SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)June 28, 1996
UNITED WASTE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-20868 13-3532338
(State or other (Commission File number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
Four Greenwich Office Park, Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(203) 622-3131
Item 5. Other Events
1. On June 28, 1996, the Company acquired all of the
outstanding shares of common stock of Salinas Disposal Service,
Inc., Rural Dispos-All Service, Inc. and Madison Lane Properties,
Inc. (the "Salinas Companies"). The Salinas Companies were a group
of affiliated companies comprising an integrated solid waste
management company. The Registrant accounted for the transaction
as a pooling-of-interests and, accordingly, the financial position
and results of operations of the Registrant for all prior periods
have been restated to include the accounts of the Salinas Companies.
This restatement is reflected in the supplemental consolidated
financial statements that are filed as Exhibit 99.1 hereto for all
periods presented in such financial statements. These supplemental
financial statements are further identified under Item 7 below.
2. During the month of July 1996 (i.e, the first full calendar
month following the transaction described above), the Registrant had
consolidated revenues, net income and earnings per share of
$28,393,037, $4,323,478 and $.11, respectively.
Item 7. Financial Statements and Exhibits
(a) Exhibit 99.1 hereto includes the following supplemental
financial statements of the Registrant:
Report of Independent Auditors.
Supplemental Consolidated Balance Sheets as of December 31, 1995 and
1994.
Supplemental Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993.
Supplemental Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993.
Supplemental Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993.
Notes to Supplemental Consolidated Financial Statements.
(b) Exhibit 99.2 hereto includes the following pro forma
condensed consolidated financial statements of the Registrant:
Pro Forma Condensed Consolidated Statement of Operations for the six
months ended June 30, 1996
Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1995
(c) Exhibits. The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit Number Exhibit
<S> <C>
23.1 Consent of Ernst & Young LLP
27.1 Restated Financial Data Schedule
99.1 Supplemental Consolidated Financial
Statements
99.2 Pro Forma Condensed Consolidated
Financial Statements
99.3 Independent Auditors Reports (two) of
Hanson Rotter Green
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized on this 22nd day
of August, 1996.
UNITED WASTE SYSTEMS INC.
By: Michael J. Nolan
-----------------
Name: Michael J. Nolan
Title: Chief Financial Officer
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Number Exhibit
<S> <C>
23.1 Consent of Ernst & Young LLP
27.1 Restated Financial Data Schedule
99.1 Supplemental Consolidated Financial
Statements
99.2 Pro Forma Condensed Consolidated
Financial Statements
99.3 Independent Auditors Reports (two) of
Hanson Rotter Green
</TABLE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in (i) the Registra-
tion Statements (Form S-3 Numbers: 33-74676; 33-62420; 33-83564;
33-90262; 33-91370; 33-95662; 33-98146; 33-80403; 333-1890 and
333-7991 and any amendments hereto) and the related Prospectuses
and (ii) the Registration Statements (Form S-8 Numbers: 33-98794
and 333-4294 and any amendments hereto) and the related Pro-
spectuses of our report dated June 28, 1996 (except for Note 13,
as to which the date is August 22, 1996), with respect to the
supplemental consolidated financial statements of United Waste
Systems, Inc. included in this Current Report on Form 8-K dated
June 28, 1996 filed with the Securities and Exchange Commission.
Ernst & Young LLP
MetroPark, New Jersey
August 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The restated financial data schedule for the three months ended March 31, 1996
has been restated to reflect the acquisition of the Salinas Companies on June
28, 1996 which was accounted for as a pooling-of-interests as described in Note
2 to the financial statements filed under Item 1 on the Company's Report on Form
10-Q for the quarterly period ended June 30, 1996.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,212,878
<SECURITIES> 0
<RECEIVABLES> 42,580,182
<ALLOWANCES> 2,817,000
<INVENTORY> 0
<CURRENT-ASSETS> 59,315,300
<PP&E> 371,818,037
<DEPRECIATION> 65,026,834
<TOTAL-ASSETS> 575,969,201
<CURRENT-LIABILITIES> 59,706,890
<BONDS> 182,980,119
0
0
<COMMON> 18,213
<OTHER-SE> 262,486,995
<TOTAL-LIABILITY-AND-EQUITY> 575,969,201
<SALES> 0
<TOTAL-REVENUES> 66,735,480
<CGS> 43,180,245
<TOTAL-COSTS> 53,579,537
<OTHER-EXPENSES> (289,313)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,408,687
<INCOME-PRETAX> 10,036,569
<INCOME-TAX> 3,910,948
<INCOME-CONTINUING> 6,125,621
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,125,621
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Waste Systems, Inc.
We have audited the accompanying supplemental consolidated
balance sheets of United Waste Systems, Inc. (formed as a result
of the consolidation of United Waste Systems, Inc. and the
Salinas Companies) as of December 31, 1995 and 1994 and the
related supplemental consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1995. The supplemental
consolidated financial statements give retroactive effect to the
merger of United Waste Systems, Inc. and the Salinas Companies on
June 28, 1996, which has been accounted for using the pooling-of-
interests method as described in the notes to the supplemental
consolidated financial statements. Our audits also included the
accompanying financial statement schedule. These supplemental
financial statements and schedule are the responsibility of the
management of United Waste Systems, Inc. Our responsibility is
to express an opinion on these supplemental financial statements
and schedule based on our audits. We did not audit the 1994
financial statements of Carmel Marina Companies, which statements
reflect total assets constituting 6% in 1994 and total revenues
constituting 15% in 1994 of the related supplemental consolidated
totals, nor did we audit the 1993 financial statements of Carmel
Marina Corporation, one of the Carmel Marina Companies, which
statements reflect total assets constituting 4% in 1993, and
total revenues constituting 14% in 1993 of the related
supplemental consolidated totals. Those statements were audited
by other auditors, whose reports have been furnished to us and
our opinion, insofar as it relates to data included for Carmel
Marina Companies and Carmel Marina Corporation, is based solely
on the reports of the other auditors.
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 and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and, for 1994 and 1993, the
reports of other auditors, the supplemental financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of United Waste Systems, Inc. at
December 31, 1995 and 1994 and the consolidated result of its
operations and its cash flows for each of the three years in the
period ended December 31, 1995, after giving retroactive effect
to the merger of the Salinas Companies, as described in the notes
to the supplemental consolidated financial statements, in
conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information
set forth therein.
ERNST & YOUNG LLP
MetroPark, New Jersey
June 28, 1996, except for
Note 13, as to which the date is
August 22, 1996
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,721,849 $ 2,600,207
Accounts receivable, net of
allowance for doubtful accounts
of $2,249,000 in 1995 and
$1,949,000 in 1994 38,522,126 21,301,159
Prepaid expenses and
other current asset 14,198,544 5,887,740
Total current assets 59,442,519 29,789,106
Property and equipment, net 289,378,346 144,258,644
Intangible assets, net 171,739,197 65,485,246
Other assets 20,008,399 15,321,942
$ 540,568,461 $ 254,854,938
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and nonrecourse bonds $ 5,644,096 $ 6,836,079
Accounts payable 18,031,701 13,186,390
Deferred revenue 8,291,415 4,388,013
Due to seller 6,465,720 1,353,403
Short-term accrued landfill costs 6,524,024 1,686,834
Current portion of capital lease
obligations 1,383,576 1,245,539
Accrued expenses and other
current liabilities 17,077,402 9,162,518
Total current liabilities 63,417,934 37,858,776
Long-term debt, less current portion 156,193,971 50,935,950
Obligations under capital leases, less
current portion 4,687,554 1,731,809
Nonrecourse sewage facility revenue
bonds, less current portion 9,400,000 9,700,000
Accrued landfill costs 27,663,907 15,889,389
Other long-term liabilities 3,056,578
Deferred income taxes 33,885,306 10,751,690
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value,
75,000,000 shares authorized;
35,157,099 in 1995 and
13,626,595 in 1994 shares
issued and outstanding 35,157 13,627
Preferred stock, $.001 par value,
5,000,000 shares authorized;
943,429 shares issued and
outstanding in 1994 944
Additional paid-in capital 200,250,052 107,117,160
Retained earnings 41,978,002 20,855,593
Total stockholders' equity 242,263,211 127,987,324
$ 540,568,461 $ 254,854,938
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated financial statements.
