<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[Mark One]
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
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.
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(Exact name of registrant as specified in its charter)
Florida 65-0369288
------------------------------- -------------------------------
(State of incorporation) (I.R.S. Employer
Identification Number)
1502 Second Avenue, East, Tampa, Florida 33605
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(Address of registrant's principal executive offices, including zip code)
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(Registrant's telephone number, including area code): (813) 248-5885
Not applicable
--------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
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 [ ]
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by a check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]<PAGE>
Applicable Only to Corporate Issuers
The number of shares of Common Stock outstanding on November 5, 1997, was
4,000,000 shares.<PAGE>
TRANSCOR WASTE SERVICES, INC.
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated balance sheets at
December 31, 1996 and
September 30, 1997 (unaudited) . . . . . . 1 - 2
Consolidated statements of operations
for the three months and nine months
ended September 30, 1996 and 1997
(unaudited) . . . . . . . . . . . . . . . 3 - 4
Consolidated statements of cash flows
for the nine months ended September 30,
1996 and 1997 (unaudited) . . . . . . . . 5 - 6
Notes to consolidated financial
statement . . . . . . . . . . . . . . . 7 - 10
Item 2. Management's discussion and
analysis of financial condition and
results of operation . . . . . . . . . . 11 - 14
Item 3. Quantitative and qualitative disclosures
about market risk . . . . . . . . . . . . . 15
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . 16
Item 2. Changes in securities . . . . . . . . . . . . 16
Item 3. Defaults upon senior securities . . . . . . . 16
Item 4. Submission of matters to a vote of
security holders . . . . . . . . . . . . . 16
Item 5. Other information . . . . . . . . . . . . . . 16
Item 6. Exhibits and reports on Form 8-K . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . 17
Exhibit 11 - Calculation of income (loss)
per share . . . . . . . . . . . . . . 18 - 19<PAGE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, September 30,
1996 1997
---------------- ----------------
(unaudited)
Current assets:
Cash . . . . . . . . . . . . . . . . $ 1,437,788 $ 4,673,796
Due from affiliate . . . . . . . . . 1,953,236 1,764,318
Accounts receivable - trade, net . . 6,230,484 5,241,845
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . . . 230,869 435,209
Income tax refund receivable . . . . 422,567 1,214,806
Deferred income taxes . . . . . . . . 639,079 639,079
Other current assets . . . . . . . . 255,552 244,102
---------------- ----------------
Total current assets . . . . . . . 11,169,575 14,213,155
---------------- ----------------
Property and equipment, net . . . . . . 26,115,277 27,901,878
Intangible assets, net . . . . . . . . 898,853 629,250
Due from affiliate . . . . . . . . . . 6,840,516 5,125,745
Other assets . . . . . . . . . . . . . 985,608 1,447,449
---------------- ----------------
$ 46,009,829 $ 49,317,477
================ ================
1
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1996 1997
---------------- ----------------
(unaudited)
Current liabilities:
Accounts payable, trade . . . . . . . $ 4,255,150 $ 4,205,913
Accrued expenses . . . . . . . . . . 4,536,778 4,521,955
Billings in excess of costs and
estimated earnings on
uncompleted contracts . . . . . . 170,771 7,755
Due to affiliate . . . . . . . . . . 368,199 4,526,490
Current portion of long-term
debt . . . . . . . . . . . . . . . 3,453,168 4,167,087
---------------- ----------------
Total current liabilities . . . . 12,784,066 17,429,200
---------------- ----------------
Long-term debt, net of current
maturities (including debt owed to
KVN of $2,003,258 at December 31,
1996 and September 30, 1997) . . . . 16,807,059 16,922,348
Deferred income taxes . . . . . . . . . 3,299,355 3,299,355
Commitments and contingencies . . . . . - -
