<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[MARK ONE]
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to .
Commission File No. 1-11822
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TRANSCOR WASTE SERVICES, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0369288
(State of incorporation) (I.R.S. Employer Identification No.)
1502 Second Avenue, East, Tampa, Florida 33605
(Address of registrant's principal executive offices,
including zip code)
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(Registrant's telephone number, including area code):
(813) 248-5885
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Each Class on Which Registered
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Common Stock, $.001 par value The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 [ ]<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not 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-K or any amendment to this
Form 10-K. [X]
As of April 7, 1997, there were 4,010,000 shares of Common
Stock outstanding. The aggregate market value of the voting
stock held by non-affiliates of the registrant as of April 7,
1997, was $4,200,000.
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DOCUMENTS INCORPORATED BY REFERENCE:
NONE<PAGE>
Documents incorporated by reference: Certain exhibits
provided in Part IV are incorporated by reference from the
Company s Registration Statement on Form S-3 (File No. 33-54640).
Note: The discussions in this Form 10-K contain forward
looking statements that involve risks and uncertainties. The
actual results of TransCor Waste Services, Inc., and subsidiaries
(the "Company") could differ significantly from those set forth
herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in
"Business" and "Management s Discussion and Analysis of Financial
Condition and Results of Operations," as well as those discussed
elsewhere in this Form 10-K. Statements contained in this Form
10-K that are not historical facts are forward looking statements
that are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. A number of important
factors could cause the Company s actual results for 1997 and
beyond to differ materially from those expressed or implied in
any forward looking statements made by, or on behalf of, the
Company. These factors include, without limitation, those listed
in "Risk Factors" in the Company's Registration Statement on
Form S-3 (File No. 33-54640).
PART I
ITEM 1. BUSINESS
The Company
TransCor Waste Services, Inc. (the "Company") provides solid
waste management services to commercial, industrial, residential,
and municipal customers. In connection with such services, the
Company currently owns and operates fully-permitted construction
and demolition ("C&D") transfer and recycling ("T&R") facilities
in four of the largest metropolitan regions in the state of
Florida. The Company also engages, pursuant to several municipal
contracts, in the residential curbside collection of a variety of
already segregated recyclable forms of solid waste, including
such materials as newspapers, cardboard, plastic, metals, and
glass. In addition to its T&R operations, the Company collects
and disposes of all types of non-hazardous solid waste for
industrial and commercial customers in its T&R regions, and it
provides residential garbage collection services for several
municipalities in Pinellas County, St. Lucie County, Lee County,
and Hillsborough County, Florida. The Company also provides
demolition and other related services in conjunction with, and as
an economic complement to, its waste management services.
The Company was incorporated under the laws of the State of
Florida on November 6, 1992. In addition, the Company is a 74
percent owned subsidiary of Kimmins Corp. ("Kimmins"), a
publicly-held New York Stock Exchange listed company that
provides, among other things, various specialty contracting
services.<PAGE>
Company Services
Transfer and Recycling Operations
The Company currently owns and operates fully permitted
T&R facilities in four Florida metropolitan regions, which
include Clearwater (Pinellas County), Tampa (Hillsborough
County), Jacksonville (Duval County), and Miami (Dade
County). Non-hazardous C&D debris, and occasionally where
permitted, yard waste is deposited by both the Company's own
collection vehicles and by outside third parties, including
competitive waste disposal companies. Waste material
deposited at the Company's facilities is first weighed on a
computerized scale to determine the fee to be paid to the
Company. Then the recyclable waste is segregated by the
Company for resale or donation. The non-recyclable material
is compacted, transferred to trailers, and transported by
third-party haulers to landfills for disposal.
Because the Company's permits allow it to segregate and
recycle part of the C&D debris and yard waste accepted at
its T&R facilities (thereby decreasing the Company's
landfill disposal costs) and the Company can haul
economically the non-recyclable waste to outlying rural
landfills (where disposal fees are much lower than those
charged by urban disposal facilities), the Company is
frequently able to charge lower
rates at its T&R facilities than those charged by landfill
operators in the same vicinities. In addition, disposal of
debris at the Company's T&R facilities generally requires
less time and causes less damage to waste collection
vehicles than landfill disposal. At landfills, haulers of
all types of solid waste and debris must converge on the
same weigh stations and must often travel up to two to three
miles over temporary, debris-laden roads and contend with
hard-to-maneuver tipping conditions. In contrast, the
Company's T&R facilities, which generally accept C&D debris
and yard waste primarily, are only approximately four acres
in size and provide haulers with flat concrete-finished
surfaces for driving and tipping. As a result, the Company
believes those waste haulers, including those in competition
with the Company's own collection services, are provided
strong economic and other incentives for disposing of their
C&D debris, and yard waste at the Company's T&R facilities.
Laws requiring recycling or the achievement of
recycling goals have already been passed and continue to be
passed throughout the United States, including the state of
Florida. These laws have resulted from problems associated
with the disposal of an increasing volume of solid waste,
and the Company believes that more state and local
governments will mandate recycling of reusable materials and
the composting of yard waste. The Company currently
segregates and recycles C&D debris, and occasionally where<PAGE>
permitted, yard waste at all four of its T&R facilities. In
addition, pursuant to its contracts with the City of Tampa, St.
Lucie County, Lee County, and other municipalities, the Company
provides residential curbside collection of a variety of already
segregated recyclable material, including newspapers, cardboard,
plastic, metals, and glass. The Company sells substantially all
of the recyclable material it collects to processors or
manufacturers.
The Company's T&R facilities also are used to provide
maintenance, parking, and fueling of the Company's truck
fleet and a base of operations for its regional
administrative personnel.
Collection Operations
In addition to its T&R operations, the Company provides
solid waste collection and disposal services for a wide
range of customers. In connection with such services, the
Company collects C&D debris and yard waste for processing at
its T&R facilities. It also collects other forms of non-
hazardous solid waste for hauling directly to, and disposal
at, landfills in each of its T&R regions and Fort Pierce
(St. Lucie County), Lantana (Palm Beach County), and Fort
Myers (Lee County), Florida (where it has administrative
facilities for its collection operations). The Company
currently provides its collection services to approximately
16,200 commercial and industrial customers and to
approximately 72,200 residential households. Commercial
services are typically provided pursuant to municipal and
private contracts, as well as through a direct marketing
program, with terms of one to three years, industrial
services are typically provided on a project-by-project
basis, and residential services are provided by municipal
contract or individual household request. Municipal
contracts have a term of three to five years.
For the years ended December 31, 1994, 1995 and 1996,
St. Lucie County, Florida, provided approximately 10
percent, 8 percent, and 7 percent of the Company's revenue
pursuant to a five-year agreement entered into between the
Company and St. Lucie in January 1994 (the "St. Lucie
Contract"). Pursuant to such agreement, the Company
provides solid waste collection services to St. Lucie,
including the collection of waste, yard waste, and
recyclable materials from residential and commercial
customers. The Company's collection fees are calculated
according to specified rates and vary with the type of waste
collected and the method in which collection services are
performed.<PAGE>
For the years ended December 31, 1995 and 1996 (none
for 1994), the City of Tampa, Florida, provided
approximately 1 percent and 6 percent, respectively, of the
Company s revenue pursuant to a five-year agreement entered
into between the Company and the City of Tampa in August
1995 (the "City of Tampa Contract"). Pursuant to such
agreement, the Company provides solid waste collection
services to the City of Tampa, including the collection of
waste and recyclable materials from residential and
commercial customers. The Company s collection fees are
calculated according to specified rates and vary with the
type of waste collected and the method in which collection
services are performed.
For the years ended December 31, 1995 and 1996 (none
for 1994), Lee County, Florida, provided approximately 2
percent and 8 percent, respectively, of the Company s
revenue pursuant to a five-year agreement entered into
between the Company and Lee County in April 1995 (the "Lee
County Contract"). Pursuant to such agreement, the Company
provides solid waste collection services to Lee County,
including the collection of waste and recyclable materials
from residential and commercial customers. The Company s
collection fees are calculated according to specified rates
and vary with the type of waste collected and the method in
which collection services are performed.
For the years ended December 31, 1994, 1995, and 1996,
the City of Tarpon Springs, Florida, provided approximately
5 percent, 4 percent, and 3 percent, respectively, of the
Company's revenues pursuant to a five-year agreement entered
into between the Company and Tarpon Springs in September
1991 (the "Tarpon Springs Contract"). Pursuant to such
agreement, the Company provided, on a daily basis, solid
waste collection services to Tarpon Springs, including the
collection of C&D debris, yard waste, and recyclable
residential waste for processing at the Company's Clearwater
T&R facility and collection of waste from residential and
commercial customers garbage for hauling to and disposal at
county landfills.
Commercial and Industrial Waste Collection
The Company provides commercial and industrial non-
hazardous solid waste collection services to customers who
are serviced by the Company's route collection system at
agreed upon schedules or upon the customer's request.
Commercial and industrial customers generally use waste
containers and/or compactors provided by the Company.
Commercial customers use containers that range in size from
one to eight cubic yards or compactor boxes that range in
size from 20 to 40 cubic yards. Compactor boxes are used
with customer or Company-owned compactors, which are
designed to reduce the volume of stored waste, thereby<PAGE>
permitting less frequent collection. Commercial containers
are lifted and the waste contents are unloaded into the
Company's collection trucks at the customer's site.
Industrial customers use "roll-off" waste containers that
range in size from 10 to 40 cubic yards. Filled roll-off
containers are collected and replaced by empty containers by
the Company's roll-off trucks.
Fees for both commercial and industrial solid waste
collections jobs vary based on such factors as job duration,
collection frequency, type of equipment furnished, type and
volume or weight of the waste collected, distance to the
disposal facility, and cost of disposal.
Residential Waste Collection
Residential collection services are typically provided
either on a subscription basis, where the individual
household contracts directly with the Company, or on a
municipal contract basis, where the Company contracts with
the municipality to collect from all residences within a
specified area. Municipal contracts provide relatively
consistent cash flow during the contract period and require
less administration as individual billing and debt
collection systems are not necessary and because all
residents within the area are served. The Company has
currently entered into several municipal contracts that
provide from $86,400 to $4,320,000 in collection revenue
annually. These contracts are typically competitively bid
and have initial terms of one to five years. These
contracts also generally provide for the Company's curbside
collection and recycling of already segregated recyclable
materials from individual residences. Substantially all of
the segregated recyclable waste collected by the Company is
delivered to other waste management facilities for
processing or disposal.
Demolition Services
The Company provides demolition services for commercial
and residential customers. Its demolition services include
the razing and dismantling of facilities and structures, the
recovery of demolished material for reuse and recycling, and
the disposal of non-recycled demolition debris. The typical
demolition projects of the Company are single and multistory
urban buildings and small warehouses, manufacturing plants,
and other facilities. The Company enters into separate
demolition contracts for each project, which are usually for
a term of less than six months and, to date, have ranged in
amounts from $1,500 to $1,775,000. In connection with the
Company's demolition activities, the Company uses equipment
such as bulldozers, front-end wheel loaders, and roll-off
trucks and containers, all of which are stored at the
Company's T&R facilities. By pursuing demolition projects<PAGE>
in its existing markets, the Company can use its T&R
facilities to reduce the costs of demolition waste disposal,
which is traditionally one of the most significant costs
associated with demolition projects.
Other Services and Arrangements
The Company can provide certain other specialized solid
waste management services involving particular needs of
customers. The Company's specialized services include using
Company-owned trucks and loaders to remove waste from
demolished buildings, burned-out structures, and closed
scrap yards and to clean customer sites after natural
disasters, such as Hurricane Andrew in South Florida and the
tornadoes in the Pinellas County, Florida, area.
Sales and Marketing
In management s view, both the Company's current T&R
operations and its collection and disposal operations still have
growth capacity. Consequently, the Company has increased its
sales and marketing efforts on attracting potential customers to
its T&R facilities by emphasizing the perceived economic and
environmental benefits associated with such use and on obtaining
additional collection routes within its operating regions. To
date, the Company's sales and marketing activities principally
have been conducted through the efforts of the Company's
management and its in-house sales staff. However, during the
fourth quarter of 1996, the Company has implemented a program to
hire and train additional sales personnel for its T&R facilities
to support the commercial and industrial markets. This sales
force operates on an incentive-based, industry standard
compensation program that management believes will yield an
increase in revenue growth through 1997 and beyond. In
conjunction with the increased sales effort, the Company
implemented an aggressive advertising program.
The Company generally obtains waste collection contracts for
its services or for the operation of certain waste management
facilities through the process of competitive bidding, purchase
orders, or negotiations. The Company's marketing efforts include
selling door to door, monitoring trade journals and other
industry sources for bid solicitations by various entities,
including government authorities and related instrumentalities,
and responding to such bid solicitations, which may include
requests for proposals ("RFPs") and requests for qualifications
("RFQs"). The Company also attempts to be included on lists of
qualified bidders frequently contained in RFPs and RFQs. In
response to an RFP or RFQ, the soliciting entity requires a
written response within a specified period. Generally, in the
case of an RFP, a bidder submits a proposal detailing its
qualifications, the services to be provided, and the cost of the
services to the soliciting entity; and then such entity, based on
its evaluation of the proposals submitted, awards the contract to<PAGE>
the successful bidder. In the case of an RFQ, a bidder submits a
response describing its experience and qualifications. The
soliciting entity then selects the bidder believed to be the
most qualified and negotiates all the terms of the contract,
including the cost of the services. The Company's single largest
contract was derived through competitive bidding, and the Company
expects that future significant customers will be obtained
through competitive bidding. The Company also has obtained
customers through recommendations and referrals from existing
customers.
