<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
TRANSCOR WASTE SERVICES, INC.
(Name of the Issuer)
TRANSCOR WASTE SERVICES, INC.
(Names of Person(s) filing Statement)
Common Stock, $.001 par value
(Title of Class of Securities)
893629105
----------------------------------
(CUSIP Number of Class Securities)
Francis M. Williams
TransCor Waste Services, Inc.
1502 Second Avenue East
Tampa, Florida 33605
(813) 248-3878
(Name, Address and Telephone Number of Persons Authorized to
receive Notices and Communications on
Behalf of Persons Filing Statement)
Copies to:
Robert Copps
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E.
First Union Plaza, Suite 1400
Atlanta, Georgia 30309
(404) 873-8528
This statement is filed in connection with (check the appropriate
box):
a. [ ] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c)
under the Securities Exchange Act of 1934.
b. [ ]The filing of a registration statement under the Securities
Act of 1933.
c. [ ] A tender offer
d. [X] None of the above<PAGE>
Check the following box if the soliciting materials are preliminary
copies. [ ]
Calculation of Filing Fee
-------------------------------------------------------------------------
Transaction Amount of Filing Fee
valuation*
[To be completed]
[ ] Check box if any part of the fee is offset as provided by Rule 0-11
(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
Amount Previously Paid:
Form or Registration No.:
Filing Party:<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The name of the issuer is TransCor Waste Services, Inc., a Florida
corporation ("TransCor" or the "Company"). The principal executive
office of the Company is located at 1502 Second Avenue East, Tampa,
Florida 33605. The exact title of the class of securities subject to
this transaction is the Company's Common Stock, $.001 par value (the
"Common Stock").
(b) As of June 30, 1998, the number of shares of Common Stock
outstanding was 4,000,000 and the approximate number of holders of
record of such Common Stock was 38. Many of such holders are brokers
and other institutions holding shares in "street names" for more
than one beneficial owner.
(c) The Company's Common Stock has been traded on The Nasdaq Stock
Market under the symbol "TRCW" since April 21, 1995. The Nasdaq
Stock Market consists of two distinct market tiers: The Nasdaq
National Market and The Nasdaq SmallCap Market. New quantitative
maintenance requirements for continued listing on the Nasdaq Stock
Market became effective on February 23, 1998. One of the new rules
requires that the Company maintains $5,000,000 in market value of
public float. Public float is defined as shares that are not held by
officers, directors, or other persons who are beneficial owners of
more than 10 percent of the total shares outstanding. As of February
20, 1998, the Company's public float was approximately $1,984,000.
As part of Nasdaq's review process, the Company was contacted about
voluntarily moving the Company's listing to The Nasdaq SmallCap
Market. The Company filed the Nasdaq SmallCap Market Transfer
Listing Application on February 23, 1998. On June 10, 1998, the
Company's stock was delisted because of its failure to satisfy the
market value public float requirement and delinquency in filing its
1997 Form 10-K.<PAGE>
The following table sets forth, for the periods indicated, high and
low sales quotations for the Company's Common Stock as reported by
Nasdaq.
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
1997 High Low
------------------------- ------------ ------------
First quarter . . . . . . $ 6.875 $ 3.500
Second quarter . . . . . $ 4.500 $ 3.000
Third quarter . . . . . . $ 4.125 $ 2.875
Fourth quarter . . . . . $ 3.750 $ 2.125
1998 High Low
------------------------- ------------ ------------
First quarter . . . . . . $ 2.875 $ 1.500
(d) The Company has never paid any dividends. The Company's lending
agreements prohibit the payment of dividends.
(e) The Company has not made an underwritten public offering of the
Common Stock for cash during the past three years.
(f) Since the commencement of the Company's second full fiscal year
preceding the date of this Statement, the Company has not purchased
any shares of its Common Stock.
Since the commencement of the Company's second full fiscal year
preceding the date of this Statement, Francis M. Williams has made
the following purchases of Common Stock: 54,900 shares during the
first quarter of 1998; 24,200 shares during 1997; and 31,525 shares
during 1996.