Stockholders' equity:
Preferred stock, $.001 par value;
1,000,000 shares authorized; none
issued and outstanding . . . . . . - -
Capital stock, $.001 par value;
10,000,000 shares authorized;
4,010,000 shares issued and
4,000,000 outstanding . . . . . . 4,010 4,010
Capital in excess of par value . . . 12,193,547 12,193,547
Retained earnings . . . . . . . . . . 969,798 (482,977)
---------------- ----------------
Less treasury stock, at cost 13,167,355 11,714,580
(10,000 shares) . . . . . . . . . (48,006) (48,006)
---------------- ----------------
Total stockholders' equity . . . . 13,119,349 11,666,574
---------------- ----------------
$ 46,009,829 $ 49,317,477
================ ================
2
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30,
---------------------------------
1996 1997
---------------- ----------------
(unaudited) (unaudited)
Revenue . . . . . . . . . . . . . . . . $ 11,369,715 $ 10,151,528
Expenses:
Operating expenses . . . . . . . . . 9,081,617 9,880,166
Selling, general, and
administrative expenses . . . . . 1,887,552 2,359,463
---------------- ----------------
Operating income (loss) . . . . . . . . 400,546 (2,088,101)
Non-operating gain (loss) on
disposal of equipment . . . . . . . . - 208,316
Interest expense, net . . . . . . . . . (304,822) (284,033)
---------------- ----------------
Income (loss) before provision for
income taxes . . . . . . . . . . . . 95,724 (2,163,818)
Provision for income
taxes (benefit) . . . . . . . . . . . 37,312 (843,992)
---------------- ----------------
Net income (loss) . . . . . . . . . . . $ 58,412 $ (1,319,826)
================ ================
Share data:
Primary income (loss)
per share . . . . . . . . . . . . $ .01 $ (.33)
Fully diluted income (loss) ================ ================
per share . . . . . . . . . . . . $ .01 $ (.32)
================ ================
Weighted average number of shares
outstanding used in computations:
Primary . . . . . . . . . . . . . 4,049,429 4,051,467
================ ================
Fully diluted . . . . . . . . . . 4,053,875 4,051,467
================ ================
3
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended September 30,
---------------------------------
1996 1997
---------------- ----------------
(unaudited) (unaudited)
Revenue . . . . . . . . . . . . . . . . $ 32,996,203 $ 33,989,459
Expenses:
Operating expenses . . . . . . . . . 26,665,358 29,260,234
Selling, general, and
administrative expenses . . . . . 5,364,497 6,883,415
---------------- ----------------
Operating income (loss) . . . . . . . . 966,348 (2,154,190)
Non-operating gain (loss) on disposal
of equipment . . . . . . . . . . . . - 563,055
Interest expense, net . . . . . . . . . 954,647 (790,633)
---------------- ----------------
Loss before provision for
income taxes . . . . . . . . . . . . 11,701 (2,381,768)
Provision for income taxes
(benefit) . . . . . . . . . . . . . . 4,545 (928,993)
---------------- ----------------
Net income (loss) . . . . . . . . . . . $ 7,156 $ (1,452,775)
================ ================
Share data:
Primary loss per share . . . . . . . $ .00 $ (.36)
================ ================
Fully diluted loss per share . . . . $ .00 $ (.33)
================ ================
Weighted average number of shares
outstanding used in computations:
Primary . . . . . . . . . . . . . 4,060,573 4,061,029
================ ================
Fully diluted . . . . . . . . . . 4,060,573 4,061,029
================ ================
4
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30,
---------------------------------
1996 1997
---------------- ----------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . $ 7,156 $ (1,452,775)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and
amortization . . . . . . . . . . 2,650,969 3,164,419
Gain on disposal of
equipment . . . . . . . . . . . (53,624) (563,689)
Changes in operating assets and
liabilities:
Accounts receivable . . . . . . 557,467 988,639
Costs and estimated earnings
in excess of billings on
uncompleted contracts . . . . 507,741 (204,340)
Income tax refund
receivable . . . . . . . . . 566,717 (792,239)
Other assets . . . . . . . . . (272,540) (579,183)
Accounts payable . . . . . . . (503,670) (49,237)
Accrued expenses . . . . . . . (181,544) (14,823)