Competition
Although developments in the waste management industry have
resulted in the emergence of large private and public waste
management companies and in consolidating trends in the industry,
the waste management business is characterized by intense
competition. The Company believes that no single company has a
dominant market share of the waste management business in the
United States or Florida. Although competition varies by
locality and type of service, the Company's principal sources of
competition are local and regional waste management companies of
varying size, which primarily provide collection or disposal
services to customers in a limited geographic area; large
regional and national waste management companies, which operate
over more extensive geographic areas that provide completely
integrated waste management services, own or operate disposal
sites, and engage in various transfer and resource recovery
activities; and counties and municipalities that maintain their
own waste collection and disposal services for residents and
businesses in the locality. National companies that compete
against the Company include, among others, Waste Management,
Inc., Browning-Ferris Industries, Inc., U.S.A. Waste, and
Republic Waste Industries. Several competitors are or have been
customers of the Company's transfer and recycling facilities.
Many of the Company's competitors are well established and had
much greater marketing, financial, and other resources than the
Company. In addition, the counties and municipalities that
compete with the Company often have financial advantages due to
their access to tax revenues and tax-exempt financing.
The Company believes that the principal competitive factors
in the industry are price, reputation, service, managerial
experience, financial assurance capability (particularly as it
relates to municipal contracts), and internalization of costs
from vertical integration of services offered.
Government Regulation
The waste management business is subject to extensive and
frequently evolving federal, state, and local laws and
substantial regulation under these laws by governmental agencies,
including the United States Environmental Protection Agency (the
"EPA"), various state agencies, and county and local authorities<PAGE>
acting in conjunction with and independently of such federal and
state entities. Among other things, these regulatory bodies
impose restrictions to control air, soil, and water pollution,
and requirements that regulate health, safety, zoning, and land
use. Solid waste management companies are required to obtain and
maintain state and local government permits in connection with a
significant part of their operations. Operating permits
generally are required for solid waste management facilities
(such as landfills and recycling operations), transfer stations,
and certain vehicles, and these permits are subject to
revocation, modification, and renewal.
Federal, state, and local regulations vary; however, they
generally govern disposal activities, govern the location and use
of facilities, and impose restrictions to prohibit or reduce air,
soil, and water pollution. Waste management facilities generally
are subject to certain operational, closure, post-closure,
monitoring and site maintenance, and remediation obligations,
which could lead to significant costs for monitoring and
corrective measures. Both governmental authorities and the
public have the power to enforce compliance with these
regulations and to obtain injunctions or the imposition of fines
for violations.
The federal statutes of most importance to the Company are
the Resource Conservation and Recovery Act of 1976, as amended,
and the EPA's implementing regulations (collectively, "RCRA"),
and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, ("CERCLA"). RCRA establishes
a comprehensive framework for state and federal regulation of
solid and hazardous waste management. It seeks to prevent the
release into the environment of hazardous waste through the
development of solid waste management plans and the regulation of
the generation, treatment, transport, storage, and disposal of
hazardous wastes. It also establishes a program to ensure that
non-hazardous wastes are disposed of in environmentally
controlled facilities. While RCRA was implemented to prevent the
release of hazardous wastes into the environment, CERCLA was
designed to establish a national strategy to remediate or improve
existing hazardous environmental conditions. CERCLA establishes
liability for cleanup costs and environmental damages for current
and former facility owners and operators and persons who
generate, transport, or arrange for transportation of hazardous
substances for disposal at a particular facility. Most states,
including Florida, have statutes similar to RCRA and CERCLA that
regulate the handling of hazardous substances, hazardous wastes,
and non-hazardous wastes. Many such statutes impose requirements
that are more stringent than their federal counterparts. The
Company could be subject to substantial liability under these
statutes to private parties and governmental entities, in some
instances without any fault, for fines, remediation costs, and
environmental damage because of the mishandling, release, or
existence of any hazardous substances at any of its facilities or
the improper operation of such facilities.<PAGE>
Certain states have recently implemented or are implementing
legislation that mandates recycling as an integral part of their
solid waste management programs. In 1988, the state of Florida
enacted a law that requires each county in the state to recycle
30 percent of its total municipal solid waste stream by 1994. In
addition, many other states have adopted similar recycling
legislation. Although the Company believes that such legislation
has a beneficial impact on the Company's existing business, to
the extent that the Company executes its expansion plans and
acquires or develops one or more landfills, recycling legislation
would reduce the total volume of waste that would otherwise be
available for disposal. The Company currently recycles certain
waste at all four of its T&R facilities and collects recyclable
material for its commercial, industrial, and residential
customers.
Amendments to existing statutes and regulations, changes in
regulatory policies, adoption of new statutes and regulations,
and the Company's expansion into other jurisdictions and waste
management services could require the Company and others in the
industry continually to modify waste disposal facilities and
alter methods of operations at costs that would likely be
substantial, which could adversely affect the Company. In
addition, the Company is and will be required to obtain and
maintain government permits in connection with almost every
aspect of its operations, including its operation of its transfer
stations or future proposed waste management facilities. The
permits range in length from one year to five years and all may
be renewed upon expiration. The Company believes that it is in
substantial compliance with all federal, state, and local laws
and regulations that govern its material operations.
Potential Liability and Insurance
The solid waste management industry involves potentially
significant risks of statutory, contractual, and common law
liability. The Company carries a broad range of insurance
coverage, which the Company considers to be sufficient to meet
regulatory and customer requirements and to protect the Company's
assets and operations. The Company also obtains additional
insurance as required on a contract-by-contract basis. The
Company attempts to operate in a professional and prudent manner
and to reduce its liability risks through specific risk
management efforts. Nevertheless, an under-insured or completely
uninsured claim against the Company, if successful and of a
significant amount, could have a material adverse effect on the
Company. In addition, the inability to obtain insurance in the
future of the type and in the amounts required could impair the
Company's ability to obtain new contracts, which are, in certain
instances, conditioned upon the availability of adequate
insurance coverage.<PAGE>
By policy, the Company does not deal with or handle
hazardous waste, either in its T&R facilities or in connection
with its collection routes. However, the Company's T&R
facilities are located on former industrial or landfill sites
where debris and fill may have accumulated or been deposited by
prior owners. Consequently, there is a risk that these facilities
may contain contaminants at more than permissible levels caused
by the prior owners of the Company's facilities. Environmental
studies have been prepared on these facilities by independent
engineers engaged by the Company that indicate that these
facilities are not violating state and federal standards. The
Company does not currently maintain environmental impairment
insurance as it believes that it does not require this type of
insurance. The Company also believes it is common for waste
management companies that do not generally participate in the
hazardous waste business to forego such insurance, as such
insurance is not cost-effective for them to maintain.
Performance Bonds
The Company is required, in certain instances, to post
performance and payment bonds in connection with contracts or
projects with government entities and, to a lesser extent,
private sector customers. To date, a significant amount of the
Company's revenue has been derived from contracts or projects
that required the Company to post such bonds. In addition to
performance and payment bond requirements, new or proposed
legislation in various jurisdictions requires or will require the
posting of substantial bonds. In addition, legislation will
require waste management companies to provide further assurances
covering the closure, post-closure monitoring, and corrective
activities for certain waste management facilities, especially
and primarily landfills. The Company's current bonding coverage
is $30 million per project, with an aggregate of $100 million.
Francis M. Williams, Chairman of the Company, has indemnified the
performance bond issuer against default by the Company. There
can be no assurance that in the future the Company can obtain
bonds in the amounts required or can increase its bonding
capacity. To date, the Company has not experienced any
difficulty in obtaining such bonds.
Employees
The Company has approximately 400 full-time employees, 2 of
whom are executive officers of the Company, 14 of whom are
employed in professional capacities, 32 of whom are employed in
administrative capacities, 32 of whom are employed as field
supervisors in all of the Company's operations, and 320 of whom
are employed in field operations. Field supervisors and
employees hired for field operations are hired on a project
basis. No employees are covered by collective bargaining
agreements. The Company considers its relationship with its
employees to be satisfactory.<PAGE>
ITEM 2. PROPERTIES
The Company's principal executive offices are located at
1502 Second Avenue - East, Tampa, Florida 33605. The office has
been subleased from Kimmins for three years, commencing on June
1, 1993, and contains renewal options for subsequent one-year
terms. The lease provides for rental payments based on market
rental rates. At the end of each lease term, including all
option terms, the rent will be subject to a cost of living
increase. The lease provides that the Company is responsible for
all expenses including property taxes, telephone service and
trash removal fees, property insurance premiums, other insurance
related costs, and all maintenance and repair costs.
The Company owns and operates the following facilities:
Clearwater, Pinellas County
The Company's Clearwater facility, located on
approximately ten acres, is zoned heavy industrial and
contains a T&R building of approximately 33,000 square feet
with modular office space of approximately 3,000 square
feet. The Clearwater facility is subject to a mortgage
securing indebtedness evidenced by a promissory note with an
outstanding principal amount at December 31, 1996, of
$867,000. The note matures on January 1, 1999, and bears
interest at a rate of 1 percent above the lender's prime
rate. As additional security for the lender, the Company
executed an assignment of rents and leases in the event of a
default under the mortgage.
Tampa, Hillsborough County
The Company's Tampa facility is located on
approximately four and one-quarter acres in downtown Tampa.
The property is zoned heavy industrial and contains an
approximately 15,000 square foot T&R building. The Tampa
facility is subject to a mortgage securing indebtedness
evidenced by a promissory note with an outstanding principal
amount at December 31, 1996, of $585,000. This note matures
on March 1, 2001, and bears interest at a rate of 1.5
percent above the lender s prime rate.
Jacksonville, Duval County
The Company's Jacksonville facility is located on
approximately ten acres. The property is zoned light
industrial and contains an approximately 37,500 square foot
recycling building, 2,000 square feet of office space, and a
1,500 square foot maintenance shop. The Jacksonville
facility is subject to a mortgage, securing indebtedness
evidenced by a promissory note with an outstanding principal
amount at December 31, 1996, of $1,400,000. The note
matures on January 1, 2012, and bears interest at the rate<PAGE>
of 8.75 percent per annum. As additional security for the
payments under the notes and the Company's performance of
its obligations under the mortgage, the Company executed a
modification to the mortgage to assign all rents from the
property or to appoint a receiver in the event of a default
under the mortgage.
Miami, Dade County
The Company's Miami facility is located on
approximately four and one-half acres, is zoned industrial,
contains an approximately 60,500 square foot T&R building,
and contains an office area of approximately 2,500 square
feet that is used for its Miami collection operations. The
Miami facility is subject to a mortgage, which was
refinanced during 1995, securing indebtedness evidenced by a
promissory note with an outstanding principal amount at
December 31, 1996, of approximately $911,000. The note
matures on July 30, 2003, and bears interest at a rate of
1.5 percent above the prime rate of CitiBank, N.A. As
additional security for the lender, the Company executed a
conditional assignment of leases, rents, and profits in the
event of a default under the mortgage.
Fort Pierce, St. Lucie County
The Company's Fort Pierce facility is located on
approximately two acres and is zoned heavy industrial. The
facility contains an approximately 1,000 square foot
warehouse and office space of approximately 1,000 square
feet. The Fort Pierce facility is subject to a mortgage
securing indebtedness evidenced by a promissory note with an
outstanding principal amount at December 31, 1996, of
approximately $155,000. The note matures on March 1, 1999,
and bears interest at a rate of 3.75 percent above the
lender's prime rate.
Lantana, Palm Beach County
The Company's Lantana facility is located on
approximately five acres and is zoned industrial. The
facility contains an approximately 36,000 square foot
building, an office area of approximately 3,900 square feet,
and a maintenance shop of approximately 7,000 square feet.
The Lantana facility is subject to a mortgage securing
indebtedness evidenced by a promissory note with an
outstanding principal amount of approximately $952,000 at
December 31, 1996. The note matures on October 18, 2010,
and bears interest at the rate equal to the lender's prime
rate.<PAGE>
Fort Myers, Lee County
The Company's Fort Myers facility is located on
approximately two acres and is zoned industrial. The
facility contains a building of approximately 6,400 square
feet and office areas of approximately 2,200 square feet.
The Fort Myers facility, which began operations on October
1, 1995, is subject to a mortgage securing indebtedness
evidenced by a promissory note with an outstanding principal
amount at December 31, 1996, of approximately $331,000. The
note matures on August 9, 2000, and bears interest at the
rate of 9.25 percent.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal actions and claims
arising in the ordinary course of its business, none of which is
expected to have a material effect on the Company's financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of 1996.<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the NASDAQ
National Market System under the symbol "TRCW" since August 21,
1995. The Company's Common Stock had been traded on the Boston
Stock Exchange under the symbol "TRW" from March 25, 1993, to
August 21, 1995. Prior to March 25, 1993, the Company's Common
Stock was not publicly held or traded. The following table sets
forth, for the periods indicated, high and low bid quotations for
the Company's Common Stock as reported by NASDAQ.