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
<S> <C> <C> <C>
Revenues $ 228,376,762 $ 146,042,523 $ 109,005,902
Cost of operations 140,813,834 88,611,515 68,199,587
Selling, general and
administrative expense 34,841,125 22,526,867 20,440,687
Income from operations 52,721,803 34,904,141 20,365,628
Interest expense 10,061,290 6,424,630 4,705,363
Other income, net (948,830) (474,211) (825,326)
Income before provision
for pro forma
income taxes 43,609,343 28,953,722 16,485,591
Provision for pro forma
income taxes 16,779,259 10,008,796 4,920,806
Pro forma net income 26,830,084 18,944,926 11,564,785
Net deductions from pro
forma income available
to common stockholders 372,501 1,275,180 1,654,720
Pro forma income
available to
common stockholders $ 26,457,583 $ 17,669,746 $ 9,910,065
Pro forma primary earnings
per common share and
common equivalent share $.77 $.68 $.49
Pro forma fully diluted
earnings per common
share and common
equivalent share $.77 $.65 $.48
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Preferred Stock Common Stock
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992, as
previously
reported 2,363,889 $ 2,364 8,328,788 $ 8,328 $ 61,461,335 $ (6,382,672)
Pooling-of-
interests 365,383 366 305,504 2,624,449
Balance, December
31, 1992,
as restated 2,363,889 2,364 8,694,171 8,694 61,766,839 (3,758,223)
Issuance of common
stock and warrants 2,168,820 2,169 21,087,715
Exercise of common
stock warrants 201,454 201 1,081,048
Conversion of Series
C convertible
preferred stock (88,889) (89) 19,754 20 (69)
Conversion of 8%
convertible
preferred stock (477,419) (477) 429,861 430 47
Preferred stock
dividends (1,948,315)
Subchapter S distributions
of pooled
entities (2,220,457)
Pro forma net
income 11,564,785
Pro forma tax
adjustment 897,281
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
<CAPTION>
Preferred Stock Common Stock
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1993 1,797,581 1,798 11,514,060 11,514 83,935,580 4,535,071
Issuance of
common stock 763,578 764 15,279,707
Exercise of
common stock
warrants and
options 568,394 569 7,311,162
Conversion of 8%
convertible
preferred
stock (854,152) (854) 780,563 780 44
Preferred stock
dividends (1,275,180)
Contributed capital 590,667
Subchapter S
distributions
of pooled
entities (3,413,997)
Pro forma net
income 18,944,926
Pro forma tax
adjustment 2,064,773
Balance, December
31, 1994 943,429 944 13,626,595 13,627 107,117,160 20,855,593
Issuance of
common stock 2,469,299 2,469 79,684,075
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- Continued
<CAPTION>
Preferred Stock Common Stock
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Exercise of
common stock
warrants and options 529,582 530 8,145,726
Conversion of 8%
convertible
preferred stock (943,429) (944) 862,105 862 82
Conversion of convertible
debt 90,969 91 2,660,752
Preferred stock
dividends (372,501)
Subchapter S distributions
of pooled
entities (4,133,700)
Pro forma net
income 26,830,084
Pro forma tax
adjustment 1,458,361
Reclassification of
subchapter S
accumulated earnings to
paid-in capital 2,659,835 (2,659,835)
Balance, December
31, 1995 17,578,550 17,579 200,267,630 41,978,002
Two-for-one stock
split (Note 13) 17,578,549 17,578 (17,578)
Balance, December 31,
1995, as adjusted 35,157,099 $ 35,157 $200,250,052 $41,978,002
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year ended December 31
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating
activities:
Pro forma net
income $ 26,830,084 $ 18,944,926 $ 11,564,785
Adjustments to reconcile
pro forma net income to
net cash provided
by operating activities:
Depreciation and
amortization 24,308,227 14,247,906 11,162,636
Deferred income
taxes 3,859,374 1,871,425 986,888
(Gain) loss on sale of
assets (174,767) (25,618) 50,614
Pro forma tax
adjustment 1,458,361 2,064,773 897,281
Changes in operating assets
and liabilities:
Accounts
receivable (2,446,181) (6,076,126) (2,615,043)
Other assets (3,874,321) (163,365) (1,323,988)
Accounts payable (882,447) 4,870,279 399,759
Accrued landfill
costs 34,893 (1,849,037) (3,616,710)
Other
liabilities 7,277,122 3,536,541 (593,820)
Net cash provided by
operating
activities 56,390,345 37,421,704 16,912,402
Cash flows from investing
activities:
Purchases of property
and equipment (39,189,791) (22,562,624) (11,844,422)
Proceeds from sale
of assets 280,290 285,243 18,568
Restricted investments, net
(held to maturity) (7,954,428) (186,741) (414,900)
Payments of capitalized
project costs (1,279,671) (2,305,851) (661,269)
Payments of contingent
purchase price (2,337,751) (6,262,879) (1,096,859)
Purchases of other companies,
net of cash acquired (159,062,810) (27,331,361) (27,021,361)
Net cash used in
investing activities (209,544,161) (58,364,213) (41,020,243)
Cash flows from financing
activities:
Dividends on preferred
stock (372,501) (1,275,180) (1,960,015)
Proceeds from debt 278,281,793 40,839,022 52,444,526
Repayments of debt (185,233,930) (32,977,036) (45,422,488)
Repayments of capital lease
obligations (614,686) (1,570,971) (2,033,668)
Net proceeds from issuance
of common stock 66,072,051 15,280,471 15,472,780
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
<CAPTION>
Year ended December 31
1995 1994 1993
<S> <C> <C> <C>
Proceeds from exercise
of common stock warrants
and options 8,146,256 6,296,716 1,081,249
Payment of financing costs (2,684,074) (582,483) (1,508,846)
Redemption of preferred
stock (180,000)
Due to sellers (2,185,751) (317,498) (1,560,366)
Notes receivable (1,104,505) (994,981)
Contributed capital of
pooled entities 590,667
Subchapter S distributions
of pooled entities (4,133,700) (3,413,997) (2,220,457)
Net cash provided by
financing activities 157,275,458 21,765,206 13,117,734
Increase (decrease) in cash
and cash equivalents 4,121,642 822,697 (10,990,107)
Cash and cash equivalents
at beginning of period 2,600,207 1,777,510 12,767,617
Cash and cash equivalents
at end of period $ 6,721,849 $ 2,600,207 $ 1,777,510
Supplemental disclosure of
cash flow information:
Cash paid during the period
for interest, net of
amounts capitalized $ 8,337,161 $ 5,970,394 $ 4,338,988
Cash paid during the period
for income taxes $ 10,362,953 $ 3,426,391 $ 3,546,892
Supplemental schedule of
noncash investing and
financing activities:
The Company acquired the
net assets and assumed
certain liabilities of
other companies as follows:
Fair value of net assets
acquired:
Property and equipment $ 121,210,509 $ 14,795,348 $28,565,296
Other assets, net of cash
acquired 129,422,285 22,425,750 32,215,509
Less liabilities assumed (67,813,389) (9,227,426) (27,326,622)
Less amounts due to
seller (7,965,999) (594,483) (144,549)
Less amounts paid in common
stock (13,333,150) (5,536,538)
Less deposits and
capitalized project costs
paid in
prior periods (2,457,446) (67,828) (751,735)
Net cash paid $ 159,062,810 $ 27,331,361 $27,021,361
Equipment financed by capital
lease obligations $ 777,867 $ 167,370 $ 2,966,776
Conversion of convertible
preferred stock 10,377,719 9,395,672 5,451,609
Conversion of convertible
debt 2,660,843
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated financial statements.
UNITED WASTE SYSTEMS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note 1 - Organization and basis of presentation
United Waste Systems, Inc. and its subsidiaries ("United" or
"the Company") owns, operates, acquires and develops nonhazardous
solid waste landfills, collection operations and other related
environmental services in selected markets in the United States.
The accompanying supplemental consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The accompanying supplemental
consolidated financial statements have been restated to include
the accounts of acquisitions accounted for as a pooling-of-interests
(see Notes 3 and 13). One of these acquisitions, the
Salinas Companies, utilized a September 30 fiscal year end. The
accompanying supplemental consolidated financial statements
combine the Company's consolidated financial statements for the
years ended December 31, 1995, 1994 and 1993 with the Salinas
Companies' consolidated financial statements for the years ended
September 30, 1995, 1994 and 1993.
During June 1996, the Company had a two-for-one stock split
effected as a stock dividend and the share and per share amounts
in the supplemental consolidated financial statements and
accompanying notes have been restated to reflect such stock split
(See Note 13).
Note 2 - Summary of significant accounting policies
Cash Equivalents: The Company considers all highly liquid
instruments with a maturity of three months or less when
purchased to be cash equivalents.
Property and Equipment: Property and equipment are recorded
at cost and depreciated over their estimated useful lives using
the straight-line method. The estimated useful life ranges for
property and equipment are as follows:
Range of
Estimated
Useful Lives
Buildings and improvements 25 - 30 years
Vehicles and equipment 7 - 10 years
Furniture, fixtures and
office equipment 5 - 10 years
Amortization of assets recorded under capital leases is
included in depreciation expense. The Company's sludge
composting facility is being depreciated over the original
contract period of 20 years. Landfill and landfill improvement
costs are amortized based upon total units of airspace filled
during the year in relation to estimated permitted airspace
capacity. Land held for future development is excluded from
amortization.
Engineering and legal fees paid to third parties incurred to
obtain a disposal facility permit are capitalized as landfill
costs and amortized over the estimated related airspace capacity.
These costs are not amortized until the permit is obtained and
operations have commenced. If the permit is denied, these costs
are charged to expense.
Other Assets: Other assets consist primarily of deposits
for, or advances to, pending or prospective acquisitions and
restricted cash and cash equivalents which are collateral for
letters of credit and bonds and restricted debt service and
construction funds. Restricted cash and cash equivalents are
$8,366,000 at December 31, 1995 and $3,705,000 at December 31,
1994.