Billings in excess of costs
and estimated earnings on
uncompleted contracts . . . . (138,405) (163,016)
---------------- ----------------
Total adjustments . . . . . . . . . . 3,133,111 1,786,531
Net cash provided by operating ---------------- ----------------
activities . . . . . . . . . . . . . 3,140,267 333,756
---------------- ----------------
Cash flows from investing activities:
Capital expenditures . . . . . . . . (1,764,788) (5,810,279)
Proceeds from sale of property
and equipment . . . . . . . . . . 271,130 1,821,343
Net cash used by investing ---------------- ----------------
activities . . . . . . . . . . . . . (1,493,658) (3,988,936)
---------------- ----------------
5
See accompanying notes.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Nine months ended September 30,
---------------------------------
1996 1997
---------------- ----------------
(unaudited) (unaudited)
Cash flows from financing activities:
Proceeds from long-term debt . . . . $ 1,583,354 $ 4,272,544
Repayment of long-term debt . . . . . (2,798,579) (3,443,336)
Advances from (to) KVN . . . . . . . (89,957) 6,061,980
Proceeds from stock warrants . . . . 60,000 -
Net cash provided (used) by ---------------- ----------------
financing activities . . . . . . . . (1,245,182) 6,891,188
---------------- ----------------
Net increase (decrease) in cash . . . . 401,427 3,236,008
Cash, beginning of period . . . . . . . 3,414,479 1,437,788
---------------- ----------------
Cash, end of period . . . . . . . . . . $ 3,815,906 $ 4,673,796
================ ================
6
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. TransCor also provides demolition services in conjunction
with, and as an economic complement to, its solid waste management
services.
Basis of presentation - The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do
not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine-month periods ended
September 30, 1997, are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. For further
information, refer to the consolidated financial statements and notes
thereto as of and for the year ended December 31, 1996, included in the
Company's Form 10-K dated December 31, 1996, as filed with the United
States Securities and Exchange Commission.
Certain amounts in the 1996 consolidated financial statements have
been reclassified to conform to the 1997 presentation.
Intangible assets - Intangible assets consist primarily of the
excess of cost over fair market value of the net assets of the acquired
business, which will be amortized on a straight-line basis over twenty
years, and customer contracts, which will be amortized on a straight-line
basis over five years. Amortization expense was approximately $90,000
and $270,000 for the nine months ended September 30, 1996 and 1997,
respectively. Accumulated amortization was $191,000 and $223,000 at
December 31, 1996, and September 30, 1997, 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 $89,000
and $89,000 for the nine months ended September 30, 1996 and 1997,
respectively. Accumulated amortization was $296,000 and $385,000 at
December 31, 1996, and September 30, 1997, respectively.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
As of September 30, 1997, other assets include approximately
$1,150,000 of pre-contract costs. As explained above, these costs are
currently being amortized over the terms of the related contracts.
However, the American Institute of Certified Public Accountants ("AICPA")
has recently issued proposed Statement of Position ("SOP"), "Reporting on
the Costs of Start-up Activities," would require all start-up costs,
including pre-contract costs, to be expensed as incurred. If adopted,
effective in the first quarter of 1998 the proposed SOP would require the
Company to write off the remaining unamortized balance of approximately
$1,150,000.
Earnings per share - Net income (loss) per share is computed based
on the weighted average number of shares of capital stock and stock
options outstanding. Fully diluted earnings per share assumes that the
convertible subordinated debt was converted into common stock as of the
beginning of the year and that the interest expense thereon, net of
taxes, was added to net income (loss).