1995 High Low
------------------------- --------- ---------
First quarter . . . . . . $ 3.125 $ 1.625
Second quarter . . . . . $ 5.750 $ 2.875
Third quarter . . . . . . $ 12.375 $ 5.125
Fourth quarter . . . . . $ 8.250 $ 5.250
1996 High Low
------------------------- --------- ---------
First quarter . . . . . . $ 9.000 $ 5.250
Second quarter . . . . . $ 7.000 $ 4.000
Third quarter . . . . . . $ 5.375 $ 3.500
Fourth quarter . . . . . $ 6.000 $ 3.500
As of April 10, 1997, there were approximately 40 holders of
record of the Common Stock. Many of such holders are brokers and
other institutions holding shares in "street names" for more than
one beneficial owner.
Dividends
The Company has not paid any cash dividends since its
inception, and the Board of Directors does not plan to declare
dividends in the foreseeable future. It is the present intention
of the Company's Board of Directors to retain all earnings in the
Company to support the future growth of the Company's business.<PAGE>
Recent Sales of Unregistered Securities
The following information relates to equity securities of
the Company issued or sold during the year ended December 31,
1996, that were not registered under the Securities Act in 1993,
as amended (the "Securities Act"):
In March 1996, the Company issued 10,000 shares of Common
Stock to the underwriters of the Company s initial public
offering upon the exercise of a warrant to acquire 10,000 shares
of Common Stock at $6.00 per share. The Company believes that
this issuance was exempt from registration under the Securities
Act by virtue of Section 4(2) as a transaction not involving a
public offering.<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information set forth below has been
derived from the audited financial statements of the Company and
should be read in conjunction with the consolidated financial
statements, including the notes thereto appearing elsewhere in
this report.
Operations Statement Data:
Year Ended December 31,
(In thousands, except per share data)
------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
Revenue . . . . . . . $17,637 $24,909 $29,007 $41,119 $44,193
Expenses:
Operating expenses . 11,896 17,395 22,055 29,992 32,894
Depreciation . . . . 1,346 1,439 1,866 2,288 3,309
Selling, general,
and administrative
expenses . . . . . 2,475 2,449 3,835 5,517 6,827
Management fee to
affiliate . . . . . 529 374 435 617 671
Operating income . . 1,392 3,252 817 2,704 492
Interest expense . . 886 814 547 548 1,354
Net income (loss) . . 311 1,500 166 1,316 (526)
Net income (loss) per
share:
Primary . . . . . . $ .10 $ .40 $ .04 $ .32 $ (.13)
Fully diluted . . . $ .10 $ .37 $ .04 $ .32 $ (.13)
Weighted average
number of shares of
common stock
outstanding:
Primary . . . . . . 3,000 3,776 4,025 4,049 3,998
Fully diluted . . . 3,000 4,359 4,025 4,051 3,998
Dividends per share . None None None None None
Balance Sheet Data:
December 31,
(In thousands)
------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
Total assets . . . . $21,601 $31,455 $30,241 $46,851 $46,010
Working capital
(deficit) . . . . . 220 2,684 2,643 (301) (1,614)
Long-term
obligations, net
of current
maturities . . . . . 8,884 10,309 8,691 17,972 16,807
Stockholders' equity 6,808 12,087 12,318 13,585 13,119 <PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the periods indicated,
the percentage of revenue represented by certain items reflected
in the Company's operations statement data:
Year Ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Revenue . . . . . . . . 100.0% 100.0% 100.0%
Expenses:
Operating expenses . . 76.0% 72.8% 74.4%
Depreciation . . . . . 6.4% 5.7% 7.6%
Selling, general,
and administrative
expenses . . . . . . 13.2% 13.4% 15.4%
Management fee to
affiliate . . . . . . 1.5% 1.5% 1.5%
------------- ------------- -------------
Operating income . . . 2.9% 6.6% 1.1%
Interest expense . . . 1.9% 1.4% 3.1%
------------- ------------- -------------
Income (loss) before
provision for income
taxes (benefit) . . . 1.0% 5.2% (2.0%)
Provision for income
taxes (benefit) . . . 0.4% 2.0% (0.8%)
------------- ------------- -------------
Net income (loss) . . . 0.6% 3.2% (1.2%)
============= ============= =============
Year ended December 31, 1996, Compared to Year Ended December 31,
1995
Total revenue for the year ended December 31, 1996, was
$44,193,000, representing an increase of $3,074,000 or
approximately 7 percent from $41,119,000 for the year ended
December 31, 1995. The increase in revenue attributable to the
Company's industrial and commercial services ($3,356,000 increase
in revenue) was due to increased activity in the Miami and Ft.
Myers markets. The increase in revenue attributable to the
Company s residential services ($2,302,000 increase in revenue)
was a result of a full year of services provided due to the
commencement of the City of Tampa and Lee County municipal
contracts during October 1995. The increase in revenue
associated with the Company s demolition services ($753,000
increase in revenue) was primarily due to contracts awarded in
1996. The decrease in revenue attributable to the Company s
transfer and recycling services ($3,337,000 decrease in revenue)
was due to decreased activity in the Miami market due to the loss<PAGE>
of a significant customer. The impact of price increases on
revenue is less than 3 percent.
Operating expenses for the year ended December 31, 1996,
were $32,894,000, representing an increase of $2,902,000 or
approximately 10 percent from $29,992,000 for the year ended
December 31, 1995. Operating expenses include fees charged by
landfills for waste disposal (which, to date, have been the
largest component of the Company's operating expenses), and
direct labor costs associated with the collection, transfer, and
recycling of waste. The dollar increase in operating expenses is
attributable to the increase in revenue. The increase in
operating expenses, as a percentage of total revenue, primarily
was attributable to the increase in revenues from the Company's
residential services, which have historically had lower profit
margins than the Company's other solid waste management
operations.
Depreciation expense for the year ended December 31, 1996,
was $3,309,000, representing an increase of $1,021,000 or 45
percent from $2,288,000 for the year ended December 31, 1995.
The dollar and percentage increase in depreciation is primarily
attributable to the additional equipment acquired during the last
quarter of 1995 and during 1996 to service the Company's
increased level of operations in Fort Myers and Tampa, Florida.
Selling, general, and administrative expenses, including
management fees of $671,000 to Kimmins, for the year ended
December 31, 1996, were $7,498,000, representing an increase of
$1,364,000 or 22 percent from $6,134,000 for the year ended
December 31, 1995. The dollar and percentage increase in
selling, general, and administrative expenses is primarily
attributable to increased overhead costs, such as administrative,
sales, and marketing costs associated with higher expected levels
of operations. The management fee covers the cost of certain
executive, administrative, and financial services provided by
Kimmins.
Interest expense, net of interest income, for the year ended
December 31, 1996, was $1,354,000, as compared to $548,000 for
the year ended December 31, 1995. Interest expense associated
with debt increased from $1,040,000 to $1,950,000 as a result of
the increase in the amount of interest-bearing debt outstanding.
Interest income related to receivables from affiliates increased
from $492,000 to $596,000, as a result of expenditures for the
purchase of equipment in connection with the Company's contracts
with the City of Tampa and Lee County to provide solid waste
management services.
The Company's income tax benefit for the year ended December
31, 1996, and income tax expense for the year ended December 31,
1995, was calculated using a rate of approximately 39 percent.
For tax purposes, temporary differences between carrying amounts
of assets and liabilities resulted in a federal net operating<PAGE>
loss ("NOL") of approximately $1,840,000. The largest component
of these book-tax differences is depreciation on operating assets
that created approximately $1,935,000 of additional depreciation
expense in calculating the 1996 tax NOL. Approximately
$1,300,000 of the 1996 NOL is being carried back for tax
purposes, resulting in approximately $320,000 of federal tax
refunds. The remaining NOL of approximately $500,000 will be
carried forward to offset taxable income in future years.
Management expects to utilize this NOL before it expires in the
year 2011. In addition to the NOL, the Company has a $170,000
alternative minimum tax credit available to offset future federal
regular income tax. This credit does not expire.
As a result of the foregoing, the Company incurred a net
loss of $526,000 for the year ended December 31, 1996, as
compared to net income of $1,316,000 for the year ended December
31, 1995.
Year Ended December 31, 1995, Compared to Year Ended December 31,
1994
Total revenue for the year ended December 31, 1995, was
$41,119,000, representing an increase of $12,112,000 or
approximately 42 percent from $29,007,000 for the year ended
December 31, 1994. The increase in revenue primarily was
attributable to an increase of $4,366,000 in the Company's
industrial and commercial services during this period and an
increase of $4,347,000 of revenue generated from transfer and
recycling services. The increase in revenue generated from
industrial and commercial operations was attributable to
commencement of the Company's Fort Myers operations and to
increased activity in the Miami market. A substantial portion of
the increase in revenue from transfer and recycling services was
attributable to increased activity in the Jacksonville and Miami
collection markets.
Operating expenses for the year ended December 31, 1995,
were $29,992,000, representing an increase of $7,937,000 or
approximately 36 percent from $22,055,000 for the year ended
December 31, 1994. Operating expenses include fees charged by
landfills for waste disposal (which, to date, have been the
largest component of the Company's operating expenses), and
direct labor costs associated with the collection, transfer, and
recycling of waste. The dollar increase in operating expenses is
attributable to the increase in revenue. The decrease in
operating expenses, as a percentage of total revenue, primarily
was attributable to the increase in revenues from the Company's
industrial and commercial services, which have historically had
higher profit margins than the Company's other solid waste
management operations.
Depreciation expense for the year ended December 31, 1995,
was $2,288,000, representing an increase of $422,000 or 23
percent from $1,866,000 for the year ended December 31, 1994. <PAGE>
The dollar increase in depreciation is primarily attributable to
the additional equipment acquired during the last quarter of 1994
and during 1995 to service the Company's increased level of
operations in Fort Myers and Tampa, Florida. Depreciation as a
percentage of revenue decreased for the year ended December 31,
1995, compared to the same period in 1994, primarily due to
improved equipment utilization over an expanded revenue base.
Selling, general, and administrative expenses, including
management fees to Kimmins, for the year ended December 31, 1995,
were $6,134,000, representing an increase of $1,864,000 or 44
percent from $4,270,000 for the year ended December 31, 1994.
The dollar and percentage increase in selling, general, and
administrative expenses is primarily attributable to increased
overhead costs, such as office salaries and marketing costs
associated with higher levels of operations.
Interest expense for the year ended December 31, 1995, was
$548,000, as compared to $547,000 for the year ended December 31,
1994. Interest expense associated with debt increased from
$786,000 to $1,040,000 as a result of the increase in the amount
of interest-bearing debt outstanding. Interest income related to
receivables from affiliates increased from $223,000 to $492,000.
The Company's income tax expense was calculated using a rate
of approximately 39 percent for the years ended December 31, 1995
and 1994.
As a result of the foregoing, the Company earned net income
of $1,316,000 for the year ended December 31, 1995, as compared
to net income of $166,000 for the year ended December 31, 1994.
Liquidity and Capital Resources
At December 31, 1996, the Company had a working capital
deficit of $1,614,000 compared to a working capital deficit of
$301,000 at December 31, 1995. Working capital was impacted by
decreases in accounts receivable - trade, costs and estimated
earnings in excess of billings on uncompleted contracts, income
tax refund receivable, and an increase in accrued expenses. In
addition, balances due to KVN increased by approximately $2,775,000
due to advances of current funds. All such advances are interest
bearing. Current financial resources, anticipated funds from
operations, and repayment of receivables from affiliates (if
needed) are expected to be adequate to meet cash requirements in
the year ahead and the foreseeable future. At December 31,
1996, the Company had cash of $1,438,000.
During the year ended December 31, 1996, net cash provided
by operating activities was $4,464,000 compared with $4,306,000
for the year ended December 31, 1995. The cash provided by
operating activities was primarily due to the Company s net loss,
offset by the effect of depreciation, net of changes in certain
operating assets and liabilities (primarily costs and estimated<PAGE>
earnings in excess of billings on uncompleted contracts and
accrued expenses). Net cash used in investing activities during
the period was $2,244,000 as the result of expenditures for the
purchase of equipment and vehicles. Net cash used by financing
activities was $4,197,000, primarily as a result of advances to
KVN and higher required levels of principal payments on debt.
During the year ended December 31, 1995, net cash provided
by operating activities was $4,306,000 compared with $1,770,000
for the year ended December 31, 1994. The increase in cash
provided by operating activities primarily was due to the
increase in net income earned during 1995, net of changes in
certain operating assets and liabilities (primarily accounts
receivable, accounts payable, and accrued expenses). Net cash
used by investing activities during the period was $13,445,000 as
the result of expenditures for the purchase of equipment in
connection with the Company's contracts with the City of Tampa
and Lee County to provide solid waste management services, and
the purchase of certain assets and customer lists associated with
the Company's Jacksonville operations. Net cash provided by
financing activities was $9,342,000, primarily as a result of
higher levels of debt borrowing.
The Company intends to expand the range of services offered,
while increasing the size and scope of the customer base for its
current operations. Expansion of the Company's operations,
however, will be dependent upon, among other things, its ability
to attract new customers, successfully manage growth, provide
additional services on a profitable basis, and obtain the
resources necessary to pursue other opportunities. The Company
has no current material commitments for capital expenditures
relating to any other new facilities.