In connection with the Company's Tax Exempt Bonds (See Note
6), restricted cash and cash equivalents in escrow total
$5,590,000 at December 31, 1995.
Concentrations of Credit Risk: Financial instruments that
potentially subject the Company to concentrations of credit risk
consist primarily of cash investments and accounts receivable.
The Company places its cash investments with high quality
financial institutions. Concentrations of credit risk with
respect to accounts receivable are limited because a large number
of geographically diverse customers make up the Company's
customer base. No single group or customer represents greater
than 10% of total accounts receivable. The Company controls
credit risk through credit approvals, credit limits, and
monitoring procedures.
Accrued Landfill Costs: Landfill site closure and post-closure
cost liabilities are accrued for the Company's owned
landfills based on engineering estimates of total units of
airspace filled during the year and the total closure and
post-closure costs to be incurred by the Company. Such liabilities
are not discounted or reduced by possible recoveries from third
parties.
Revenue Recognition: Landfill revenues are recorded at the
date of actual waste disposal. Revenues received prior to
services being performed are deferred and are recognized over the
service period.
Income Taxes: The accompanying supplemental consolidated
financial statements reflect provisions for income taxes on a pro
forma basis as if the Company and its subsidiaries were liable
for federal and state income taxes as a taxable corporate entity
for all periods presented. The offsetting credits to the pro
forma income tax provisions are reflected as an increase in
retained earnings.
The Company uses the liability method in accounting for
income taxes. Under this method, deferred tax assets and
liabilities are determined based on the differences between
financial reporting and tax basis of assets and liabilities and
are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to
reverse.
Impact of Recently Issued Accounting Standards: In March
1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of ("SFAS No. 121"), which
requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121
also addresses the accounting for long-lived assets that are
expected to be disposed of. SFAS No. 121 is effective for the
Company's fiscal year ended December 31, 1996. The Company's
current accounting practice is substantially in compliance with
the new Statement. Accordingly, the adoption and on-going
effects of this Statement are not expected to have material
effect on the Company's financial position or results of
operations.
Use of Estimates: The preparation of the supplemental
consolidated financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
supplemental consolidated financial statements and accompanying
notes. These estimates and assumptions principally affect the
Company's accruals for landfill costs and accounts receivable
reserve, the amortization periods for intangible assets and
landfill and landfill improvement costs. Actual results could
differ from those estimates.
Stock-Based Compensation: The Company accounts for its stock
compensation arrangements under the provisions of APB Opinion No.
25, "Accounting for Stock Issued to Employees," and intends to
continue to do so. Since the stock options are granted by the
Company at the fair value of the shares at the date of grant, no
compensation expense is recognized in the accompanying
supplemental consolidated financial statements.
Reclassification: Certain 1994 balances have been
reclassified to conform with 1995 presentation.
Note 3 - Acquisitions
On September 29, 1995, the Company issued 2,252,946 shares
of its common stock for all of the outstanding shares of common
stock of Carmel Marina Corporation, Neal Road Landfill
Corporation, Jolon Road Landfill Corporation, Cal Sanitation
Services, Inc., Portable Site Services, Inc. and certain real
estate assets (the "Carmel Marina Companies"), a group of
affiliated companies that comprise an integrated solid waste
management company. This transaction has been accounted for as a
pooling-of-interests and, accordingly, the consolidated financial
statements have been restated for all periods presented to
include the accounts of the Carmel Marina Companies.
Separate revenue and pro forma net income of United and the
Carmel Marina Companies prior to combination are as follows:
<TABLE>
<CAPTION>
Carmel
Marina
United Companies Combined
<S> <C> <C> <C>
Nine months ended
September 30, 1995:
Revenues $ 130,062,761 $ 17,817,582 $147,880,343
Pro forma net income 16,251,519 1,524,862 17,776,381
Year ended
December 31, 1994:
Revenues 106,551,057 21,977,708 128,528,765
Pro forma net income 15,557,488 1,509,387 17,066,875
Year ended
December 31, 1993:
Revenues 77,507,859 18,206,621 95,714,480
Pro forma net income 10,020,692 1,328,603 11,349,295
</TABLE>
The acquisitions discussed below have been accounted for as
purchases and, accordingly, the results of their operations have been
included in the Company's results of operations from their respective
acquisition dates. The purchase prices have been allocated to the
assets acquired and liabilities assumed based on their fair values at
their respective acquisition dates. Contingent purchase price is
capitalized when earned and amortized over the remaining life of the
related asset.
During September 1995, the Company purchased outstanding stock
and certain assets of the Partyka Resource Companies. The companies
are comprised of two solid waste landfills and collection operations.
The aggregate consideration was $36,424,609 in cash, $6 million in
seller notes and 184,200 shares of the Company's common stock.
Contingent royalty payments of $5.95 per ton are due for each ton
received commencing October 1995 (subject to a cap of $10,577,773).
During September 1995, the Company purchased all of the
outstanding stock of the Zenith Kremer companies. The companies are
comprised of a collection company and two transfer station permits.
The aggregate consideration was $19,158,320 in cash.
During February 1995, the Company purchased all of the
outstanding stock of Waste Systems Corporation and certain assets of
WasteCo, Inc. The companies are comprised of a solid waste landfill
and collection operations. The initial aggregate purchase price was
$12,326,396 in cash and 280,000 shares of the Company's common stock.
Contingent royalty payments of $1.15 per ton are due for each ton
received (not to exceed $8 million in aggregate). An additional
contingent purchase payment of $750,000 was made upon receipt of a
permit modification increasing daily and annual tonnage limits that
may be accepted by the landfill and an additional contingent payment
of $1,000,000 is due upon the receipt of another permit modification
from required regulatory agencies authorizing additional landfill
capacity.
The total initial consideration for other acquisitions that the
Company made in 1995 was approximately $91,200,000 in cash,
approximately $5,900,000 in seller notes, 464,398 shares of the
Company's common stock and contingent consideration not to exceed
$19,200,000.
During August 1994, the Company purchased all of the outstanding
stock of Pete's Disposal Service, Inc., a company that provides solid
waste collection services. The aggregate initial consideration was
$4,800,000 in cash. Contingent consideration of $347,896 in cash was
paid in January 1995 related to certain contractual obligations for
billing retentions.
During June 1994, the Company purchased all of the outstanding
stock of PRTR, Inc., a company that operates a transfer station. The
aggregate initial consideration was $4,225,846 in cash. Contingent
royalty payments of $1 per ton (subject to $.75 increases on the fifth
and tenth anniversary dates of the transaction) for each ton received
in excess of 100 tons per day are payable quarterly (subject to a cap of
$125,000 per year and $1,300,000 in aggregate).
During April 1994, the Company purchased substantially all of the
assets of Orlando Trucking, Inc., a company that provides solid waste
collection services. The aggregate initial consideration was
$3,970,000 in cash.
During March 1994, the Company purchased all of the outstanding
stock of Kent Industrial Services, Inc., a company that provides solid
waste collection services. The aggregate initial consideration was
$5,000,000 in cash.
During January 1994, the Company purchased 100% of the
outstanding stock of Harland's Sanitary Landfill, Inc. and purchased
substantially all of the assets of Harland's Disposal Service, Inc.
These companies are comprised of solid waste landfill and collection
operations. The initial aggregate purchase price was $4,170,000 in
cash. Contingent royalty payments of $1.50 per ton commence on the
ninth anniversary of the transaction.
The total consideration for other acquisitions that the Company
made in 1994 was $2,652,291 in cash and $1,363,000 in seller notes.
During May 1993, the Company acquired all of the outstanding
stock of G.S. and M.S., Inc. and of West Michigan Disposal Company.
These companies are comprised of solid waste landfill and collection
operations. Total initial consideration was comprised of $4,353,000
in cash, a $3,375,000 convertible promissory note and 500,000 shares
of the Company's common stock. Contingent consideration will be a
maximum of $2,250,000 in the event of receipt of a new landfill permit
and, if such permit is obtained, continuing royalty payments of $1.50
per ton, subject to certain annual adjustments.
The consideration for all of the outstanding stock of Northern A-1
Sanitation Services, Inc. and substantially all of the assets of
Edmire Leasing, Inc., also purchased during May 1993, was comprised of
approximately $4,492,000 in cash and 458,334 shares of the Company's
common stock. These companies provide solid waste collection and
other environmental services.
During January 1993, the Company acquired all of the outstanding
stock of Peninsula Sanitation, Inc., a company that provides solid
waste collection services. Total consideration was approximately
$3,779,000 in cash.
The total initial consideration for the other acquisitions that
the Company made during 1993 was comprised of $11,732,000 in cash,
206,452 shares of the Company's common stock and $782,000 in seller
notes. Certain of these acquisitions require royalty payments to the
former owners based upon various formulas.
The Company has not completed its valuation of certain of its
1995 purchases and the purchase price allocations are subject to
change when additional information concerning asset and liability
valuations are completed.