2. Property and equipment, net
December 31, September 30,
1996 1997
---------------- ----------------
(unaudited)
Land . . . . . . . . . . . . . . . $ 4,610,323 $ 4,610,323
Buildings and improvements . . . . 5,621,962 5,739,194
Vehicles . . . . . . . . . . . . . 13,459,891 16,729,191
Waste containers and equipment . . 12,508,751 11,699,100
Furniture and fixtures . . . . . . 547,739 714,918
Construction in progress . . . . . 33,462 183,363
---------------- ----------------
36,782,128 39,676,089
Less accumulated depreciation . . (10,666,851) (12,335,547)
---------------- ----------------
$ 26,115,277 $ 27,340,542
================ ================
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 $2,472,000 and
$2,766,000 for the nine months ended September 30, 1996 and 1997,
respectively.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Long-term debt
December 31, September 30,
1996 1997
---------------- ----------------
(unaudited)
Notes payable, due through April
1, 2002, payable in monthly
installments with interest at
varying rates up to 9.75 percent,
collateralized by equipment . . . $ 13,055,213 $ 14,123,902
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 January 1,
2012, interest at varying rates
up to prime plus 1.5 percent,
collateralized by land and
buildings . . . . . . . . . . . . 5,201,756 4,962,275
---------------- ----------------
20,260,227 21,089,435
Less current portion . . . . . . . (3,453,168) (4,167,087)
---------------- ----------------
$ 16,807,059 $ 16,922,348
================ ================
As of September 30, 1997, 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 $1,560,000 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 $6,500,000. 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 all loan covenants.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. 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.
The convertible subordinated term note is convertible into 400,652
shares of the Company's capital stock at the time the market value per
share equals or exceeds $9.00 for twenty consecutive trading days.
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 to
purchase 90,000 shares are exercisable through March 25, 1998.
5. Earnings Per Share
In February 1997, SFAS No. 128, "Earnings per Share" was issued.
This statement simplifies the standards for computing earnings per share
("EPS") previously found in APB Opinion No. 15, "Earnings per Share," by
replacing the presentation of primary EPS with basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted EPS
computation. Basic EPS is computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS is computed similarly to fully
diluted EPS under Opinion No. 15. [The Company intends to adopt this
statement in 1998.]<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1997 And 1996
Revenue for the three months ended September 30, 1997, was
$10,152,000, representing an decrease of $1,218,000, or approximately 11
percent, from $11,370,000 for the three months ended September 30, 1996.
The decrease in total revenue was primarily attributable to facility
closures and market pricing pressure in the Company's solid waste
operations, which generated revenue of approximately $7,610,000 for the
three months ended September 30, 1997, compared to approximately
$9,100,000 for the same period in 1996. During the three-month period
ended September 30, 1997, the Company closed its Palm Beach County,
Florida, facility and sold contracts and equipment related to its
Pinellas County and St. Lucie County operations.
Operating expenses for the three months ended September 30, 1997,
were $9,880,000, representing an increase of $798,000, or approximately
8.8 percent, from $9,082,000 for the three months ended September 30,
1996. Operating expenses include fees charged by landfills for waste
disposal (which to date has been the largest component of the Company's
operating expenses), direct labor costs associated with the collection,
transfer, and recycling of waste, and depreciation. The increase in
operating expenses was attributable primarily to cost-related increases
in certain major operational expenses; such as, landfill fees and direct
labor costs.
Selling, general, and administrative expenses for the three months
ended September 30, 1997, were $2,359,000, representing an increase of
$471,000, or 25 percent, from $1,888,000 for the three months ended
September 30, 1996. The dollar and percentage increase in selling,
general, and administrative expenses is primarily attributable to
advertising costs for a new contract of approximately $500,000 and costs
associated with the closing and sale of certain facilities and operating
assets of approximately $1,000,000.
The Company sold certain contracts and related equipment during the
three months ended September 30, 1997, resulting in a non-operating gain
of approximately $208,000. These assets were primarily utilized in the
Company's commercial and residential waste collection services.
Interest expense, net of interest income, for the three months ended
September 30, 1997, was $284,000 as compared to $305,000 for the three
months ended September 30, 1996. Interest expense associated with debt
decreased from $459,000 to $426,000 as a result of the decrease in the
amount of interest-bearing debt outstanding. Interest income related to
receivables from affiliates decreased from $154,000 to $142,000.