The Company does not maintain environmental impairment
insurance. There can be no assurance that the Company will not
face claims and significant remediation costs (for which the
Company may, consequently, be uninsured and in connection with
which it may be unable to obtain reimbursement from other
responsible parties) in connection with its facilities where
contamination has been or may in the future be detected.
Financing Arrangements
As of December 31, 1996, the amount of the Company's total
outstanding indebtedness to Kimmins was $2,003,258 which had
been consolidated into the Kimmins Note, which is due and payable
on December 1, 2003, with interest accruing at 1 percent per
annum in excess of the stated prime rate established by
NationsBank of Florida. Until December 1, 2003, the Kimmins Note
may be converted, at the option of Kimmins, into shares of the
Company's Common Stock at an initial conversion price of $5.00
per share, subject to adjustment, in the event and anytime after
the closing sale price of the Company's Common Stock is $9.00 or
more for twenty consecutive trading days. Kimmins has one demand<PAGE>
registration right during the period from March 25, 1994, until
December 1, 2003, with respect to any shares of Common Stock
issuable upon such conversion. The Kimmins Note is subordinated
to all senior indebtedness of the Company. Payments of principal
and interest are based on certain net income levels of the
Company.
From December 1991 to December 1996, the Company, in a
series of separate equipment loans, borrowed an aggregate of
$22,470,000 from Associates Commercial Corporation ("Associates")
as a sole borrower and as a co-borrower with Kimmins and other
subsidiaries of Kimmins. Of such indebtedness, $19,830,000
represented the sum of the Company's sole borrowings and
allocable share of co-borrowings, of which $9,283,000 was
outstanding on December 31, 1996. Interest on such indebtedness
ranges from 7.4 percent to 9.0 percent, and payments on
outstanding borrowings are made according to specified payment
schedules. The portion constituting the Company's sole
borrowings is guaranteed by Kimmins.
The Company also has outstanding equipment loan indebtedness
pursuant to various agreements with other financial institutions.
During the years ended December 31, 1994, 1995, and 1996, the
Company borrowed an aggregate of $7,244,000 under such
arrangements, of which $3,782,000 was outstanding at December 31,
1996. Substantially all of these borrowings are guaranteed by
Kimmins.
In 1992, Kimmins Recycling Corp. offered to certain
investors in a private placement 14 guaranteed secured mortgage
Performance Notes (the "Performance Notes") of $100,000 each to
finance the purchase and development of the Company's T&R
facility in Jacksonville, Florida. The Performance Notes were
repaid during 1996, and the Jacksonville facility was refinanced
with an unaffiliated lender.
In addition to its own debt (either as an individual
borrower or a co-borrower), the Company has also guaranteed the
indebtedness (an aggregate of approximately $2,400,000 and
$1,920,000 at December 31, 1995 and 1996, respectively) of the
Kimmins' Employee Stock Ownership Plan Trust, in which employees
of the Company participate. See Item 13, "Certain Relationships
and Related Transactions."
Certain of the financial institutions' debt agreements
contain certain covenants, the most restrictive of which
requires, for Kimmins, maintenance of a consolidated tangible net
worth, as defined, of not less than $15,900,000, maintenance of a
debt to consolidated tangible net worth ratio of no more than 3.5
to 1.0, consolidated debt service coverage ratio of not less than
1.0 to 1.0, and a fixed charge coverage ratio of not less than
1.0 to 1.0. In addition, the covenants prohibit the payment of
dividends by the Company without lender approval. For all
periods presented, the Company believes that Kimmins had complied<PAGE>
with or obtained waivers for all loan documents. (See Note 8 of
Notes to Consolidated Financial Statements.)
Effect of Inflation
Historically, inflation has not had a material effect on the
Company's operations. If inflation increases, the Company will
attempt to increase its prices to offset its increased expenses.
No assurance can be given, however, that the Company will be able
to adequately increase its prices in response to inflation.
New Accounting Pronouncements
In October 1995, FASB issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123") effective for transactions entered
into after December 15, 1995. FAS No. 123 provides alternatives
for the methods used by entities to record compensation expense
associated with its stock-based compensation plans.
Additionally, FAS No. 123 provides further guidance on the
disclosure requirements relating to stock-based compensation
plans that are effective for fiscal years beginning after
December 15, 1995. The adoption of FAS No. 123 has not had a
material impact on the financial condition or the results of
operations of the Company.
Forward-Looking Information
The foregoing discussion in "Management s Discussion and
Analysis of Financial Condition and Results of Operations"
contains forward-looking statements that reflect management s
current views with respect to future events and financial
performance. Such statements involve risks and uncertainties,
and there are certain important factors that could cause actual
results to differ materially from those anticipated. Some of the
important factors that could cause actual results to differ
materially from those anticipated include, but are not limited
to, economic conditions, competitive factors, and other
uncertainties, all of which are difficult to predict and many of
which are beyond the control of the Company. Due to such
uncertainties and risk, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as
of the date hereof.<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TRANSCOR WASTE SERVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
----
Report of Independent Certified Public Accountants . . . . . 17
Consolidated balance sheets at
December 31, 1995 and 1996 . . . . . . . . . . . . . . . . 18
Consolidated statements of operations for each of
the three years in the period ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . 20
Consolidated statements of stockholders' equity for
each of the three years in the period ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . 21
Consolidated statements of cash flows for each of the
three years in the period ended December 31, 1996 . . . . 22
Notes to consolidated financial statements . . . . . . . . . 23
Financial statement schedule:
Schedule II - Valuation and qualifying accounts . . . . S-1
All other schedules are omitted since the required
information is not present in amounts sufficient to require
submission of the schedule or because the information required is
included in the financial statements and notes thereto.<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
TransCor Waste Services, Inc.
We have audited the accompanying consolidated balance sheets
of TransCor Waste Services, Inc. as of December 31, 1995 and
1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1996. Our audits also included
the financial statement schedule listed in the index at Item
14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the
schedule 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
consolidated financial position of TransCor Waste Services, Inc.
at December 31, 1995 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 1996, 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.
/s/ Ernst & Young LLP
Tampa, Florida
April 9, 1997<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
---------------------------
1995 1996
------------- -------------
Current assets:
Cash . . . . . . . . . . . . . . . . $ 3,414,479 $ 1,437,788
Due from affiliate . . . . . . . . . - 1,953,236
Accounts receivable - trade, less
allowance for doubtful accounts
of $306,809 and $543,770
at December 31, 1995 and 1996,
respectively . . . . . . . . . . . 6,760,172 6,230,484
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . . . . 785,473 230,869
Income tax refund receivable . . . . 731,951 422,567
Deferred income taxes . . . . . . . 441,596 639,079
Other current assets . . . . . . . 255,514 255,552
------------- -------------
Total current assets . . . . . . . 12,389,185 11,169,575
------------- -------------
Property and equipment, net . . . . . 27,116,350 26,115,277
Intangible assets, net . . . . . . . 785,175 898,853
Due from affiliate . . . . . . . . . 6,019,112 6,840,516
Other assets . . . . . . . . . . . . 963,611 985,608
-------------- ------------
$ 47,273,433 $ 46,009,829
============= =============
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
---------------------------
1995 1996
------------ --------------
Current liabilities:
Accounts payable, trade . . . . . . $ 3,942,274 $ 4,255,150
Accrued expenses . . . . . . . . . 4,424,287 4,536,778
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . . 184,871 170,771
Due to affiliate . . . . . . . . . 368,199 368,199
Current portion of long-term
debt . . . . . . . . . . . . . . . 3,770,219 3,453,168
------------- -------------
Total current liabilities . . . . 12,689,850 12,784,066
------------- -------------
Long-term debt, net of current
maturities (including debt owed to
KVN of $2,003,258 at December 31,
1995 and 1996) . . . . . . . . . . . 17,972,049 16,807,059
Deferred income taxes . . . . . . . . 3,026,244 3,299,355
Commitments and contingencies
(Note 14) . . . . . . . . . . . . . - -
Stockholders' equity:
Preferred stock, $.001 par value;
1,000,000 shares authorized;
none issued and outstanding . . . . - -
Common stock, $.001 par value;
10,000,000 shares authorized;
shares issued and outstanding
4,000,000 in 1995 and 4,010,000
in 1996 . . . . . . . . . . . . . . 4,000 4,010
Capital in excess of par value . . 12,133,557 12,193,547
Retained earnings . . . . . . . . . 1,495,739 969,798
------------- -------------
Less treasury stock, at cost 13,633,296 13,167,355
(10,000 shares) . . . . . . . . . . (48,006) (48,006)
------------- -------------
Total stockholders' equity . . . . 13,585,290 13,119,349
------------- -------------
$ 47,273,433 $ 46,009,829
============= =============
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Revenue . . . . . . . . $ 29,007,212 $ 41,118,762 $ 44,193,226
Expenses:
Operating expenses . 22,055,056 29,992,481 32,893,839
Depreciation . . . . 1,865,704 2,288,452 3,309,439
Selling, general,
and administrative
expenses . . . . . . 3,834,677 5,517,227 6,826,741
Management fee to
affiliate . . . . . . 435,108 616,601 671,000
------------- ------------- -------------
Operating income . . . 816,667 2,704,001 492,207
Interest expense,
net of interest income
from affiliate of
$223,000, $492,000 and
$596,000 for the years
ended December 31,
1994, 1995, and 1996,
respectively . . . . 546,834 548,203 1,354,406
------------- ------------- -------------
Income (loss) before
provision for income
taxes (benefit) . . . 269,833 2,155,798 (862,199)
Provision for income
taxes (benefit) . . . 103,886 840,295 (336,258)
------------- ------------- -------------
Net income (loss) . . . $ 165,947 $ 1,315,503 $ (525,941)
============= ============= =============
Share data:
Primary income (loss)
per share . . . . . . $ .04 $ .32 $ (.13)
Fully diluted income ============= ============= =============
(loss) per share . . $ .04 $ .32 $ (.13)
============= ============= =============
Weighted average number
of shares outstanding
used in computations:
Primary . . . . . . . 4,024,693 4,049,030 3,997,842
============= ============= =============
Fully diluted . . . . 4,024,693 4,050,722 3,997,842
============= ============= =============
See accompanying notes.<PAGE>
<TABLE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Unearned
Common Stock Capital in Employee Total
----------------- Excess of Retained Compen- Treasury Stockholders
Shares Amount Par Value Earnings sation Stock Equity
----------------------------- ---------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <>
Balance at
January 1,
1994 . . . . 4,000,000 $4,000 $ 12,268,557 $ 14,289 $(200,000)$ - $ 12,086,846
Employee
compensation . - - - - 65,000 - 65,000
Release of
common
stock in
escrow . . . . - - (135,000) - 135,000 - -
Net income . . - - - 165,947 - - 165,947
----------------------------- ---------- ------------------ -------------
Balance at
December 31,
1994 . . . . 4,000,000 4,000 12,133,557 180,236 - - 12,317,793
Purchase of
treasury stock,
at cost . . . - - - - - (48,006) (48,006)
Net income . . - - - 1,315,503 - - 1,315,503
----------------------------- ---------- ------------------ -------------
Balance at
December 31,
1995 . . . . 4,000,000 4,000 12,133,557 1,495,739 - (48,006) 13,585,290
Issuance of
common stock
upon exercise
of stock
warrants . . . 10,000 10 59,990 - - - 60,000
Net loss . . . - - - (525,941) - - (525,941)
----------------------------- ---------- ------------------ -------------
Balance at
December 31,
1996 . . . . 4,010,000 $4,010 $ 12,193,547 $ 969,798 $ - $(48,006)$ 13,119,349
============================= ========== ================== =============
See accompanying notes.
/TABLE
<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Cash flows from
operating activities:
Net income (loss) . . $ 165,947 $ 1,315,503 $ (525,941)
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating
activities:
Depreciation and
amortization . . . 1,893,033 2,446,511 3,611,655
Provision for
uncollectible
accounts
receivable . . . . 495,375 404,455 430,382
(Gain) loss on
disposal of
equipment . . . . 440,307 (109,708) (64,192)
Reduction in
unearned employee
compensation . . . 65,000 - -
Deferred income
taxes . . . . . . 143,980 627,768 75,628
Changes in
operating assets
and liabilities:
Accounts
receivable -
trade . . . . . (1,646,277) (1,567,176) 99,306
Costs and
estimated
earnings in
excess of
billings on
uncompleted
contracts . . . . 56,363 (540,160) 554,604
Income tax refund
receivable . . . - (731,951) 309,384
Other assets . . . (229,316) (727,853) (437,929)
Accounts payable -
trade . . . . . . (282,504) 949,400 312,876
Income taxes
payable . . . . . (199,242) (30,933) -
Accrued expenses . 781,027 2,228,598 112,491
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Year ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Billings in excess
of costs and
estimated
earnings on
uncompleted
contracts . . . . 86,552 41,694 (14,100)
------------- ------------- -------------
Total adjustments . . 1,604,298 2,990,645 4,990,105
------------- ------------- -------------
Net cash provided by
operating activities . 1,770,245 4,306,148 4,464,164
------------- ------------- -------------
Cash flows from
investing activities:
Capital expenditures
including $2,267,000
and $500,000 of
business
acquisitions during
1995 and 1996,
respectively . . . . (2,438,785) (13,847,589) (2,539,304)
Proceeds from sale of
property and
equipment . . . . . 652,233 402,538 295,130
------------- ------------- -------------
Net cash used by
investing
activities . . . . . . (1,786,552) (13,445,051) (2,244,174)
------------- ------------- -------------
Cash flows from
financing activities:
Proceeds from
long-term debt . . . 1,341,455 14,471,763 3,515,315
Repayment of
long-term debt . . . (3,641,978) (2,742,364) (4,997,356)
Purchase of treasury
stock . . . . . . . - (48,006) -
Issuance of common
stock upon exercise
of stock warrants . - - 60,000
Net advances to
KVN . . . . . . . . 683,317 (2,339,806) (2,774,640)
------------- ------------- -------------
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Year ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Net cash provided
(used) by financing
activities . . . . . . (1,617,206) 9,341,587 (4,196,681)
------------- ------------- -------------
Net increase (decrease)
in cash . . . . . . . (1,633,513) 202,684 (1,976,691)
Cash, beginning of
year . . . . . . . . . 4,845,308 3,211,795 3,414,479
------------- ------------- -------------
Cash, end of year . . . $ 3,211,795 $ 3,414,479 $ 1,437,788
============= ============= =============
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
Organization - TransCor Waste Services, Inc. (the "Company")
was formed on November 6, 1992, as a subsidiary of Kimmins Corp.