The following table summarizes, on an unaudited pro forma basis,
the combined results of operations of the Company for the years ended
December 31, 1995 and 1994 as though each acquisition described above,
which was consummated through December 31, 1995, excluding those
acquisitions accounted for as purchases closed subsequent to December
31, 1995, was made on January 1, 1994.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues $268,057,466 $250,195,377
Pro forma net income 27,204,224 20,222,141
Pro forma primary earnings
per common and common
equivalent share $ .78 $ .70
Pro forma fully diluted earnings
per common and common
equivalent share $ .77 $ .67
The unaudited pro forma results are based upon certain assumptions and
estimates which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred,
nor are they necessarily indicative of expected results in the future.
Note 4 - Property and equipment
A summary of property and equipment is as follows:
</TABLE>
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Landfills $ 173,185,044 $ 81,636,822
Land and improvements 23,029,438 8,244,851
Buildings and improvements 22,626,762 12,820,598
Sludge composting facility 11,675,853 11,675,853
Vehicles and equipment 102,582,170 60,949,503
Furniture, fixtures and
office equipment 3,243,833 1,901,278
Construction in progress 11,901,845 8,016,155
348,244,945 185,245,060
Less accumulated depreciation and
amortization (58,866,599) (40,986,416)
Net property and equipment $ 289,378,346 $ 144,258,644
</TABLE>
Landfill amortization totaled $6,986,922, $3,573,196 and $2,892,608
for the years ended December 31, 1995, 1994 and 1993, respectively.
The Company capitalizes interest as a component of the cost of
property and equipment for construction projects that take considerable
time and expenditures. Interest capitalized primarily related to landfill
cell construction, in 1995, 1994 and 1993 amounted to $1,349,000, $722,000
and $301,000, respectively.
Note 5 - Intangible assets
Intangible assets consist of the excess of cost over the value of
identifiable net assets of businesses acquired and other intangible assets.
Excess of cost over value of identifiable net assets of businesses acquired
are being amortized on a straight line basis over forty years while other
intangible assets are being amortized on a straight line basis for periods
ranging from three to ten years.
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Excess of cost over value of
identifiable net assets of
businesses acquired $ 171,957,922 $ 63,077,555
Other intangible assets 8,520,001 7,455,146
180,477,923 70,532,701
Less accumulated amortization (8,738,726) (5,047,455)
Intangible assets, net $ 171,739,197 $ 65,485,246
</TABLE>
The Company continually evaluates the value and future benefits of its
intangibles. The Company assesses recoverability from future operations
using income from operations of the related acquired business as a measure.
Under this approach, the carrying value would be reduced if it becomes
probable that the Company's best estimate for expected future cash flows of
the related business would be less than the carrying amount of the
intangible over the remaining amortization period. For the three year
period ended December 31, 1995, there were no adjustments to the carrying
amounts of intangibles resulting from these evaluations.
Note 6 - Long-term debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Credit Facility $ 41,800,000 $ 41,000,000
Senior secured notes, interest
payment semi-annually, at 7.67%
per annum, annual principal
payments beginning September 1999,
due September 2005 75,000,000
Tax exempt bonds, monthly interest
payments at variable rates
(5.15% at December 31, 1995),
due April 2010 22,500,000
Installment notes, principal
and interest ranging from 3.07%
to 14.70%, secured by equipment,
payable monthly, and
maturing through 2001 2,652,295 1,987,964
Promissory note, quarterly interest
payments, at 8% per annum, due
September 2001 6,000,000
Subordinated promissory note,
monthly interest payments at 8 1/2%
per annum due April 2000 1,500,000
Subordinated promissory note,
monthly interest payments at 8 1/2%
per annum due April 2000 1,500,000
Note payable, secured by certain
real property, monthly interest
payments at 10% per annum;
principal payment of $500,000
is due March 2000 and $600,000
is due March 2005 1,100,000 1,600,000
Convertible notes, (converted in 1995) 3,090,008
Note payable - bank, collaterized by
all bank accounts contract rights,
equipment and general
intangibles of the Carmel Marina
Companies (repaid in 1995) 1,611,108
Note payable-bank, collaterized by
certain equipment and guaranteed
by a shareholder (repaid in 1995) 679,584
Note payable - bank, secured by
certain real property (repaid in 1995) 1,115,794
</TABLE>
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <S> <C>
Other (interest rates ranging from
7% to 11.5%) 9,485,772 6,387,571
161,538,067 57,472,029
Less current portion (5,344,096) (6,536,079)
$156,193,971 $50,935,950
</TABLE>
The Company's $215 million three year secured revolving
credit facility (the "Credit Facility") due August 1998, bears
interest at a rate per annum equal to the Eurodollar Rate
(Reserve Adjusted) (as defined in the loan agreement providing
for the Credit Facility) applicable to each interest period plus
.75% to 1.75% per annum or the Alternate Reference Rate (as so
defined) from time to time in effect plus 0% to .25% per annum.
At December 31, 1995, the Credit Facility's weighted average
interest rate was 7.15% per annum. The Credit Facility also
allows the Company to obtain up to $65 million in letters of
credit and these outstanding letters of credit reduce the
Company's availability under the Credit Facility. The Credit
Facility is secured by substantially all of the assets of United
Waste Systems, Inc. and by the stock and assets of its
subsidiaries, restricts the Company from granting certain liens
on its assets (subject to certain limited exceptions), and
requires the Company to comply with certain covenants including,
but not limited to, maintenance of certain financial ratios,
limitation on additional indebtedness, limitation on capital
expenditures and a prohibition on the Company's paying cash
dividends on its capital stock. The Credit Facility also
currently requires that the consent of the lenders be obtained in
order for the Company to make an acquisition that provides for an
aggregate purchase price of $15 million or more. In addition,
the Credit Facility prohibits the Company from using more than
$10 million of its cash to secure closure and post-closure
obligations that the Company may have relating to its landfills.
Under the terms of the Credit Facility, an event of default would
occur should two or more of the individuals currently serving as
executive officers of the Company cease to be employed by the
Company.
In April 1995, $22.5 million in principal amount of Variable
Rate Demand Limited Obligation Revenue Bonds (the "Tax Exempt
Bonds") were issued for the benefit of the Company by a corporate
body organized under the laws of the State of Michigan. The
proceeds of the Tax Exempt Bonds were initially placed in escrow
and are available to the Company for the purpose of financing the
Company's costs of construction of certain solid waste disposal
facilities and purchase of solid waste collection equipment in
the State of Michigan. The Tax Exempt Bonds mature on April 1,
2010 and bear interest at a variable rate unless the Company
elects a fixed rate in accordance with the terms of the Tax
Exempt Bonds. If a variable rate is in effect, this rate is set
periodically at a level (not to exceed 12% per annum) that would
enable the Tax Exempt Bonds to be resold at a price equal to
their principal amount plus all accrued interest thereon. As of
December 31, 1995, $5.6 million of the proceeds of the Tax Exempt
Bonds remained in escrow and available for future drawdowns by
the Company.
In September 1995, the Company issued $75 million in Senior
Secured Notes due September 1, 2005 (the "Notes"). The Notes
bear interest at a fixed rate of 7.67% per annum; interest is
payable semi-annually and annual principal payments in the amount
of $10.7 million are due beginning September 1999. The Notes are
secured pari passu with the Credit Facility and any event of
default under the Credit Facility also constitutes an event of
default under the Notes. The Notes require the Company to comply
with certain covenants including, but not limited to, maintenance
of certain financial ratios, limitation on additional
indebtedness and prohibition on the Company's payment of cash dividends on any
of its capital stock.
Maturities of the Company's long-term debt for each of the
next five years at December 31, 1995 are as follows:
1996 $5,344,096
1997 2,329,295
1998 43,997,419
1999 11,536,063
2000 11,751,641
Thereafter 86,579,553
Note 7 - Nonrecourse Sewage Facility Revenue Bonds
The Company's nonrecourse sewage facility revenue bonds (the
"Revenue Bonds") are obligations of a wholly-owned subsidiary of
the Company and are collateralized solely by the subsidiary's
interest in a sludge composting facility, revenue derived from
such facility and by certain Bond funds held in trust. The
Revenue Bonds are nonrecourse and, therefore, the subsidiary and
its affiliates, including, but not limited to, United Waste
Systems, Inc. and subsidiaries, are not liable for any payment
due on the Revenue Bonds, nor any claim based on, or in respect
to, the Revenue Bond's indenture. Annual principal payments on
the Revenue Bonds range from $300,000 in 1996, $400,000 in 1997
through 2000 to $1,100,000 in 2010 at final maturity and interest
is payable semi-annually at a fixed rate of 9.25%.
Note 8 - Income Taxes
Certain of the Carmel Marina Companies (see Note 3) and
Salinas Companies (see Note 13) had elected to be treated as
Subchapter S Corporations for federal and state income tax
purposes. Under this provision, the companies' income or loss is
passed through to their stockholders rather than being subjected
to taxes at the corporate level. The accompanying consolidated
financial statements reflect provisions for income taxes on a pro
forma basis as if all of the Carmel Marina Companies and Salinas
Companies were liable for federal and state income taxes as
taxable corporate entities. The offsetting credits to the pro
forma income tax provisions are reflected as an increase in
retained earnings.