The Company's income tax provision was calculated using a rate of
approximately 39 percent for the three-month periods ended September 30,
1997 and 1996.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
As a result of the foregoing, the Company recorded a net loss of
$1,320,000 for the three months ended September 30, 1997, as compared to
net income of $58,000 for the three months ended September 30, 1996.
Comparison of Nine Months Ended September 30, 1997 and 1996
Revenue for the nine months ended September 30, 1997, was
$33,989,000, representing an increase of $993,000, or approximately 3
percent, from $32,996,000 for the nine months ended September 30, 1996.
The increase in total revenue was primarily attributable to the Company's
demolition operations, which generated revenue of approximately
$9,601,000 for the nine months ended September 30, 1997, compared to
approximately $6,737,000 for the same period in 1996. The increase in
demolition revenue offsets the decrease in solid waste revenue, which was
caused by facility closures and pricing pressures in the commercial
market. During the nine-month period ended September 30, 1997, the
Company closed its Palm Beach County, Florida, facility and sold
contracts and related equipment associated with its operations in
Pinellas County and St. Lucie County.
Operating expenses for the nine months ended September 30, 1997,
were $29,260,000, representing an increase of $2,595,000 or approximately
10 percent from $26,665,000 for the nine months ended September 30, 1996.
Operating expenses include fees charged by landfills for waste disposal
(which to date has been the largest component of the Company's operating
expenses), direct labor costs associated with the collection, transfer,
and recycling of waste, and depreciation. The increase in operating
expenses was attributable primarily to cost-related increases in certain
major operational expenses; such as, landfill fees and direct labor
costs.
Selling, general, and administrative expenses for the nine months
ended September 30, 1997, were $6,883,000, representing an increase of
$1,519,000 or 28 percent from $5,364,000 for the nine months ended
September 30, 1996. The dollar and percentage increase in selling,
general, and administrative expenses is primarily attributable to costs
associated with advertising a new contract and costs associated with the
closures of certain facilities and sales of certain contracts and related
equipment.
The Company sold certain contracts and related equipment during the
nine months ended September 30, 1997, resulting in a non-operating gain
of approximately $563,000. These assets were primarily utilized in the
Company's commercial and residential waste collection services.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Interest expense, net of interest income, for the nine months ended
September 30, 1997, was $791,000 as compared to $955,000 for the nine
months ended September 30, 1996. Interest expense associated with debt
decreased from $1,373,000 to $1,236,000 as a result of the decrease in
the amount of interest-bearing debt outstanding. Interest income related
to receivables from affiliates increased from $418,000 to $445,000.
The Company's income tax provision was calculated using a rate of
approximately 39 percent for the nine month periods ended September 30,
1997 and 1996.
As a result of the foregoing, the Company recorded a net loss of
$1,453,000 for the nine months ended September 30, 1997, as compared to
net income of $7,000 for the nine months ended September 30, 1996.
Liquidity And Capital Resources
At September 30, 1997, the Company had a working capital deficit of
$3,216,000 compared to a working capital deficit of $1,614,000 at
December 31, 1996. Working capital was impacted by a decrease in
accounts receivable - trade, an increase in the current portion of long-
term debt, and an increase in advances from affiliates. Current
financial resources, anticipated funds from operations, and repayment of
receivables from affiliate (if needed) are expected to be adequate to
meet cash requirements in the year ahead and the foreseeable future. At
September 30, 1997, the Company had cash of $4,674,000.
Net cash provided by operating activities during the nine months
ended September 30 1997, was $334,000 compared to $3,378,000 for the nine
months ended September 30, 1996. The decrease in cash provided by
operating activities was due primarily to the net loss incurred during
1997, net of changes in certain operating assets and liabilities
(primarily costs and estimated earnings in excess of billings on
uncompleted contracts, other assets, and accounts payable). Net cash
used by investing activities during the nine months ended September 30,
1997, was $3,989,000, as compared to $1,732,000 during the nine months
ended September 30, 1996, primarily due to capital expenditures for the
purchase of vehicles and equipment. Net cash provided by financing
activities during the nine months ended September 30, 1997, was
$6,891,000 as compared to net cash used by financing activities of
$1,245,000 for the nine months ended September 30, 1996, primarily as a
result of higher levels of debt borrowings and advances from KVN.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Liquidity And Capital Resources (continued)
During the nine months ended September 30, 1997 and 1996, the
Company's average trade receivables were outstanding for 42 and 48 days,
respectively. Both averages were based on the nine-month revenue
annualized and compared to the trade receivable balances at September 30.