("KVN"). KVN owns approximately 74 percent of the outstanding
common stock of the Company. The Company provides solid waste
management services to commercial, industrial, residential, and
municipal customers in the state of Florida.
Principles of consolidation - The consolidated financial
statements include the accounts of the Company and its wholly-
owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in preparing the financial
statements.
As of December 31, 1996, the Company had advances due from
an affiliate of approximately $8,794,000. These advances accrue
interest at a rate of 10 percent per annum. While the entire
balance is due on demand, management only intends to collect
$1,953,000 during 1997. Therefore, the remaining balance is
classified as long term at December 31, 1996.
Intangible assets - Intangible assets consist primarily of
the excess of cost over fair market value of the net assets of
the acquired businesses, which are being amortized on a straight-
line basis over twenty years, and customer contracts, which are
being amortized on a straight-line basis over five years.
Amortization expense was $67,000 and $124,000 for the years ended
December 31, 1995 and 1996 (none for 1994), respectively.
Accumulated amortization was approximately $67,000 and $191,000
at December 31, 1995 and 1996, respectively.
Other assets - Other assets consist primarily of pre-
contract costs associated with residential solid waste management
contracts obtained during 1995 and 1996, which are being
amortized on a straight-line basis over five years, the term of
the contracts, and loan costs, which are amortized over the term
of the loans. Amortization expense was $27,000, $91,000 and
$178,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. Accumulated amortization was $118,000 and $296,000
at December 31, 1995 and 1996, respectively.
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
Concentrations of credit risk - Financial instruments which
subject the Company to concentrations of credit risk consist
primarily of trade receivables in the State of Florida. Trade
receivables are comprised primarily of amounts due from solid
waste management customers and on specialty contracting
contracts. Credit is extended based on an evaluation of the
customer's financial condition, and, generally, collateral is not
required.
A significant portion of the Company s solid waste
management business is conducted under contracts with municipal
customers in Florida. These contracts have varying terms and are
typically subject to renegotiation or reproposal by the
respective municipalities. Revenue from these contracts amount
to 15 percent, 15 percent, and 24 percent of total revenue during
1994, 1995 and 1996, respectively. No individual municipal
contract contributed revenue greater than 10 percent of total net
revenue in any year presented.
Accounts receivable - trade, net includes $3,315,000 related
to a municipal solid waste management contract with St. Lucie
County. Unlike other municipal solid waste management contracts,
St. Lucie County requires the Company to bill and collect
directly from individual property owners. Pursuant to St. Lucie
County ordinances, property owners that are delinquent in payment
are subject to lien rules. The Company has placed liens on
approximately 2,250 individual properties representing
approximately $511,000 of the balance as of December 31, 1996.
Management intends to file additional liens when considered
appropriate, and all such liens will be maintained in accordance
with applicable laws until the outstanding balances are recovered
by payment, judgement, foreclosure, or other action.
Revenue recognition - The Company recognizes revenue from
solid waste management and recycling operations when the services
are performed. Billings prior to the rendering of services are
classified as deferred revenue. Demolition contract earnings are
recognized on the percentage-of-completion basis for financial
statement purposes. The estimated earnings for each contract
reflected in the accompanying consolidated financial statements
represent the percentage of estimated total earnings that costs
incurred to date bear to estimated total costs. When current
estimates of total contract costs indicate a loss, provision is
made for the entire estimated loss.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
Income taxes - Income taxes have been provided using the
liability method in accordance with Financial Accounting
Standards Board ("FASB") Statement No. 109, "Accounting for
Income Taxes."
Stock based compensation - The Company grants stock options
for a fixed number of shares to employees with an exercise price
equal to the fair value of the shares at the date of grant. The
Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"), and, accordingly, recognizes
no compensation expense for the stock option grants.
In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement No. 123 ("SFAS No. 123"), "Accounting
and Disclosure of Stock-Based Compensation", which encourages,
but does not require, companies to recognize stock awards based
on their fair value at the date of grant. Pro forma financial
information, assuming that the Company had adopted the
measurement standards of SFAS No. 123, is immaterial for
presentation.
Earnings per share - Earnings per share is computed based on
the weighted average number of shares of capital stock and stock
options outstanding that are considered dilutive. Fully diluted
earnings per share assumes that the convertible subordinated debt
(Note 10), if dilutive, was converted into common stock as of the
beginning of the year and that the interest expense thereon, net
of income taxes, was added to net income (loss).
Liquidity - The Company s current liabilities exceeded its
current assets by $301,000 and $1,614,000 at December 31, 1995
and 1996, respectively. Management believes that the Company
will be able to fulfill its obligations in the normal course of
business from its ongoing operations and, if it becomes
necessary, by advances from or repayments on amounts due from
affiliates.
Reclassification - Certain amounts in the 1995 consolidated
financial statements have been reclassified to conform to the
1996 presentation.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Business acquisitions
On February 21, 1996, Kimmins Recycling Corp. ("KRC"), a
wholly-owned subsidiary of the Company, acquired certain assets
from Automated Resource Recovery, Inc., for $300,000 relating to
its solid waste management operations. This acquisition has been
accounted for under the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets
acquired (approximately $150,000) based on the estimated fair
values at the date of acquisition. The purchase price associated
with the acquisition exceeded the net assets acquired by
approximately $150,000, which was assigned to intangible assets,
including customer lists. The operating results associated with
this business acquisition are included in the Company s
consolidated results of operations from February 22, 1996, to
December 31, 1996.
On May 31, 1996, KRC acquired certain assets from Paper
Stock Dealers, Inc., for $200,000 relating to its solid waste
management operations. This acquisition has been accounted for
under the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets acquired
(approximately $112,000) based on the estimated fair values at
the date of acquisition. The purchase price associated with the
acquisition exceeded the net assets acquired by approximately
$88,000, which was assigned to intangible assets, including
customer lists. The operating results associated with this
business acquisition are included in the Company s consolidated
results of operations from June 1, 1996, to December 31, 1996.
On March 31, 1995, KRC acquired certain assets from County
Sanitation, Inc., for $2,267,000 relating to its solid waste
management operations. This acquisition has been accounted for
under the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets acquired
(approximately $1,415,000) based on the estimated fair values at
the date of acquisition. The purchase price associated with the
acquisition exceeded the net assets acquired by approximately
$852,000, which was assigned to intangible assets, including
goodwill. The operating results associated with this business
acquisition are included in the Company's consolidated results of
operations from April 1, 1995, to December 31, 1995.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Business acquisitions (continued)
The unaudited pro forma results of operations for the year
ended December 31, 1995, assumes the acquisition of County
Sanitation, Inc., had been consummated as of January 1, 1995.
The pro forma effects of Automated Recovery, Inc., and Paper
Stock Dealers, Inc., were considered by management to be
immaterial for purposes of pro forma presentation. Pro forma
results of operations are not necessarily indicative of the
results that would have occurred if County Sanitation, Inc., had
been acquired at the beginning of the period.
Year ended
December 31,
1995
-------------
Revenue . . . . . . . . . . . . . . . . . . $ 42,049,000
Net income (loss) . . . . . . . . . . . . . $ 1,321,000
Net income (loss) per common share . . . . . $ .33
During the years ended December 31, 1994, 1995, and 1996,
the Company entered into transactions with KVN and companies
affiliated with KVN through common ownership. KVN provides the
Company administrative services for a fee based on gross revenue.
In 1993, the fee was reduced from 3 percent of revenue to the
lesser of 1.5 percent of revenue or actual costs. The costs
incurred by KVN to provide these services are not less than the
1.5 percent fee amount. The amounts charged were approximately
$435,000, $617,000, and $671,000, respectively, for the years
ended December 31, 1994, 1995, and 1996.
The Company is insured or co-insured with KVN on various
insurance policies of the Company or KVN. The Company pays its
allocable share of the cost of such policies based on
specifically identified costs or on a combination of its
revenues, payroll, assets, and incurred losses as a percentage of
the combined total of such items of all insured parties, as
appropriate for each particular insurance policy or coverage.
For the years ended December 31, 1994, 1995, and 1996, the
Company paid KVN approximately $746,000, $811,000, and $849,000,
respectively. The Company pays directly for any coverage for
which it is the only insured.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Related party transactions (continued)
At December 31, 1995, the Company had $500,000 of mortgage
notes payable to affiliated parties: $400,000 to the president of
KVN, his wife, and his son and $100,000 to a director of KVN.
These notes were refinanced during 1996 with an unaffiliated
lender.
4. Accounts receivable - trade
December 31,
---------------------------
1995 1996
------------- -------------
Contract and trade:
Billed contract receivables:
Completed and uncompleted
contracts . . . . . . . . . . $ 1,476,800 $ 1,469,473
Retainage . . . . . . . . . . 155,973 230,409
Unbilled contract
receivables . . . . . . . . . 422,231 353,708
Trade receivables . . . . . . 5,011,977 4,720,664
------------- -------------
7,066,981 6,774,254
Allowance for doubtful (306,809) (543,770)
accounts . . . . . . . . . . . ------------- -------------
$ 6,760,172 $ 6,230,484
============= ============= <PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Costs and estimated earnings in excess
of billings on uncompleted contracts
December 31,
---------------------------
1995 1996
------------- -------------
Expenditures on uncompleted
contracts . . . . . . . . . . . $ 6,019,647 $ 3,841,201
Estimated earnings on
uncompleted contracts . . . . . 1,478,602 1,579,433
------------- -------------
7,498,249 5,420,634
Less actual and allowable
billings on uncompleted
contracts . . . . . . . . . . . 6,897,647 5,360,536
------------- -------------
$ 600,602 $ 60,098
============= =============
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . . $ 785,473 $ 230,869
Billings in excess of costs and
estimated earnings on
uncompleted contracts . . . . . (184,871) (170,771)
------------- -------------
$ 600,602 $ 60,098
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Property and equipment
December 31,
---------------------------
1995 1996
------------- -------------
Land . . . . . . . . . . . . . . $ 4,596,622 $ 4,610,323
Building and improvements . . . 5,092,686 5,621,962
Vehicles . . . . . . . . . . . . 12,939,015 13,459,891
Waste containers and equipment . 11,024,246 12,508,751
Furniture and fixtures . . . . . 482,091 547,739
Construction in progress . . . . 615,846 33,462
------------- -------------
34,750,506 36,782,128
Less accumulated depreciation . (7,634,156) (10,666,851)
------------- -------------
$ 27,116,350 $ 26,115,277
============= =============
Property and equipment is recorded at cost. Depreciation is
provided using the straight-line method over estimated useful
lives, which range from 3 to 30 years. Depreciation expense was
$1,866,000, $2,289,000 and $3,309,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. Construction in
progress will be depreciated over the estimated useful lives when
placed into service.