The provision for pro forma federal and state income taxes
is as follows:
<TABLE>
<CAPTION>
December 31
<S> 1995 1994 1993
Historical income taxes: <C> <C> <C>
Current State $ 1,546,649 $ 546,230 $ 506,044
Current Federal 10,228,961 5,575,607 2,531,503
Deferred State 660,890 181,636 144,975
Deferred Federal 3,198,484 1,640,550 841,003
(Benefit) for deferred
taxes of Subchapter S
Corporation at time
of pooling (314,086)
15,320,898 7,944,023 4,023,525
Pro forma tax adjustment:
State 310,142 450,095 207,387
Federal 1,148,219 1,614,678 689,894
1,458,361 2,064,773 897,281
$16,779,259 $10,008,796 $4,920,806
</TABLE>
A reconciliation of the provision for pro forma income taxes and the
amount computed by applying the statutory federal income tax rates of 35%
for 1995 and 1994 and 34% for 1993 to income before taxes is as follows:
<TABLE>
<CAPTION>
December 31
1995 1994 1993
<S> <C> <C> <C>
Computed tax at statutory
tax rate $ 15,263,270 $ 10,133,803 $ 5,605,101
Increase (decrease)
in taxes:
Change in valuation
allowance (35,978) (472,306) (1,270,386)
Nondeductible expense
(primarily
intangibles) 992,663 230,994 136,539
State income taxes, net of
federal tax benefit 1,636,493 658,546 566,640
(Benefit) for deferred
taxes of Subchapter S
Corporation at
time of pooling (314,086)
Other (763,103) (542,241) (117,088)
$ 16,779,259 $ 10,008,796 $ 4,920,806
</TABLE>
The components of deferred income tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Deferred income tax
liabilities:
Property, equipment
and intangibles $ 42,593,903 $ 12,928,124
Deferred income
tax assets:
Accounts receivable
allowance 921,905 636,162
Accrued liabilities 1,861,550 685,324
Closure reserves 8,090,566 1,385,896
Net operating loss
carryforwards 1,131,158 306,458
Other 64,004 839,700
Total deferred income
tax assets 12,069,183 3,853,540
Valuation allowance (270,480) (306,458)
$ 11,798,703 $ 3,547,082
</TABLE>
The Company recognized certain tax benefits related to its
stock option plan in the amount of $1,754,177 and $1,015,000 in
1995 and 1994, respectively. These benefits were recorded as a
reduction of income taxes payable and an increase in additional
paid-in capital.
At December 31, 1995, the Company has a net short-term
deferred tax asset in the amount of $2,842,000, which is reported
in the balance sheet included in prepaid expenses and other
current assets.
At December 31, 1995, the Company had net operating loss
carryforwards ("NOLs") of $439,093 for federal and $10,447,104
for state income tax purposes that expire in years 1997 through
2010. The NOLs resulted from the Company' acquisitions discussed
in Note 3 and the NOLs are limited to the future taxable earnings
of their related acquired businesses. For financial reporting
purposes, a valuation allowance has been recorded for that
portion that management believes may not be utilized.
Note 9 - Capital Stock
Common Stock: At December 31, 1995, approximately 5,400,000
shares of common stock are reserved for the exercise of warrants,
options and the conversion of certain debt.
Preferred Stock: The Company's board of directors has the
authority to designate 5,000,000 shares of $.001 par value
preferred stock in series, to establish as to each series the
designation and number of shares to be issued and the rights,
preferences, privileges and restrictions of the shares of each
series, and to determine the voting powers, if any, of such
shares. At December 31, 1995, the Company's Board of Directors
had designated 3,440,990 shares, of which 336,621 shares are
available for future issuance.
The Company's 8% Cumulative Convertible Preferred Stock ("8%
Stock") has 2,500,000 shares designated and 943,429 shares were
issued and outstanding at December 31, 1994. As of December 31,
1995, all of the remaining outstanding 8% Stock has been
converted to common stock.
Common Stock Options and Warrants: During July 1992, the
Company adopted a 1992 Stock Option Plan for the grant of
incentive stock options and non-statutory stock options. The
aggregate number of shares of common stock which may be subject
to options granted under the plan may not exceed 4,500,000,
subject to adjustment under certain circumstances. The exercise
price, subject to certain minimums, vesting periods and other
conditions applicable to each option granted, are generally
determined by two disinterested directors on the Compensation
Committee of the Board of Directors.
Also during July 1992, the Company adopted a 1992
Disinterested Director Stock Option Plan for the grant of
non-statutory options for certain directors of the Company. The
plan provides for a fixed number of options to be issued annually
for each participant with exercise prices at current market value
and the options vest immediately.
At December 31, 1995, the Company had 4,185,250 stock
purchase options outstanding with exercise prices per share
ranging from $5.06 to $19.00, of which 3,063,584 options were
exercisable. During 1995, 447,140 stock purchase options were
exercised with exercise prices per share ranging from $5.25 to
$17.19. Also at December 31, 1995, the Company had 1,247,328
stock purchase warrants outstanding with exercise prices per
share ranging from $2.61 to $12.50, all of which are currently
exercisable, and expire through the year 2002.
At December 31, 1994, the Company had 3,235,242 stock
purchase options outstanding with exercise prices per share
ranging from $5.06 to $12.00. During 1994, 672,844 stock
purchase options were exercised with exercise prices per share
ranging from $4.05 to $9.00. Also at December 31, 1994, the
Company had 1,631,214 stock purchase warrants outstanding with
exercise prices per share ranging from $.03 to $7.71, all of
which were currently exercisable, and expiring through the year
2002.
At December 31, 1993, the Company had 2,847,206 stock
purchase options outstanding with exercise prices per share
ranging from $4.05 to $8.44. Through December 31, 1993, no
options had been exercised. Also at December 31, 1993, the
Company had outstanding warrants to purchase 2,046,434 shares of
its common stock at prices from $.03 to $7.71 per share and
expiring through 2002, all of the warrants were currently
exercisable.
Note 10 - Earnings Per Share
Primary and fully diluted earnings per common share for the
year ended December 31, 1995 have been computed based upon
weighted average equivalent shares outstanding of 34,693,501 and
34,898,801, respectively.
Primary and fully diluted earnings per common share for the
year ended December 31, 1994 have been computed based upon
weighted average equivalent shares outstanding of 26,076,421 and
29,153,689, respectively. Primary earnings per share was
calculated after giving effect to net deductions from income
available to common stockholders of $1,275,180 related to
dividends on preferred stock.
Primary and fully diluted earnings per common share for the
year ended December 31, 1993 has been computed based upon
weighted average equivalent shares outstanding of 20,108,379 and
20,840,881, respectively, after giving effect to net deductions
from income available to common stockholders of $1,654,720 and
$1,528,218, respectively, primarily related to dividends on
preferred stock.
Note 11 - Fair Value of Financial Instruments
The following methods and assumptions were used by the
Company in estimating the fair value disclosures for financial
instruments:
Cash and cash equivalents: The carrying amount reported in
the balance sheet for cash and cash equivalents approximates fair
value.
Restricted cash: The $13,955,560 carrying amount reported in
the balance sheet included in other assets for restricted cash
and cash equivalents approximates fair value.
Long and short-term debt: The carrying amount of the
Company's borrowings under its revolving credit agreement
approximates fair value. The fair values of the other long and
short-term debt are estimated based on the Company's incremental
borrowing rates for similar types of borrowing arrangements.
These carrying amounts approximate fair value.
Note 12 - Commitments and Contingencies
The Company leases various office space and equipment under
noncancellable operating leases expiring on various dates through
2004. The Company leases equipment with a cost of $5,981,710 and
$5,461,745 and cumulative amortization of approximately
$1,547,133 and $1,343,000 under various capital leases at
December 31, 1995 and December 31, 1994, respectively.
The following is a schedule of future minimum lease payments
under capital leases and noncancellable operating leases with
initial terms in excess of one year as of December 31, 1995:
Noncancellable
Capital Operating
December 31 Leases Leases
1996 $1,827,350 $ 498,338
1997 1,363,896 485,292
1998 614,194 433,980
1999 371,593 324,083
2000 290,312 81,540
Thereafter 4,870,604 321,360
Total minimum
lease payments $9,337,949 $ 2,144,593
Less amount
representing
interest (3,266,819)
Present value of net
minimum lease payments 6,071,130
Less current
portion (1,383,576)
Long-term portion $ 4,687,554
Rent expense under noncancellable operating leases for the
years ended December 31, 1995, 1994 and 1993 was $435,008,
$428,233 and $492,252, respectively.
During 1995, the Company entered into a contingent lease
agreement related to a portion of the land related to one of its
solid waste landfills. Payments under this lease agreement are
based upon 50% of the net cash receipts (as defined in the lease
agreement) of the landfill and are payable monthly. For the year
ended December 31, 1995 the related lease expense totaled
$243,000.
The Company owns and operates a waste water sludge
composting plant located in Springfield, Massachusetts. This
facility encompasses a totally "in vessel" sludge composting
operation that was designed as an enclosed system in order to
prevent emissions from escaping into the atmosphere. During
1992, the Company entered into a 20-year service agreement with
the City of Springfield under which the Company treats sewage
sludge generated at the Springfield Regional Wastewater Treatment
Facility.