Management believes that the number of days outstanding for its
receivables approximates industry norms. Credit is extended based on an
evaluation of the customer's financial condition. Credit losses are
provided for in the financial statements and have been within
management's expectations.
During the nine months ended September 30, 1997 and 1996, the
Company's average trade payables were extended for 35 and 29 days,
respectively. Both averages were based on the nine-month operating and
selling, general, and administrative expenses annualized and compared to
trade payable balances at September 30.
In addition to its own debt, the Company has also guaranteed the
indebtedness (an aggregate of approximately $1,920,000 and $1,560,000 at
December 31, 1996, and September 30, 1997, respectively) of the Kimmins'
Employee Stock Ownership Plan Trust, in which employees of the Company
participate.
Certain of KVN's debt agreements with a financial institution
contain certain covenants, the most restrictive of which requires, for
KVN, maintenance of a consolidated tangible net worth, as defined, of not
less than $6,500,000. 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 all loan
documents.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Liquidity And Capital Resources (continued)
Forward-Looking Information
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, that reflect management's current views with respect to
future events and financial performance. Such forward looking statements
include, without limitation, statements regarding the Company's future
capital expenditures, plant closures, product demand and market growth,
competitive position, and other statements regarding future plans and
strategies, anticipated events or trends, and similar expressions
concerning matters that are not historical facts. 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, increases in
landfill charges, unanticipated costs in connection with facility
closures, 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.
Effect of Inflation
Inflation has not had, and is not expected to have, a material
impact upon 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.
Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Not required pursuant to Item 305, General Instruction 1.<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
During April 1997, Kimmins Recycling Corp. ("KRC"), a subsidiary of
the Company, filed a claim in the Fourth Judicial Circuit Court of
Florida against the Consolidated City of Jacksonville, Duval County,
Florida. This action challenged the propriety of the City of
Jacksonville, Non-Residential Solid Waste Collection and Transportation
Franchise Ordinance (the "Franchise Ordinance"). KRC sought declaratory
and injunctive relief within the jurisdiction of the court and recovery
of damages in excess of $15,000. KRC's request for declaratory and
injunctive relief was denied, and the Company is not currently pursuing
additional litigation.
During June 1997, KRC, St. Lucie County, a political subdivision of
the State of Florida, and the City of Fort Pierce, a municipality
organized under the laws of the State of Florida, were notified of a
class action lawsuit filed in the Nineteenth Judicial Circuit Court of
Florida by three residents of St. Lucie County. This action challenged
the propriety of certain contract provisions included in KRC s solid
waste and recyclable materials collection service agreement with St.
Lucie County, which allow KRC to place liens on the property of
delinquent service recipients. The court recently refused to certify the
existence of a class. Therefore, the Company is aggressively pursuing its
lien rights under the service agreement with St. Lucie County. At
September 30, 1997, the total amount of lien rights was approximately
$500,000.
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
None
Item 6. Exhibits and reports on Form 8-K
(a) The following documents are filed as exhibits to this Form
10-Q:
11. - Calculation of income (loss) per share
27. - Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRANSCOR WASTE SERVICES, INC.
Date: November 14, 1997 By: /s/Joseph M. Williams
--------------------- ----------------------------------------
Joseph M. Williams
President
(Principal Executive Officer)
Date: November 14, 1997 By: /s/Norman S. Dominiak
--------------------- ----------------------------------------
Norman S. Dominiak
Treasurer and Chief Financial Officer
(Principal Accounting and
Financial Officer)<PAGE>
EXHIBIT 11
TransCor Waste Services, Inc.