7. Accrued expenses
December 31,
---------------------------
1995 1996
------------- -------------
Deferred revenue . . . . . . . . $ 1,858,148 $ 1,641,857
Accrued insurance . . . . . . . 705,132 1,171,965
Accrued disposal costs . . . . . 846,606 744,229
Accrued real estate and
property taxes . . . . . . . . 210,060 291,080
Other . . . . . . . . . . . . . 804,341 687,647
------------- -------------
$ 4,424,287 $ 4,536,778
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
8. Long-term debt ---------------------------
1995 1996
------------- -------------
Notes payable, due through March
1, 2001, payable in monthly
installments with interest at
varying rates up to 13 percent,
collateralized by equipment . . $ 14,327,277 $ 13,055,213
Convertible subordinated term
note with KVN, interest payable
in monthly installments,
principal due December 1, 2003,
interest at bank's base rate
plus 1 percent . . . . . . . . . 2,003,258 2,003,258
Mortgage notes, principal and
interest payable in monthly
installments through August 1,
2010, interest at varying rates
up to prime plus 1.5 percent,
collateralized by land and
buildings . . . . . . . . . . . 4,011,733 5,201,756
Mortgage notes - $500,000 with
related parties (Note 3),
interest payable in quarterly
installments at 10 percent, plus
a performance based return not
to exceed 6 percent ($25,030 and
$26,209 for 1995 and 1996,
respectively), principal due on
January 9, 1997, principal and
interest guaranteed by KVN,
collateralized by land and
buildings . . . . . . . . . . . 1,400,000 -
------------- -------------
21,742,268 20,260,227
Less current portion . . . . . . (3,770,219) (3,453,168)
------------- -------------
$ 17,972,049 $ 16,807,059
============= ============= <PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Long-term debt (continued)
Annual principal maturities for years subsequent to December
31, 1996, are as follows:
1997 . . . . . . . . . . . . . . . . . . . . $ 3,453,168
1998 . . . . . . . . . . . . . . . . . . . . 7,948,605
1999 . . . . . . . . . . . . . . . . . . . . 2,348,588
2000 . . . . . . . . . . . . . . . . . . . . 1,724,776
2001 . . . . . . . . . . . . . . . . . . . . 588,293
Thereafter . . . . . . . . . . . . . . . . . 4,196,797
-------------
$ 20,260,227
=============
As of December 31, 1996, the Company has guaranteed a loan
agreement on behalf of KVN and other subsidiaries of KVN in
connection with the Kimmins Employee Stock Ownership Plan, which
had an outstanding balance of $1,920,000 that is recorded in the
financial statements of KVN.
The debt agreements contain certain covenants, the most
restrictive of which require, for KVN, maintenance of a
consolidated tangible net worth, as defined, of not less than
$15,900,000, maintenance of a debt to consolidated tangible net
worth ratio of no more than 3.5 to 1.0, consolidated debt service
coverage ratio of at least 1.0 to 1.0, and a fixed charge
coverage ratio of not less than 1.0 to 1.0. In addition, the
covenants prohibit the payment of dividends by the Company
without lender approval. For all periods presented, the Company
believes that KVN had complied with or obtained waivers for all
loan covenants.
The lenders' prime rate under the Company's notes was 8.5
percent at December 31, 1995 and 1996, respectively.
9. Leasing arrangements
The Company rents equipment and machinery, as needed, as
well as office space, under operating leases for varying periods
not to exceed one year. Rental expense for the years ended
December 31, 1994, 1995, and 1996 were approximately $959,000,
$763,000, and $2,230,000, respectively.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Stockholders' equity
The Company has authorized 1,000,000 shares of preferred
stock with a par value of $.001 per share, none of which has been
issued. Such preferred stock may be issued in series and will
have such designations, rights, preferences, and limitations as
may be fixed by the Board of Directors.
Warrants to purchase 100,000 shares of the Company's common
stock at $6.00 per share were issued in 1993 to the underwriters
of the Company's initial public offering. Warrants to purchase
10,000 shares of common stock were exercised during March 1996.
The remaining warrants are exercisable through March 25, 1998.
On November 6, 1992, KVN sold 50,000 of its shares of the
Company's common stock for nominal consideration to the Company's
vice president in recognition for services rendered. The terms
of the original agreement stated that the shares will be held in
escrow and released to the vice president commencing December 31,
1993, at the rate of 20 percent per year, subject to his
continued employment by the Company. The first installment of
10,000 shares was released to the Company's vice president on
December 31, 1993. During 1994, this agreement was restructured
and the remaining 40,000 shares were released to the Company's
vice president. This resulted in compensation expense of $65,000
based on the current market price of the stock and the
elimination of the remaining deferred compensation expense.
The convertible subordinated term note is convertible into
400,652 shares of the Company's common stock at the time the
market value per share equals or exceeds $9.00 for 20 consecutive
trading days.
11. Pension and other benefit plans
On January 1, 1989, KVN formed the Kimmins Corp. Employee
Stock Ownership Plan Trust (the "ESOP") for the benefit of
employees of KVN and its subsidiaries, including those of the
Company, to purchase shares of KVN's common stock from time to
time on the open market or in negotiated transactions at prices
deemed to be attractive. Contributions to the ESOP, which have
not been material, are made at the discretion of the Board of
Directors of KVN.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Pension and other benefit plans (continued)
The Company has 250,000 shares of its common stock reserved
for issuance upon the exercise of options to be granted under the
Company's 1992 Stock Option Plan (the "TransCor Plan"). The
exercise price of an incentive stock option granted under the
TransCor Plan may not be less than the fair market value of the
common stock at the time the option is granted. The exercise
price of a non-qualified option is within the discretion of the
Board of Directors but may not be less than the par value of such
shares. Options granted under the TransCor Plan must, in
general, vest over five years from the date of grant and expire
no later than ten years from the date of the grant.
The Company s 1992 Stock Option Plan (the "Plan") has an
option to acquire an aggregate of 250,000 shares of common stock
that may be granted to employees, officers, directors and
consultants of the Company. The Plan authorizes the Board of
Directors (the "Board") to issue incentive stock options
("ISOs"), as defined in Section 422A(b) of the Internal Revenue
code, and stock options that do not conform to the requirements
of that Code section ("Non-ISOs"). The Board has discretionary
authority to determine the types of stock options to be granted,
the persons among those eligible to whom options will be granted,
the number of shares to be subject to such options, and the terms
of the stock option agreements. Options may be exercised in the
manner and at such times as fixed by the Board, but may not be
exercised after the tenth anniversary of the grant of such
options.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Pension and other benefit plans (continued)
The following table summarizes the transactions for the
three years ended December 31, 1996, relating to the Plan:
Number of Per Share
Shares Option Price
------------- -------------
Outstanding January 1, 1994: . 70,000 $ 5.00
Granted . . . . . . . . . . 70,000 $ 2.00
Exercised . . . . . . . . . - $ -
Canceled . . . . . . . . . (70,000)
------------- $ 5.00
Outstanding December 31, 1994: 70,000 $ 2.00
Granted . . . . . . . . . . 17,000 $2.00 - $4.38
Exercised . . . . . . . . . - $ -
Canceled . . . . . . . . . -
------------- $ -
Outstanding December 31, 1995: 87,000 $2.00 - $4.38
Granted . . . . . . . . . . 5,000 $ 4.00
Exercised . . . . . . . . . - $ -
Canceled . . . . . . . . . -
------------- $ -
Outstanding December 31, 1996: 92,000 $2.00 - $4.38
=============
Exercisable December 31, 1996: 49,800
=============
The Board of Directors has reserved 100,000 shares of common
stock in connection with stock warrants that may be issued to
employees, officers, directors, and consultants, of the Company
pursuant to stock options as may be determined by the Board of
Directors.
Pro forma information regarding net income (loss) and
earnings per share is required by Statement 123, which also
requires that the information be determined as if the Company had
accounted for its employee stock options granted subsequent to
December 31, 1993, under the fair value method of that Statement.
The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1994, 1995 and 1996;
risk-free interest rates of 5.5 percent; a dividend yield of
zero; volatility factors of the expected market price of the
Company s common stock based on historical trends; and a
weighted-average expected life of the options of seven years.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Pension and other benefit plans (continued)
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferrable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company s employee stock options have characteristics
significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management s opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
The pro forma effects of compensation expense related to
outstanding stock options on net income (loss) and earnings per
share were considered by management to be immaterial for purposes
of pro forma presentation.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Income taxes
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets are as follows:
December 31,
---------------------------
1995 1996
------------- -------------
Deferred tax liabilities:
Tax over book depreciation . . $ 2,726,522 $ 3,457,713
Costs deferred for books
expensed for tax . . . . . . . 299,722 328,433
Total deferred tax ------------- -------------
liabilities . . . . . . . . 3,026,244 3,786,146
------------- -------------
Deferred tax assets:
Allowance for doubtful
accounts . . . . . . . . . . . 118,322 209,552
Accrued workers'
compensation . . . . . . . . . 188,350 409,644
AMT credit carryforward . . . . 96,000 172,730
Federal and state NOL
carryforwards . . . . . . . . - 240,082
State credit
carryforwards . . . . . . . . - 32,730
Costs deferred for tax
expensed for books . . . . . . 38,924 61,132
------------- -------------
Total deferred tax assets . . . 441,596 1,125,870
------------- -------------
Net deferred tax liabilities . . 2,584,648 2,660,276
Current deferred assets . . . . 441,596 639,079
------------- -------------
Net non-current deferred
liabilities . . . . . . . . . $ 3,026,244 $ 3,299,355
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Income taxes (continued)
The components of the provision for income taxes are as
follows:
Year ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Current . . . . . $ (40,094) $ 212,527 $ (411,886)
Deferred . . . . . 143,980 627,768 75,628
------------- ------------- -------------
$ 103,886 $ 840,295 $ (336,258)
============= ============= =============
At December 31, 1996, the Company had consolidated regular
tax net operating loss carryforwards for federal tax purposes of
approximately $500,000 available to be carried to future periods.
The loss carryforward expires in the year 2011 if not used.
There is no net operating loss carryforward available for
alternative minimum tax. The Company does have alternative
minimum tax credit carryforwards of approximately $170,000 that
are available to reduce future federal regular income taxes, if
any, over an indefinite period.
13. Supplemental disclosures of cash flow information
Year ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Cash paid:
Interest . . . . $ 770,000 $ 1,040,000 $ 1,950,000
Income taxes . . $ 31,000 $ 960,000 $ 2,000
Income taxes of approximately $73,000 were not paid in cash
but settled through the intercompany account with KVN for the
year ended December 31, 1994 (none for 1995 and 1996).<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Fair value of financial instruments
The following estimated fair value amounts have been
determined using available market information and appropriate
valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
Cash, accounts receivable, and accounts payable. The
carrying amount reported in the balance sheet for cash,
accounts receivable, and accounts payable approximates their fair
value.
Long-term debt. The fair values of the Company's long-term
debt are estimated using discounted cash flow analyses, based on
the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
December 31, 1995 December 31, 1996
------------------------ -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
Liabilities:
Notes
payable . . $21,742,268 $21,656,000 $20,260,227 $20,076,000
15. Fourth quarter 1996 adjustments (unaudited)
During the fourth quarter of 1996, the Company revised its
estimate regarding the collectibility of a contract claim,
resulting in a pre-tax charge to operations of $205,000. In
addition, subsequent to December 31, 1996, the Company agreed to
a settlement of another contract claim, resulting in a pre-tax
charge to operations of approximately $101,000 during the fourth
quarter of 1996.<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as
follows:
Name Age Position
------------------- ----- -------------------------------------
Ira D. Cohen 50 President and Chief Executive Officer
Francis M. Williams 55 Chairman of the Board of Directors
Norman S. Dominiak 52 Treasurer
Joseph M. Williams 40 Secretary
R. Donald Finn 53 Director
Barry W. Ridings 45 Director
All directors of the Company hold office until the next
annual meeting of shareholders and the election and qualification
of their successors. Officers of the Company are elected
annually by the Board of Directors and hold office at the
discretion of the Board.
Ira D. Cohen has been President and Chief Executive Officer
of the Company since July 1, 1996. He has total responsibility
for operations, safety, profitability, and compliance with all
federal, state and local regulations for the Company s solid
waste facilities. From 1992 to June 1996, Mr. Cohen served as
President for John Sexton Contractors Company. Mr. Cohen also
served as Chief Operating Officer for Land Reclamation Company
from 1989 to 1992. From 1986 to 1989, Mr. Cohen served as the
Regional Landfill Manager and Director of Landfill Operations of
Chambers Development Company, Inc.
Francis M. Williams has been Chairman of the Board of
Directors of the Company since November 1992 and President of the
Company from July 1, 1994 until July 1996. He has been President
and Chairman of the Board of Kimmins since its inception in 1987.
From 1981 to 1988, Mr. Williams was the Chairman of the Board and
Chief Executive Officer of Kimmins Corp. and its predecessors and
was sole owner of K Management Corp., the former parent company
of Kimmins Corp. From June 1981 until January 1988, Mr. Williams
was the President and a Director of College Venture Equity Corp.,
a small business investment company. Mr. Williams has also been
a Director of the National Association of Demolition Contractors
and a member of the Executive Committee of the Tampa Bay
International Trade Council.<PAGE>
Norman S. Dominiak has been the Treasurer of the Company
since May 1995 and as its Chief Financial Officer since January
1994. Mr. Dominiak served as controller of ThermoCor Kimmins,
Inc., a subsidiary of Kimmins, from October 1990 until January
1994. From May 1988 until September 1991, Mr. Dominiak served as
Senior Vice President of Creative Edge, a company engaged in the
manufacturing and distribution of educational products. From
October 1982 until April 1988, Mr. Dominiak served as Senior Vice
President of Cecos Environmental Services, Inc., a company
engaged in treatment, transportation, and disposal of hazardous
waste. From 1965 until 1982, Mr. Dominiak was employed in
various financial capacities for the Carborundum Company.
Joseph M. Williams has been the Secretary of the Company
since November 1992 and was the Treasurer from November 1992
until May 1995. Mr. Williams has served as Secretary of Kimmins
since June 1988. Since November 18, 1991, Mr. Williams has also
served as President and has been a Director of Cumberland
Holdings, Inc., a holding company whose wholly-owned subsidiaries
provide reinsurance for specialty sureties and performance and
payment bonds. Since June 1986, Mr. Williams has served as
President and Vice President and has been a Director of
Cumberland Real Estate Holdings, Inc., a company specializing in
property management. Mr. Williams has been employed by Kimmins
and its subsidiaries in various capacities since January 1984.