While the Company carries a wide range of insurance coverage
for the protection of the Company's assets and operations, the
Company does not carry insurance coverage for environmental
liability, except as described in the following sentence. The
Company's insurance coverage for environmental liability is
limited to (i) over-the-road environmental liability protection
for the transportation of asbestos-containing material, (ii)
contractor pollution liability insurance that relates to certain
environmental services provided by the Company and (iii) certain
other pollution liability insurance which is the equivalent to
self-insurance because under the terms thereof the Company is
required to fully reimburse the insurance company for any paid
claims. In the event uninsured losses occur, the Company's net
income and financial position could be materially adversely
affected.
On January 9, 1996 the Junker Landfill Trust sued the
Company, Junker Sanitation Service, Inc., and United Waste
Transfer, Inc., both of which are subsidiaries of the Company,
and approximately 800 other parties in the United States District
Court for the Western District of Wisconsin, Case No. 96C 19S,
for contribution under the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), as well as state
common law. These claims relate to alleged releases of hazardous
substances at the Junker Landfill site in Hudson, Wisconsin. The
suit against Junker Sanitation Services, Inc. is based upon its
transportation of waste to the landfill over a ten year period
ended 1987. The claims asserted directly against the Company and
United Waste Transfer, Inc. are based upon the Company's
acquisition in 1995 of the stock of Junker Sanitation Service,
Inc. The suit is in its initial stages and the Company is not
yet in a position to assess the likelihood of the Plaintiff's
success in this litigation. In any event, the former owner of
Junker Sanitation, Inc. has agreed to indemnify the Company
against any liability to the Plaintiff. In the opinion of
management, this claim should not materially affect the financial
position of the Company.
On May 26, 1995, the Company sued Robert Foley and Matthew
Parzych in the United States District Court for the District of
Connecticut, Case No. 3:95-CV-985. The defendants sold stock in
certain Massachusetts corporations to the Company under an
agreement dated April 1, 1992 (the "1992 agreement"). In the
suit the Company seeks approximately $1,115,000 in cash and
securities from an escrow account and additional amounts from
defendants by reason of indemnity provisions contained in the
1992 agreement and confirmed in an agreement dated January 28,
1994 (the "1994 agreement"). The defendants have counterclaimed
against the Company and its chief executive officer, seeking to
invalidate the 1994 agreement primarily for alleged lack of
consideration and economic duress, and to receive alleged damages
and costs. The counterclaims for damages are primarily for
alleged misrepresentations by the Company in connection with the
1992 agreement, and were asserted by defendants notwithstanding
provisions in the 1994 agreement which generally released the
Company from all claims. The Company intends vigorously to
pursue its claims in this action and to seek dismissal of the
counterclaims. In the opinion of management, this claim should
not materially affect the financial position of the Company.
The Company accrues the costs for closure and postclosure
monitoring over the life of its owned landfills and will pay out
these costs over the next fifty years. Major components of these
costs include closure cap construction, leachate treatment and
groundwater monitoring. The Company accrues these costs
utilizing engineering estimates based on current governmental
regulations regarding closure requirements. The Company
estimates that the aggregate liability for the closure,
postclosure and remediation costs of its landfills owned at
December 31, 1995 will be approximately $52.6 million. At
December 31, 1995, the Company has approximately $34.2 million of
these costs accrued and, therefore, has accrued approximately 65%
of its estimated total costs to date.
The Company monitors the availability of airspace at each of
its landfills and the need to obtain permit modifications for
approvals for expansion in order to continue operating these
landfills. In order to develop and operate a landfill, a
composting facility or transfer station, or other solid waste
management facility, the Company typically must go through
several governmental review processes and obtain one or more
permits and often zoning or other land use approvals. Once
obtained, operating permits generally must be periodically
renewed and are subject to modification and revocation by the
issuing agency. There can be no assurance that the Company will
succeed in obtaining these permits, permit modifications or
approvals.
The Company has outstanding letters of credit with banks
of approximately $51,392,000 and $12,394,000 at December 31, 1995
and 1994, respectively. The letters of credit were obtained as
collateral for the Company's Tax Exempt Bonds, self-fund
insurance programs and as direct collateral to assure compliance
with governmental sanitary landfill closure and post-closure
obligations for landfills.
Note 13 - Subsequent Events
On May 30, 1996, the stockholders of the Company approved an
amendment to the Company's Certificate of Incorporation that
increased the authorized shares of common stock of the Company to
75,000,000 shares. On March 12, 1996, the Board of Directors
approved a two-for-one stock split of the Company's common stock
to be effected in the form of a 100% stock dividend. Such stock
split was effected by the distribution on June 18, 1996, of a
dividend of one share of the Company's common stock in respect of
each share of common stock that was outstanding on June 7, 1996,
the record date established for such distribution. All
Agreements concerning stock options, convertible securities and
other commitments payable in shares of the Company's common stock
were amended pursuant to their own terms to provide for the
issuance of two shares of common stock for every one share that
was issuable prior to the stock split.
On June, 28, 1996, the Company issued 730,765 shares of its
common stock for all of the outstanding shares of common stock of
Salinas Disposal Service, Inc., Rural Dispos-All Service, Inc.
and Madison Lane Partnership, Inc. (the "Salinas Companies"), a
group of affiliated companies that comprise an integrated solid
waste management company. This transaction has been accounted
for as a pooling-of-interests and, accordingly, the supplemental
consolidated financial statements have been restated for all
periods presented to include the accounts of the Salinas
Companies. The accompanying supplemental consolidated financial
statements will become the historical financial statements of the
Company upon issuance of financial statements for the periods
that include the date of such transaction with the Salinas
Companies.
Separate revenue and pro forma net income of the combined
United and Carmel Marina companies and the Salinas Companies
prior to the Salinas Companies combination are as follows:
United and
Carmel Marina Salinas
Companies Companies Combined
Year ended December 31:
1995
Revenues $ 211,790,224 $ 16,586,538 $ 228,376,762
Pro forma net income 25,987,769 842,315 26,830,084
1994
Revenues 128,528,765 17,513,758 146,042,523
Pro forma net income 17,066,875 1,878,051 18,944,926
1993
Revenues 95,714,480 13,291,422 109,005,902
Pro forma net income 11,349,295 215,490 11,564,785
Subsequent to December 31, 1995, the Company completed the following
purchases of businesses:
Date
Company Business Acquired
United Waste Systems, Inc.
(MN) (not previously
affiliated with
the Company) Collection January 1996
Cardinal Sanitation,
Inc. Collection January 1996
Albany Disposal
Service, Inc. Collection January 1996
Hudson & Sons
Sanitation Collection January 1996
Commercial Disposal
Company, Inc. Collection/ January 1996
Transfer
Station
Central Sanitary Landfill, Inc. Landfill/ February 1996
Collection
Robert Wright Disposal, Inc. Collection February 1996
Creech Sanitation Collection February 1996
Cheshire Sanitation, Inc. Collection/ February 1996
Transfer
Station
Charlie's Rubbish Collection March 1996
Benjamin Scott Collection March 1996
Milby Sanitation Collection April 1996
Suburban Sanitation Service, Inc. Collection/ April 1996
Recycling
Dafter Sanitary Landfill, Inc. Landfill/ April 1996
Collection
JJ Young Collection April 1996
McDaniel Landfill, Inc. Landfill/ May 1996
Collection/
Transfer Station
DSI of Shawano County, Inc. Collection May 1996
Dietrich Sanitary Service, Inc. Collection/ May 1996
Recycling
Peterson Demolition, Inc. Transfer/ May 1996
Collection
Manca Brothers Landfill June 1996
Fred Bauer Collection June 1996
Twin City Sanitation, Inc. Collection June 1996
Carpenter Trucking Collection June 1996
Rubbish Busters, Inc. Collection June 1996
United Waste Systems, Inc.(CO) Landfill/ June 1996
(not previously affiliated with Collection/
the Company) Transfer Station
Andrews Rubbish Collection June 1996
Pete Corellis Rubbish Removal, Inc.Collection June 1996
Missouri River Sanitation, Inc. Collection/ July 1996
Cecil Shykes Sanitary Service, Inc. Collection July 1996
Baker Sanitation, Inc. Collection July 1996
Adirondack Waste Systems, Inc. Collection August 1996
Albany Greene Sanitation, Inc. Collection August 1996
Midwest Sanitation, Inc. Collection August 1996
County Waste and Recycling, Inc. Collection August 1996
Arnold Trusty Collection August 1996
CDF Consolidated Corporation Collection/ August 1996
Transfer Station
Okolona Sanitation, Inc. Collection August 1996
In June 1996, the Company issued $150 million in Convertible
Subordinated Notes (the "Convertible Notes") due June 1, 2001.