Calculation of Income (Loss) Per Share
Three and Nine Months Ended September 30, 1996 and 1997 (unaudited)
Three months ended September 30,
---------------------------------
1996 1997
---------------- ----------------
Primary income (loss) per common share:
---------------------------------------
Net income (loss) . . . . . . . . . . . $ 58,412 $ (1,319,826)
================ ================
Weighted average shares of common stock
outstanding:
Average shares outstanding . . . . 4,000,000 4,010,000
Assumed exercise of stock
options . . . . . . . . . . . . 49,429 41,467
---------------- ----------------
Weighted average shares of common
stock outstanding - primary . . . . . 4,049,429 4,051,467
================ ================
Primary income (loss) per share . . . . $ .01 $ (.33)
================ ================
Fully diluted income (loss) per common
share:
---------------------------------------
Net income (loss) . . . . . . . . . . . $ 58,412 $ (1,286,715)
================ ================
Weighted average shares of common stock
outstanding:
Average shares outstanding . . . . 4,000,000 4,010,000
Assumed exercise of
stock options . . . . . . . . . 53,875 41,467
---------------- ----------------
Weighted average shares
of common stock outstanding -
fully diluted . . . . . . . . . . . . 4,053,875 4,051,467
================ ================
Fully diluted income (loss)
per share . . . . . . . . . . . . . . $ .01 $ (.32)
================ ================<PAGE>
EXHIBIT 11
TransCor Waste Services, Inc.
Calculation of Income (Loss) Per Share
Three and Nine Months Ended September 30, 1996 and 1997 (unaudited)
Nine months ended September 30,
---------------------------------
1996 1997
---------------- ----------------
Primary loss per common share:
---------------------------------------
Net income . . . . . . . . . . . . . . $ 7,156 $ (1,452,775)
================ ================
Weighted average shares of common stock
outstanding:
Average shares outstanding . . . . 3,997,117 4,010,000
Assumed exercise of stock
options . . . . . . . . . . . . 63,456 51,029
Assumed exercise of stock
warrants . . . . . . . . . . . . . - -
---------------- ----------------
Weighted average shares of common
stock outstanding - primary . . . . . 4,060,573 4,061,029
================ ================
Primary income per share . . . . . . . $ .00 $ (.36)
================ ================
Fully diluted loss per common share:
---------------------------------------
Net income . . . . . . . . . . . . . . $ 7,156 $ (1,354,522)
================ ================
Weighted average shares of common
stock outstanding:
Average shares outstanding . . . . 3,997,117 4,010,000
Assumed exercise of stock
options . . . . . . . . . . . . 63,456 51,029
Assumed exercise of stock
warrants . . . . . . . . . . . . - -
---------------- ----------------
Weighted average shares of common
stock outstanding -
fully diluted . . . . . . . . . . . . 4,060,573 4,061,029
================ ================
Fully diluted income per share . . . . $ 0.00 $ (.33)
================ ================<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $4,673,796
<SECURITIES> $0
<RECEIVABLES> $6,122,670
<ALLOWANCES> ($880,825)
<INVENTORY> $0
<CURRENT-ASSETS> $14,213,155
<PP&E> $40,234,469
<DEPRECIATION> ($12,332,591)
<TOTAL-ASSETS> $49,317,477
<CURRENT-LIABILITIES> $17,429,200
<BONDS> $0
$0
$0
<COMMON> $4,010
<OTHER-SE> $11,662,564
<TOTAL-LIABILITY-AND-EQUITY> $49,317,477
<SALES> $33,989,459
<TOTAL-REVENUES> $33,989,459
<CGS> $29,260,234
<TOTAL-COSTS> $29,260,234
<OTHER-EXPENSES> $6,320,360
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $790,633
<INCOME-PRETAX> ($2,381,768)
<INCOME-TAX> ($928,993)
<INCOME-CONTINUING> ($1,452,775)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($1,452,775)
<EPS-PRIMARY> ($.36)
<EPS-DILUTED> ($.33)
</TABLE>