From January 1982 to December 1983, he was the managing partner
of Williams and Grana, a firm engaged in public accounting. From
January 1978 to December 1981, Mr. Williams was employed as a
senior tax accountant with Price Waterhouse & Co. Joseph M.
Williams is the nephew of Francis M. Williams.
R. Donald Finn has been a Director of the Company since
November 1992. For more than the last five years, Mr. Finn has
been a partner in the Law Firm of Gibson, McAskill & Crosby
located in Buffalo, New York, where Mr. Finn has practiced law
for more than the last 25 years.
Barry W. Ridings has been a Director of the Company since
November 1992. For more than the past five years, Mr. Ridings
has been a managing director of the investment banking firm,
Alex, Brown & Sons, Inc. Mr. Ridings is currently a Director of
Norex America, Inc., SubMicron Systems, Inc., Noodle Kidoodle,
Inc., New Valley Corp., Search Capital Group, Inc., and Telemundo
Group, Inc.<PAGE>
Set forth below is information regarding certain key
employees of the Company:
Michael D. O'Brien, 46, has been employed by the Company
(including its predecessor) as Vice President since October 1992.
From June 1987 to October 1992, Mr. O'Brien has served as the
Regional Manager of the Northeast Region of Kimmins Industrial
Service Corp., a wholly-owned subsidiary of Kimmins. From July
1983 to June 1987, Mr. O'Brien served as Vice President of Jordan
Foster Scrap Corporation in Buffalo, New York, a company
specializing in demolition and preparation of scrap for sale.
John V. Simon, Jr., 41, has been a Vice President of the
Company (including its predecessor) since November 1989. Since
May 1981, he has served as President and General Superintendent
of Kimmins Contracting Corp., responsible for supervising utility
construction. He served as a Vice President of Kimmins from July
1985 until October 1988.
Sandra J. Boland, 46, has been Controller of the Company
since November 1996. From 1992 to October 1996, Ms. Boland
served as Vice President and Chief Financial Officer of John
Sexton Contractors Company. From 1984 until 1992, Ms. Boland was
employed in various financial capacities for John Sexton
Contractors Company. From 1978 to 1984, Ms. Boland was employed
as a Certified Public Accountant with Cray, Kaiser, Ltd.
Section (16a) Beneficial Ownership Reporting Compliance.
Pursuant to Section 16(a) of the Securities Exchange Act of 1934
and the rules issued thereunder, the Company's executive officers
and directors and any persons holding more than 10 percent of the
Company's common stock are required to file with the Securities
and Exchange Commission reports of their initial ownership of the
Company's common stock and any changes in ownership of such common
stock. Specific due dates have been established, and the Company
is required to disclose in its Annual Report on Form 10-K and Proxy
Statement any failure to file such reports by these dates. Copies
of such reports are required to be furnished to the Company. Based
solely on its review of the copies of such reports furnished to the
Company, or written representations that no reports were required,
the Company believes that, during 1996, all of its executive
officers (including the Named Executive Officers), directors and
persons owning more than 10 percent of its common stock complied
with the Section 16(a) requirements.<PAGE>
<TABLE>
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides
certain summary information concerning compensation paid or
accrued by the Company for the chief executive officers for the
year ended December 31, 1996. No other executive officers of the
Company earned in excess of $100,000 in salary and bonus for the
year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
------------------------- ----------------------- ---------
Other
Annual Restricted Securities All
Compen- Stock Underlying LTIP Other
Name and Salary Bonus sation Award(s) Options/ Payouts Compen-
Principal Position Year ($) ($) ($) ($) SARs (#) ($) sation ($)
------------------------- --------------- ----------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Francis M. Williams (a) 1996 $318,482 $0 $0 $0 0 $0 $995 (c)
Chief Executive 1995 271,137 $0 $0 $0 0 $0 $989 (c)
Officer 1994 171,139 $0 $0 $0 0 $0 $977 (c)
Ira D. Cohen (b) 1996 $57,692 $0 $0 $0 0 $0 $0 (c)
President
(a) Mr. Francis M. Williams' salary and other compensation are paid by Kimmins.
(b) Mr. Cohen s employment commenced in July 1996. As a result, no information regarding compensation
prior to such date is provided herein.<PAGE>
(c) Represents the Company's contribution to the employee's account of the Company's 401(k) Plan and
premiums paid by the Company for term life insurance and long-term disability. These plans, subject
to the terms and conditions of each plan, are available to all employees.
</TABLE>
During the year ended December 31, 1996, the services of
certain of the Company's officers were provided to the Company by
Kimmins and included in an administrative fee of approximately
$671,000 (1.5 percent of the Company's consolidated gross
revenues) paid to Kimmins during 1996 for such executive services
and other services. From the list of executives and key
employees, included under Item 10, "Directors and Executive
Officers," only Mr. Cohen, Mr. O'Brien and Ms. Boland received
compensation directly from the Company. During 1994, 1995, and
1996, Mr. Francis M. Williams received salary and other
compensation totaling $172,116, $271,137 and $318,482,
respectively, from Kimmins for work performed on the behalf of
Kimmins and its subsidiaries, including the Company. These
amounts were not allocated to any Kimmins subsidiary. The Company<PAGE>
and Kimmins estimate that during 1996 approximately 10 percent of
the professional time of Francis M. Williams was spent on matters
concerning the Company and that the services provided by Norman
S. Dominiak, Joseph M. Williams, and John V. Simon, Jr., to the
Company were essentially incidental to their overall
responsibilities to Kimmins and no part of their services was
allocable to the Company. The Company estimates that no more
than 10 percent of the total professional time of any of such
persons in 1996 has been spent on the affairs of the Company.
Pursuant to the Management Services Agreement, Kimmins
provides the services of Messrs. Francis M. Williams, Joseph M.
Williams, Norman S. Dominiak, and John V. Simon, Jr., as Chairman
of the Board, Secretary, Treasurer, and Vice President of the
Company, respectively, "as needed" as well as certain financial,
accounting, data processing, and other administrative services,
for an annual fee equal to the lower of the actual cost of such
services or 1.5 percent of the gross revenues of the Company.
1992 Stock Option Plan
In November 1992, the Company adopted a stock option (the
"Option Plan") pursuant to which 250,000 shares of Common Stock
have been reserved for issuance upon the exercise of options
designated as either (i) options intended to constitute incentive
stock options ("ISOs") under the Internal Revenue Code of 1986,
as amended (the "Code") or (ii) non-qualified options. ISOs may
be granted under the Option Plan to employees and officers of the
Company. Non-qualified options may be granted to consultants,
directors (whether or not any such director is an employee),
employees, or officers of the Company.
The purpose of the Option Plan is to attract and retain the
best available talent and encourage the highest level of
performance to serve the best interests of the Company and its
shareholders. The Option Plan is administered by the Board of
Directors or, at their discretion, by a committee appointed by
the Board of Directors to perform such function. The Board of
Directors or such committee, as the case may be, within the
limitations of the Option Plan, determine, among other things,
when to grant options, the persons to whom options will be
granted, the number of shares to be covered by each option,
whether the options granted are intended to be ISOs or non-
qualified options, the duration and rate of exercise of each
option, the option purchase price per share and the manner of
exercise, and whether restrictions such as repurchase rights in
the Company are to be imposed on shares subject to options. In
determining the employees, officers, consultants, and directors
to whom options should be granted and the number of shares to be
covered by each option, the Board of Directors or committee, as
the case may be, will take into account the nature of their
duties, their present and potential contributions to the success
of the Company, and other such factors as it will deem relevant.<PAGE>
ISOs granted pursuant to the Option Plan may not be granted
at a price less than the fair market value of the Common Stock on
the date of grant (or 110 percent of fair market value in the
case of persons holding 10 percent or more of the voting stock of
the Company). The aggregate fair market value of shares for
which ISOs granted to any employee are exercisable for the first
time by such employee during any calendar year (pursuant to all
stock option plans of the Company and any related corporation)
may not exceed $100,000. Non-qualified options granted under the
Option Plan may be granted at a price determined by the Board of
Directors or committee but may not be less than the par value of
such shares. Options granted pursuant to the Option Plan will
expire not more than ten years from the date of grant (five years
in the case of ISOs granted to persons holding 10 percent or more
of the voting stock of the Company).
Options granted pursuant to the Option Plan are not
transferable during an optionee's lifetime; however, they are
transferable at death by will or by the laws of descent and
distribution.
As of December 31, 1996, the Company has granted ten-year
options that are exercisable to purchase an aggregate of 92,000
shares. Of such options, options to purchase 25,000 shares were
granted to each of Messrs. Michael D. O'Brien and John V. Simon,
Jr. Options to purchase 20,000 shares were granted to Joseph M.
Williams, and options to purchase 5,000 shares were granted to
each of Messrs. Barry W. Ridings and R. Donald Finn. The 70,000
options granted with an exercise price of $5.00 per share were
cancelled during 1994 and subsequently reissued during 1994 with
an exercise price of $2.00. All options granted to date are
exercisable at the rate of 20 percent per year, and become fully
vested in May 1999.
Stock Option/SAR Grants in the Last Fiscal Year. No stock
options or stock appreciation rights were granted to either Mr.
Francis M. Williams or Mr. Ira D. Cohen during the year ended
December 31, 1996. In addition, Mr. Williams and Mr. Cohen do
not have any stock options or stock appreciation rights that were
granted in previous years.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values. No stock options or stock
appreciation rights were granted to either Mr. Francis M.
Williams or Mr. Ira D. Cohen during the year ended December 31,
1996. In addition, Mr. Williams and Mr. Cohen do not have any
stock options or stock appreciation rights that were granted in
previous years.<PAGE>
<TABLE>
TEN YEAR OPTION/SAR REPRICINGS
<CAPTION>
Market Length of
Price Original
of Stock Exercise Option
Number of at Time Price at Term
Securities of Time of Remaining
Underlining Repricing Repricing New Date of
Options/SARs or or Exercise Repricing
Repriced or Amendment Amendment Price or
Name Date Amended (#) ($) ($) ($) Amendment
------------------ -------------------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Williams 10/30/94 20,000 $2.00 $5.00 $2.00 4 years
Secretary
Michael D. O'Brien 10/30/94 20,000 $2.00 $5.00 $2.00 4 years
Vice President
</TABLE>
Compensation Committee Interlocks and Insider Participation.
The Compensation Committee of the Company's Board of Directors
consists solely of Barry W. Ridings. During the year ended
December 31, 1996, Francis M. Williams, the Company's Chairman of
the Board of Directors and former President, has served as
President and Chairman of the Board of Directors of Kimmins.
Compensation of Directors. During the year ended December
31, 1996, the Company paid each outside director an annual fee of
$5,000 and $1,000 for each board meeting attended. In addition,
Directors are reimbursed for all out-of-pocket expenses incurred
in attending Board of Directors and audit committee meetings.
Other Benefit Arrangements
On November 12, 1992, the Company and Kimmins entered into
an agreement for the proportional sharing of employee benefit
costs, pursuant to which the Company's employees are entitled to
participate in all of Kimmins' employee benefit plans, and the
Company is required to contribute its pro rata share of the costs
of such plans, calculated according to formulae contained in the
agreement. The agreement may be terminated by either party
anytime upon 180 days' prior written notice. Pursuant to the
agreement, Kimmins and the Company have agreed to indemnify each
other against any loss, liability, claim, damage, or expense
incurred by the failure by either party to comply with the terms
of the agreement.<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the
Company's common stock beneficially owned as of April 4, 1997, by
(i) each person known by the Company to be the owner of more than
5 percent of the outstanding shares of Common Stock, (ii) each of
the Named Executives, (iii) each director, and (iv) all executive
officers and directors as a group:
Amount and Percentage of
Nature of Outstanding
Name and address Beneficial Shares Owned
of Beneficial Owner Ownership (1) (1)
---------------------------------------------- -------------
Kimmins Corp.
1501 Second Avenue, East
Tampa, FL 33605 . . . . 2,950,000 (2)(3) 73.4%
Francis M. Williams
1501 Second Avenue, East
Tampa, FL 33605 . . . . 3,173,800 (2)(3)(4) 79.0%
Joseph M. Williams
1501 Second Avenue, East
Tampa, FL 33605 . . . . 12,000 (5) *
Barry W. Ridings . . . . 18,000 (6) *
R. Donald Finn . . . . . 3,000 (7) *
All officers and directors (2)(3)(4)
as a group 3,206,800 (5)(6)(7) 79.8%
(6 persons) . . . . . .
--------------------------
* Less than 1 percent
(1) A person is deemed to be the beneficial owner of securities
that can be acquired by such person within sixty days upon
the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that
options or warrants held by such person (but not those held
by any other person), which are exercisable within sixty
days, have been exercised.<PAGE>
(2) Represents 2,950,000 shares of Common Stock owned of record
and beneficially by Kimmins. Kimmins has sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by it. Mr. Francis M. Williams, the
Company's Chairman, beneficially owns approximately 61.5
percent of the total voting shares of Kimmins and,
accordingly, controls Kimmins. As of April 4, 1997, all
executive officers and directors of the Company as a group,
including Mr. Francis M. Williams, beneficially own an
aggregate of approximately 67.2 percent of the voting shares
of Kimmins.