The Convertible Notes bear interest at a fixed rate of 4-1/2% per
annum, payable semi-annually. The Convertible Notes are
convertible into common stock at a conversion price of $32.50 per
share. The Convertible Notes are unsecured obligations of United
Waste Systems, Inc. and are subordinated to all existing and future Senior
Indebtedness (as defined in the indenture) of
United Waste Systems, Inc. and are effectively subordinated to
all liabilities of United Waste Systems, Inc. subsidiaries. The
net proceeds from the Convertible Notes were used to repay
approximately $78 million of existing indebtedness and the
balance was retained to fund acquisitions, capital expenditures
and for general corporate purposes.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions
Charged
Balance to
at Costs Balance
Beginning and at end of
of Period Expenses Other Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended December
31, 1995:
Allowance for
doubtful accounts $ 1,949,479 $ 1,487,163 $ 244,048(1) $ 1,431,366(2) $ 2,249,324
Year ended December
31, 1994:
Allowance for
doubtful accounts $ 1,830,792 $ 1,032,149 $ 140,000(1) $ 1,053,462(2) $ 1,949,479
Year ended December
31, 1993:
Allowance for
doubtful accounts $ 838,375 $ 1,633,915 $ 176,520(1) $ 818,018 $ 1,830,792
</TABLE>
(1) Consists of $244,048, $140,000 and $176,520 of reserves through acquisitons
in 1995, 1994 and 1993, respectively.
(2) Uncollectible accounts written-of, net of recoveries.
Exhibit 99.2
UNITED WASTE SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Note 5 ("Note 5") to the accompanying pro forma condensed
consolidated statement of operations for the year ended December
31, 1995 identifies each of the acquisitions completed by United
Waste Systems, Inc. (the "Company") during the period from January
1, 1995 through August 22, 1996 that were accounted for as a
purchase. An asterisk following an acquisition identified in Note
5 indicates that such acquisition was a smaller acquisition and is
not reflected in these pro forma statements (collectively such
acquisitions being referred to as the "Excluded Acquisitions"). As
more fully disclosed in Note 1 to the pro forma financial
statements, the Company completed acquisitions that were accounted
for as a pooling-of-interests and, accordingly, have been included
in the Company's historical financial statements. None of the
Excluded Acquisitions individually represents the acquisition of a
"significant" business as determined by reference to the conditions
specified in the definition of "significant subsidiary" (in Rule 1-02 of
Regulation S-X under the Securities Exchange Act of 1934).
In addition, the Excluded Acquisitions in the aggregate do not
satisfy any such conditions for significance at the 20% level. All
acquisitions from the period January 1, 1996 through August 22,
1996 in the aggregate, do not satisfy any such conditions of
significance at the 20% level.
The accompanying unaudited pro forma condensed consolidated
statement of operations for the six months ended June 30, 1996
gives effect to each acquisition identified in Note 5 (other than
the Excluded Acquisitions) that was completed after the beginning
of such period (the "1996 Acquisitions"), as if all such
acquisitions had occurred on January 1, 1996.
The accompanying unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 1995 gives
effect to each acquisition identified in Note 5 (other than the
Excluded Acquisitions) that was completed after the beginning of
such period (the "1995 and 1996 Acquisitions") as if all such
acquisitions had occurred on January 1, 1995.
An audited pro forma balance sheet as of June 30, 1996 has not
been provided because giving effect to the acquisitions completed
after such date would not have resulted in material pro forma
adjustments to such balance sheet.
The unaudited pro forma condensed consolidated statements of
operations are based upon certain assumptions and estimates which
are subject to change. These statements are not necessarily
indicative of the actual results of operations that might have
occurred, nor are they necessarily indicative of expected results
in the future.
The unaudited pro forma condensed consolidated statements of
operations should be read in conjunction with (i) the Company's
Supplemental Consolidated Financial Statements and related notes
filed as Exhibit 99.1 to this Report on Form 8-K and (ii) the
Company's historical financial statements for the six months ended
June 30, 1996 and related notes included under Item 1 of the
Company's Report on Form 10-Q for the quarterly period ended June
30, 1996 (which financial statements and related notes are
incorporated by reference herein).
<TABLE>
UNITED WASTE SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended June 30, 1996
(Unaudited)
Pro Forma Pro Forma
Historical Acquisitions Adjustments Consolidated
<S> <C> <C> <C>
Revenues $145,791,006 $ 4,891,067 $ (60,000) (a) $150,622,073
Cost of
operations 91,662,942 3,671,903 (60,000) (a) 95,368,404
93,559 (b)
Selling, general
and administrative
expense 23,214,855 1,385,083 (726,436) (c) 23,873,502
Income from operations 30,913,209 (165,919) 632,877 31,380,167
Interest expense 7,206,432 236,976 (236,976) (d) 7,826,396
619,964 (e)
Other expense (income),
net 1,481,091 (28,215) 1,452,876
Income before income
taxes 22,225,686 (374,680) 249,889 22,100,895
Provision for income
taxes 8,993,127 6,287 (380,065) (f) 8,619,349
Net income $ 13,232,559 $ (380,967) $ 629,954 $13,481,546
Primary earnings per
common and common
equivalent share $.34 $.35
Primary weighted average
equivalent shares 38,901,193 38,901,193
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
UNITED WASTE SYSTEMS, INC.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
1. HISTORICAL
The historical balances represent the results of operations of
the Company for the indicated period as reported in the Unaudited
Condensed Consolidated Financial Statements of United Waste
Systems, Inc. included under Item 1 of the Company's Report on Form
10-Q for the six months ended June 30, 1996 (which financial
statements and related notes are incorporated by reference herein).
As described in Note 2 to such financial statements, the Company
completed the acquisition of the Salinas Companies on June 28,
1996, in a transaction accounted for as a pooling-of-interests and,
accordingly, such financial statements for all periods presented
therein have been restated to include the accounts of the Salinas
Companies. The historical balances reflect such restatement.
2. ACQUISITIONS
The balances for acquisitions represents the results of
operations of the 1996 Acquisitions prior to their respective
acquisition dates for the period presented.
3. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the pro forma condensed
consolidated statement of operations give effect to the following:
(a) To eliminate intercompany revenue and expense between the
Company and certain of the 1996 Acquisitions.
(b) To reflect (1) the amortization of excess purchase price
and landfill airspace (2) depreciation of acquired fixed
assets based upon revalued fair market asset values; and
(3) closure and post closure expenses on an accrual
basis.
Assets acquired are being depreciated and amortized over
the following remaining estimated useful lives:
Vehicles and equipment. .3-10 years
Land improvements . . . . .10 years
Buildings . . . . . . .25-30 years
Intangible assets . . . .3-40 years
(c) To reflect net contractual reductions made to former
owners' and officers' compensation.
(d) To reflect reduction of interest expense resulting from
the non-assumption of certain of the 1996 Acquisitions'
indebtedness.
(e) To reflect additional interest expense resulting from
additional Company indebtedness required to finance the
purchase of the 1996 Acquisitions.
(f) To adjust federal and state income taxes for the effect
of the pro forma adjustments and to reflect the filing of
a consolidated federal income tax return.
4. EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing the net
income by the weighted average outstanding shares during the
period.
The weighted average outstanding shares during the six months
ended June 30, 1996 are calculated as follows:
Primary Average
Equivalent Shares
Historical weighted
average shares 38,901,193
Shares issued for
1996 Acquisitions ---
38,901,193
UNITED WASTE SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995
(Unaudited)
Acquisitions
(other than
Partyka Partyka Pro Forma Pro Forma
Historical Acquisition) Acquisition Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
Revenue $ 228,376,762 $ 56,584,736 $ 12,507,546 $(1,233,763)(a) $296,235,281
Cost of
operations 140,813,834 41,445,829 8,230,249 1,341,686)(a) 188,926,393
323,078 (b)
(544,911)(c)
Selling, general
and administrative
expense 34,841,125 10,777,240 1,177,743 (1,067,718)(c) 45,728,390
Income from
operations 52,721,803 4,361,667 3,099,554 1,397,474 61,580,498
Interest expense 10,061,290 1,406,651 111,879 (1,385,394)(d) 18,801,622
8,607,196 (e)
Other income,
net (948,830) (431,267) (72,727) (1,452,824)
Income before provison
for pro forma
income taxes 43,609,343 3,386,283 3,060,402 (5,824,328) 44,231,700
Provision for pro
forma income taxes 16,779,259 699,596 1,214,830 (1,802,705)(f) 16,890,980
Pro forma net
income 26,830,084 $ 2,686,687 $ 1,845,572 (4,021,623) 27,340,720
Net deductions from
pro forma income
available to
common
stockholders 372,501 372,501
Pro forma income
available to
common stockholders $ 26,457,583 $ 26,968,219
Pro forma primary
earnings per
common and common
equivalent share $.77 $.78
Primary average
equivalent shares 34,693,501 34,834,691
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
UNITED WASTE SYSTEMS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
1. HISTORICAL
The historical balances represent the results of operations of
the Company for the indicated period as reported in the
Supplemental Consolidated Financial Statements of United Waste
Systems, Inc. filed as Exhibit 99.1 to this Report on Form 8-K. As
described in Notes 3 and 13 to such financial statements, the
Company completed the acquisition of the Carmel Marina Companies on
September 29, 1995 in a transaction accounted for as a pooling-of-interests and
the acquisition of the Salinas Companies on June 28,
1996 in a transaction accounted for as a pooling-of-interests and,
accordingly, such financial statements for all periods presented
therein have been restated to include the accounts of the Carmel
Marina Companies and the Salinas Companies. The historical
balances reflect such restatements.
