCO Sanitation, Inc. Mississippi
Barker Brothers, Inc. Tennessee
Barker Brothers Waste, Incorporated Tennessee
Berrien County Landfill, Inc. Michigan
Bluegrass Recycling & Transfer Co., Inc. Kentucky
Commercial Waste Disposal, Inc. Kentucky
Continental Waste Industries Arizona, Inc. New Jersey
Continental Waste Industries - Gary, Inc. Indiana
Covington Waste, Inc. Tennessee
CWI of Northwest Indiana, Inc. Indiana
FLL, Inc. Michigan
G.E.M. Environmental Management, Inc. Delaware
Gila Bend Regional Landfill Co., Inc. Arizona
Gilliam Transfer, Inc. Missouri
Greenfield Environmental Development Corp. Delaware
Holland Excavating, Inc. Florida
Indiana Recycling LLC Indiana
Jamax Corporation Indiana
Karat Corp. New Jersey
Midwest Material Management, Inc. Indiana
NationsWaste, Inc. Delaware
Northeast Sanitary Landfill, Inc. South Carolina
Northwest Tennessee Disposal Corp. Tennessee
Obion Realty, Inc. New Jersey
Prichard Landfill Corp. West Virginia
Sandy Hollow Landfill Corp. West Virginia
Sanifill, Inc. Tenessee
Schofield Corporation of Orlando Florida
South Trans, Inc. New Jersey
Southern Illinois Regional Landfill, Inc. Illinois
Springfield Environmental, Inc. Indiana
Springfield Environmental, Inc. Delaware
Terre Haute Recycling, Inc. Indiana
Triple G. Landfills, Inc. Indiana
United Refuse Co., Inc. Indiana
Victory Acquisition Co., Inc. Delaware
Victory Environmental Services, Inc. Delaware
Victory Waste Incorporated California
WPP Services, Inc. Ohio
WPP Continental de Costa Rica, S.A. Costa Rica
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-KSB into the Company's previously filed Form S-3
Registration Statement Nos. 33-86042 and 33-65047.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at December 31, 1995 and Consolidated
Statement of Operations for the 12 months ended December 31, 1995, and is
qualified in its entirety by reference to such financial statements.
(Restated
See Note 1)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 3,483,154
<SECURITIES> 0
<RECEIVABLES> 8,565,121
<ALLOWANCES> 396,000
<INVENTORY> 0
<CURRENT-ASSETS> 14,487,863
<PP&E> 97,297,020
<DEPRECIATION> 14,215,696
<TOTAL-ASSETS> 124,221,331
<CURRENT-LIABILITIES> 16,477,348
<BONDS> 0
0
0
<COMMON> 8,454
<OTHER-SE> 70,262,799
<TOTAL-LIABILITY-AND-EQUITY> 124,221,331
<SALES> 0
<TOTAL-REVENUES> 47,815,275
<CGS> 0
<TOTAL-COSTS> 29,044,827
<OTHER-EXPENSES> 3,264,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,658,912
<INCOME-PRETAX> 5,136,752
<INCOME-TAX> 2,134,683
<INCOME-CONTINUING> 3,002,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,002,069
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