(3) Excludes 400,652 shares issuable upon the conversion of the
Kimmins Note. See Item 13, "Certain Relationships and
Related Transactions."
(4) Includes 100,000 shares that Mr. Francis M. Williams
acquired upon the consummation of the Company's initial
public offering during March 1993; 109,800 shares owned
directly by Mr. Francis M. Williams; 6,000 shares owned by
Mr. Williams' wife; and 8,000 shares owned by Mr. Williams'
children.
(5) Represents 12,000 shares that may be purchased by Mr.
Williams pursuant to immediately exercisable options. Does
not include 8,000 shares issuable to him upon exercise of
options vesting at various times commencing in November
1997.
(6) Includes 15,000 shares owned by Mr. Ridings, and 3,000
shares that may be purchased by Mr. Ridings pursuant to
immediately exercisable options. Does not include 2,000
shares issuable to him upon exercise of options vesting at
various times commencing in November 1997.
(7) Represents 3,000 shares that may be purchased by Mr. Finn
pursuant to immediately exercisable options. Does not
include 2,000 shares issuable to him upon exercise of
options vesting at various times commencing in November
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since its inception, the Company has entered into various
transactions with Kimmins and companies affiliated through common
ownership with Kimmins. To date, the Company has been
substantially dependent on Kimmins for various management,
administrative, and financial services; and Kimmins has charged
the Company a monthly fee based on the gross annual revenue of
the Company for such services. For the years ended December 31,
1994, 1995, and 1996, Kimmins billed the Company an aggregate of
approximately $435,000, $617,000, and 671,000, respectively, for
such services. As of March 25, 1993, Kimmins and the Company
formalized this arrangement by executing a Management Services<PAGE>
Agreement. The agreement provides that Kimmins will continue to
provide various administrative services for the Company and that
Francis M. Williams (President, Chairman of the Board, and Chief
Executive Officer of Kimmins), Norman S. Dominiak (Chief
Financial Officer and Treasurer), Joseph M. Williams (Secretary
of Kimmins), and John V. Simon, Jr. (President of Kimmins
Contracting Corp.) will render management services to or on
behalf of the Company. Under the agreement, the Company has
appointed Francis M. Williams, Norman S. Dominiak, Joseph M.
Williams, and John V. Simon, Jr., as Chairman of the Board,
Treasurer, Secretary, and Vice President, respectively, of the
Company. Pursuant to the agreement, the Company will continue to
pay Kimmins an annual fee, payable monthly, equal to the lower of
actual costs of such services or 1.5 percent of the Company's
gross revenue. This agreement may be extended upon agreement of
both parties, and the Company may terminate the agreement, at
will, upon thirty days prior written notice to Kimmins.
As of December 31, 1996, the Company had advances due from
an affiliate of approximately $8,794,000. These advances accrue
interest at a rate of 10 percent per annum. While the entire
balance is due on demand, management only intends to collected
$1,953,000 during 1997. Therefore, the remaining balance is
classified as long term at December 31, 1996.
As of December 31, 1996, the amount of the Company's total
outstanding indebtedness to Kimmins was $2,003,258 which had
been consolidated into the Kimmins Note, which is due and payable
on December 1, 2003, with interest accruing at 1 percent per
annum in excess of the stated prime rate established by
NationsBank of Florida. Until December 1, 2003, the Kimmins Note
may be converted, at the option of Kimmins, into shares of the
Company's Common Stock at an initial conversion price of $5.00
per share, subject to adjustment, in the event and anytime after
the closing sale price of the Company's Common Stock is $9.00 or
more for twenty consecutive trading days. Kimmins has one demand
registration right during the period from March 25, 1994, until
December 1, 2003, with respect to any shares of Common Stock
issuable upon such conversion. The Kimmins Note is subordinated
to all senior indebtedness of the Company. Payments of principal
and interest are based on certain net income levels of the
Company.
In March 1990, the Company, along with Kimmins and other
subsidiaries of Kimmins, guaranteed all obligations under a loan
by Fleet Bank, formerly known as Norstar Bank, to the trustees
for the Kimmins Employee Stock Ownership Plan ("ESOP"). The
proceeds of such loan were used to acquire shares of the Common
Stock of Kimmins for the creation of the ESOP in which the
Company's employees participate. This loan was refinanced during
December 1995 with SouthTrust Bank of Alabama, N.A., under
similar terms of the original loan. As of December 31, 1996,
$1,920,000 of such indebtedness remained outstanding.<PAGE>
On November 12, 1992, the Company and Kimmins entered into
an agreement for the proportional sharing of employee benefit
costs, pursuant to which the Company's employees are entitled to
participate in all of Kimmins' employee benefit plans, and the
Company is required to contribute its pro rata share of the costs
of such plans, calculated according to formula contained in the
agreement. The agreement may be terminated by either party
anytime upon 180 days prior written notice. Pursuant to the
agreement, Kimmins and the Company have agreed to indemnify each
other against any loss, liability, claim, damage, or expense
incurred by the failure by either party to comply with the terms
of the agreement.
The Company is an insured or co-insured with other Kimmins
entities on various insurance policies of the Company or Kimmins.
The Company pays its allocable share of the cost of such policies
based on a combination of revenues, payroll, assets, and
incurred losses as a percentage of the combined total of such
items of all insured parties, as appropriate for each particular
insurance policy or coverage. For the years ended December 31,
1994, 1995 or 1996, the Company paid Kimmins approximately
$746,000, $811,000, and $849,000, respectively. The Company pays
directly for any coverage for which it is the only insured.
At various times in 1992 and 1993, Francis M. Williams,
President and Director of Kimmins and the Chairman of the Board
of the Company, Michael Gold, a director of Kimmins, Marie K.
Williams, the wife of Francis M. Williams, and Harris Williams,
the son of Francis M. Williams, purchased $200,000, $100,000,
$180,000, and $20,000, respectively, of principal amount of
Performance Notes due on January 9, 1997. These notes were
offered by Kimmins Recycling Corp., a subsidiary of the Company,
to certain investors to finance the purchase and development of
the Company's T&R facility in Jacksonville, Florida. The
Performance Notes were repaid during 1996.
On November 6, 1992, Kimmins sold 50,000 of its shares of
the Company's Common Stock for nominal consideration to a former
vice president of the Company, in recognition for services
rendered by him on behalf of the Company. The terms of the
original agreement stated that the shares will be held in escrow
and released, commencing December 31, 1993, at the rate of 20
percent per year, subjected to the former vice president s
continued employment by the Company. The first installment of
10,000 shares was released to Mr. Baker on December 31, 1993.
During 1994, this agreement was restructured and the remaining
40,000 shares were released to the former vice president. This
resulted in compensation expense of $65,000 based on the current
market price of the stock and the elimination of the remaining
deferred compensation expense.<PAGE>
Effective as of March 25, 1993, the Company and Kimmins have
entered into an affiliate transactions agreement pursuant to
which the Company may not, for a period of three years, either
directly or indirectly, conduct any business or enter into any
transaction or series of related transactions, with or for the
benefit of any affiliate of the Company, having a total value per
transaction or series of related transactions greater than
$50,000, without the approval of most of the disinterested
members of the Company's Board of Directors and the approval of
most of the Company's shareholders who are not affiliates of the
Company. The Company and Kimmins have agreed to evaluate and
extend the affiliate transactions agreement on an annual basis.<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES,
AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report
1. Financial statements
- Report of Independent Certified Public Accountants
- Consolidated balance sheets at
December 31, 1995 and 1996
- Consolidated statements of operations for each
of the three years in the period ended
December 31, 1996
- Consolidated statements of stockholders'
equity for each of the three years in the period
ended December 31, 1996
- Consolidated statements of cash flows for each
of the three years in the period ended
December 31, 1996
- Notes to consolidated financial statements
2. Financial statement schedule
Schedule Page
Number Number
-------- ------
II - Valuation and qualifying accounts . . . . . . S-1
All other financial statement schedules are omitted
since the required information is not present or is not
present in amounts sufficient to require submission of the
schedules or because the information required is included in
the financial statements and notes thereto.
3. The following documents are filed as exhibits to this
annual report on Form 10-K:
3 (a) * - Restated Certificate of Incorporation
of Registrant, as amended
3 (b) * - Bylaws of Registrant
11 - Calculation of income per share
21 - Subsidiaries of the registrant
23 - Consent of Ernst & Young LLP
27 - Financial Data Schedule (for SEC use only)
----------------------
* Previously filed as part of Registrant's Registration
Statement on Form S-3,
File No. 33-54640 and incorporated herein by reference
thereto.
(b) Reports on Form 8-K - None<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,
thereunder duly authorized.
TRANSCOR WASTE SERVICES, INC.
Date: April 11, 1997 By: /s/ Ira D. Cohen
--------------- --------------------------------
Ira D. Cohen
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: April 11, 1997 /s/ Ira D. Cohen
--------------- --------------------------------
Ira D. Cohen
President
(Principal Executive Officer)
Date: April 11, 1997 /s/ Joseph M. Williams
--------------- --------------------------------
Joseph M. Williams
Secretary
Date: April 11, 1997 /s/ Norman S. Dominiak
--------------- --------------------------------
Norman S. Dominiak
Treasurer and Chief
Financial Officer
(Principal Accounting and
Financial Officer)
Date: April 11, 1997 /s/ R. Donald Finn
--------------- --------------------------------
R. Donald Finn, Director
Date: April 11, 1997 /s/ Barry W. Ridings
--------------- --------------------------------
Barry W. Ridings, Director<PAGE>
EXHIBIT 11
TransCor Waste Services, Inc.
Calculation of Income Per Share
Years Ended December 31, 1994, 1995, and 1996
Primary income (loss)
per common share:
-----------------------
Net income (loss) . . . $ 165,947 $ 1,315,503 $ (525,941)
============= ==========================
Weighted average shares
of common stock
outstanding:
Average shares
outstanding . . . . 4,000,000 3,994,334 3,997,842
Assumed exercise of
stock options . . . 24,693 54,696 -
------------- --------------------------
Weighted average shares
of common stock
outstanding -
primary . . . . . . . 4,024,693 4,049,030 3,997,842
============= ==========================
Primary income (loss)
per share . . . . . . $ 0.04 $ 0.32 $ (.13)
============= ==========================
Fully diluted income
(loss) per common
share:
-----------------------
Net income (loss) . . . $ 165,947 $ 1,315,503 $ (525,941)
============= ==========================
Weighted average shares
of common stock
outstanding:
Average shares
outstanding . . . . 4,000,000 3,994,334 3,997,842
Assumed exercise of
stock options . . . 24,693 56,388 -
------------- --------------------------
Weighted average shares
of common stock
outstanding - fully
diluted . . . . . . . 4,024,693 4,050,722 3,997,842
============= ==========================
Fully diluted income
(loss) per share . . . $ 0.04 $ 0.32 $ (.13)
============= ==========================<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State or Country
Name of Company of Incorporation
---------------------------------------- ----------------
Kimmins Recycling Corp. . . . . . . . . Florida
Fourth Avenue Holdings, Inc. . . . . . Florida
40th Street, Inc. . . . . . . . . . . . Florida
Lantana Eighth Avenue Corp. . . . . . . Florida
Factory Street Corporation . . . . . . Tennessee
AmeriSouth of Florida, Inc. . . . . . . Florida<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
We consent to the incorporation by reference in the
Registration Statement (Form S-3 No. 33-54640) of TransCor Waste
Services, Inc., and related Prospectus, of our report dated April
9, 1997, with respect to the consolidated financial statements
and schedule of TransCor Waste Services, Inc., included in this
Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
Tampa, Florida
April 14, 1997<PAGE>
<TABLE>
TRANSCOR WASTE SERVICES, INC.
Schedule II - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
<CAPTION>
Additions
Charged Deductions Balance
Balance at to Costs from at
Beginning of and Allowances End of
Description Period Expenses (a) Period
----------------------------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994 $ 330,007 $ 495,375$ (267,787) $ 557,595
Year ended December 31, 1995 $ 557,595 $ 404,455$ (655,241) $ 306,809
Year ended December 31, 1996 $ 306,809 $ 430,382$ (193,421) $ 543,770
</TABLE>
(a) Balance represents the write-off of uncollectible accounts.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $1,437,788
<SECURITIES> $0
<RECEIVABLES> $6,774,254
<ALLOWANCES> ($543,770)
<INVENTORY> 0
<CURRENT-ASSETS> $11,169,575
<PP&E> $36,782,128
<DEPRECIATION> ($10,666,851)
<TOTAL-ASSETS> $46,009,829
<CURRENT-LIABILITIES> $12,784,066
<BONDS> $0
$0
$0
<COMMON> 4,010
<OTHER-SE> $13,115,339
<TOTAL-LIABILITY-AND-EQUITY> $46,009,829
<SALES> $44,193,226
<TOTAL-REVENUES> $44,193,226
<CGS> $36,203,278
<TOTAL-COSTS> $36,203,278
<OTHER-EXPENSES> $7,497,741
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $1,354,406
<INCOME-PRETAX> ($862,199)
<INCOME-TAX> ($336,258)
<INCOME-CONTINUING> ($525,941)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($525,941)
<EPS-PRIMARY> ($.13)
<EPS-DILUTED> ($.13)
</TABLE>