2. ACQUISITIONS
The balances for acquisitions represents the results of
operations of the 1995 and 1996 Acquisitions prior to their
respective acquisition dates for the period presented.
3. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the pro forma condensed
consolidated statement of operations give effect to the following:
(a) To eliminate intercompany revenue and expense between the
Company and certain of the 1995 and 1996 Acquisitions
and include rate increases granted to an acquired company
upon the acquisitions closing.
(b) To reflect (1) the amortization of excess purchase price
and landfill airspace (2) depreciation of acquired fixed
assets based upon revalued fair value asset values, and
(3) closure and post closure expenses on an accrual
basis.
Assets acquired are being depreciated and amortized over
the following remaining estimated useful lives:
Vehicles and equipment. .3-10 years
Land improvements . . . . .10 years
Buildings . . . . . . .25-30 years
Intangible assets . . . .3-40 years
(c) To reflect net contractual reductions made to former
owners' and officers' compensation.
(d) To reflect reduction of interest expense resulting from
the non-assumption of certain of the 1995 and 1996
Acquisitions' indebtedness.
(e) To reflect additional interest expense resulting from
additional Company indebtedness required to finance the
purchase of the 1995 and 1996 Acquisitions.
(f) To adjust federal and state income taxes for the effect
of the pro forma adjustments and to reflect the filing of
a consolidated federal income tax return.
4. EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing the net
income by the weighted average outstanding shares during the
period.
The weighted average outstanding shares during the year ended
December 31, 1995 are calculated as follows:
Primary Average
Equivalent Shares
Historical weighted
average shares 34,552,311
Shares issued
for 1996 and
1995 Acquisitions 141,190
34,693,501
5. ACQUISITIONS LISTING
This note identifies each of the acquisitions completed by the
Company during the period from January 1, 1995, through August 22,
1996 that was accounted for as a purchase. (As described in Notes
3 and 13 of Notes to the Supplemental Consolidated Financial
Statements filed as Exhibit 99.1 to this Report on Form 8-K, the
Company during this period completed two transactions that were
accounted for as pooling-of-interests).
<TABLE>
<CAPTION>
Company Business Date Acquired
<S> <C> <C>
Ironland Disposal Collection/ January 1995
Service, Inc.* Transfer Station
Malone's Refuse Removal, Inc. Collection January 1995
E&K General Hauling, Inc.* Collection February 1995
Leahy Waste Disposal, Inc.* Collection February 1995
Waste Systems Corporation/ Landfill/ February 1995
Waste Co., Inc. Collection/
Transfer Station
Disposal Service, Inc. Landfill February 1995
C.B. Trucking, Inc.* Collection February 1995
N.J. Mensing Collection February 1995
Enterprises, Inc.*
Gallagher's Service, Inc. Collection/ March 1995
Transfer Station
Benson Brothers Collection/ March 1995
Disposal, Inc. Transfer Station
T.J.C.* Collection March 1995
Dakota Resource Transfer Station March 1995
Recovery, Inc.
Bellaire Sanitation, Inc. Collection/ April 1995
Transfer Station
Knutson Services, Inc. Collection/ April 1995
Transfer Station
Junker Sanitation, Inc. Collection April 1995
Poor Richard's, Inc.* Collection/ April 1995
Transfer Station
Tollefson Sanitary Collection May 1995
Services, Inc.*
Rhinelander Disposal Collection/ May 1995
Service, Inc.* Transfer Station
J.D.L. Leasing, Inc.* Collection May 1995
Ray Andersen & Sons Collection May 1995
Companies, Inc.*
J.R. & Sons Waste Services* Collection June 1995
Empire Waste Services, Inc.* Collection June 1995
Eisinger Sanitation Collection June 1995
Services, Inc.*
Don's S&S Disposal, Inc.* Collection July 1995
Dwayne Mapes Collection July 1995
Disposal Service*
Lewies Garbage Disposal* Collection July 1995
East Kentucky
Sanitation, Inc.* Collection July 1995
McCormick Refuse
Services, Inc.* Collection July 1995
E.R. Hopper & Son, Inc. Landfill/ July 1995
Collection/
Transfer Station
Suburban Sanitation Collection/
Company(KY) Transfer Station August 1995
Williams Landfill, Inc. Landfill/ August 1995
Collection
Zenith-Kremer Waste Collection/ August 1995
Systems, Inc. Transfer Station
Kelly's Disposal Collection August 1995
Service, Inc.*
J.F. Partyka companies Landfill/ September 1995
Collection
P&D Waste Services, Inc.* Collection September 1995
Twin Ports Collection/ September 1995
Environmental, Inc.* Transfer Station
Lake Sanitation, Inc.* Collection September 1995
Borders Sanitation, Inc.* Collection/ September 1995
Transfer Station
Bartlet's Disposal, Inc.* Collection October 1995
Wayne Sanitation, Inc.* Collection/ October 1995
Transfer Station
Campbell Rubbish Removal* Collection November 1995
B&M Sanitation, Inc.* Collection/ November 1995
Transfer Station
Tri County Sanitation, Inc.* Collection December 1995
United Waste Collection January 1996
Systems, Inc. (MN)
(not previously affiliated
with the Company)*
Cardinal Sanitation, Inc. Collection January 1996
Albany Disposal Collection January 1996
Service, Inc.*
Hudson & Sons Sanitation* Collection January 1996
Commercial Disposal Collection/ January 1996
Company, Inc. Transfer Station
Central Sanitary Landfill/ February 1996
Landfill, Inc. Collection
Robert Wright Disposal, Inc.* Collection February 1996
Creech Sanitation* Collection February 1996
Cheshire Sanitation, Inc.* Collection/ February 1996
Transfer Station
Charlie's Rubbish* Collection March 1996
Benjamin Scott* Collection April 1996
Milby Sanitation* Collection April 1996
Suburban Sanitation (MN)* Collection April 1996
Dafter Sanitary Landfill/ April 1996
Landfill, Inc. Collection
JJ Young* Collection April 1996
McDaniel Landfill, Inc. Landfill/ May 1996
Collection/
Transfer Station
DSI of Shawanoo County, Inc.* Collection May 1996
Deitrich Sanitary Collection/ May 1996
Service, Inc. Recycling
Peterson Demolition, Inc.* Collection/ May 1996
Transfer Station
Manca Brothers* Landfill June 1996
Fred Bauer* Collection June 1996
Twin City Sanitation, Inc.* Collection June 1996
Carpenter Trucking* Collection June 1996
Rubbish Busters* Collection June 1996
Andrews Rubbish* Collection June 1996
United Waste Landfill/ June 1996
Systems, Inc. (CO) Collection/
(not previously affiliated Transfer Station
with the Company)
Peter Corellis Rubbish Collection June 1996
Removal, Inc.*
Missouri River Collection/ July 1996
Sanitation, Inc.* Transfer Station
Cecil Sikes Sanitary Collection July 1996
Services, Inc.* July 1996
Baker Sanitation, Inc.* Collection July 1996
Adirondack Waste Collection July 1996
Systems, Inc.*
Albany Greene Collection July 1996
Sanitation, Inc.*
Midwest Sanitation, Inc.* Collection August 1996
County Waste* Collection August 1996
Arnold Trusty* Collection August 1996
CDF Consolidated Collection/ August 1996
Corporation* Transfer Station
Okolona Sanitation, Inc.* Collection August 1996
</TABLE>
Exhibit 99.3
November 21, 1995
To the Board of Directors and Owners
of Carmel Marina Corporation and Affiliates
Castroville, California
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying combined balance sheet of Carmel
Marina Corporation and Affiliates as of December 31, 1994 and the
related combined statements of operations and owners' equity, and
cash flows for the year then ended. These financial statements are
the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position
of Carmel Marina Corporation and Affiliates as of December 31,
1994, and the combined results of their operations and their cash
flows for the year then ended in conformity with generally accepted
accounting principles.
As described in Notes 1 and 11 to the financial statements, the
combined financial statements include certain companies and
affiliated entities and properties, all of which have common
ownership. In 1993 the reporting entity included only the accounts
of Carmel Marina Corporation and Pacific Valley Disposal
Corporation
HANSON ROTTER GREEN
CERTIFIED PUBLIC ACCOUNTANTS<PAGE>
May 20, 1994
To the Board of Directors and Stockholders
of Carmel Marina Corporation and Affiliate
Castroville, California
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Carmel Marina
Corporation and Affiliate as of December 31, 1993 and the related
statements of operations and stockholders' equities, and cash flows
for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Carmel
Marina Corporation and Affiliate as of December 31, 1993, and the
results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements present the combined
financial position and results of operations for Carmel Marina
Corporation and Pacific Valley Disposal Corporation which are
commonly owned and controlled. In the past separate audited
financial statements were presented for each company.
HANSON ROTTER GREEN
CERTIFIED PUBLIC ACCOUNTANTS