Since the commencement of the Company's second full fiscal year
preceding the date of this Statement, John V. Simon, Jr., a Vice
President of the Company, purchased 5,000 shares of the Company's
Common Stock during 1997.<PAGE>
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Company, a Florida corporation. The
Company provides solid waste management services to commercial,
industrial, residential and municipal customers in the state of Florida.
The principal executive offices of the Company are located at 1502 Second
Avenues, East, Tampa, Florida 33605.
Francis M. Williams, Chairman of the Board, President and Chief Executive
Officer of Kimmins, beneficially owns approximately 62 percent of the
outstanding Common Stock of Kimmins. 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 Corp. 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.
Norman S. Dominiak has been the Treasurer and Vice President of the
Company since May 1995 and its Chief Financial Officer since January
1994. Mr. Dominiak has also been Vice President of Kimmins Corp. since
March 1995 and Chief Financial Officer of Kimmins Corp. since January
1994. Mr. Dominiak served as controller of ThermoCor Kimmins, Inc., a
subsidiary of Kimmins Corp., 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 President and Chief Executive Officer of the
Company since September 1997, Secretary of the Company since November
1992, and Treasurer from November 1992 until May 1995. Mr. Williams has
served as Secretary of Kimmins Corp. since June 1988. Since November 18,
1991, Mr. Williams has also served as President and has been a Director
of Cumberland Technologies, 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 Corp. 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.<PAGE>
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.
Michael D. O'Brien has been employed by the Company (including its
predecessor) as Vice President since October 1992 and as a Director since
March 1998. 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.
Edward A. Mackowiak has been a Director of the Company since March 1998.
Mr. Mackowiak has been President of Qualex Consulting Group, Inc., since
November 1994. Mr. Mackowiak was employed by Kimmins Corp. as Vice
President from February 1993 until March 1995. Mr. Mackowiak was employed
by Kimmins Contracting Corp. as General Manager from 1989 until February
1993. From September 1987 to January 1989, Mr. Mackowiak was Vice
President of Ficon Corp., a wholly-owned holding company of Fischbach
Corporation, and was responsible for the administration and support of
eight subsidiary construction companies. From 1974 until September 1987,
Mr. Mackowiak was employed by M.C.I. Construction, Inc., a general
contractor for industrial and commercial projects, ultimately serving as
its President. M.C.I. Constructors, Inc., was purchased by Fischbach
Corporation in July 1987.
During the past five years, none of the above-mentioned individuals or
entities have been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such
laws. Each of the above-mentioned individuals is a citizen of the United
States.<PAGE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a)(1) Since the commencement of the Company's second full fiscal year
preceding the date of this Statement, transactions have
occurred between Kimmins Corp., its officers and directors, on
the one hand, and the Company, on the other hand, in an amount
exceeding 1 percent of the Company's consolidated revenues in
any such fiscal year or partial fiscal year as follows:
1996 1997
------------- -------------
Management services . . . . . . $ 671,000 $ 1,315,000
Subcontracted labor . . . . . . 0 3,418,000
Equipment rental . . . . . . . 2,103,000 2,573,000
Insurance reimbursements . . . 849,000 1,205,000
Collections on advances . . . . 369,000 4,385,000
(a)(2) Since the Company's second full fiscal year preceding the date
of this Statement, the only contacts, negotiations or
transactions entered into or occurring between Kimmins Corp.,
and its officers and directors, on the one hand, and the
Company, on the other hand, concerning a merger, consolidation
or acquisition, some tenders offer for or other acquisition of
securities of any class of the Company, an election of
directors of the Company, or a sale or other transfer of a
material amount of assets of the Company or any of its
subsidiaries were as follows: From January 1997 to June 1997,
management of the Company and of Kimmins Corp. discussed
merging the two companies in order to facilitate the separation
of the two principal business lines: specialty contracting
services and solid waste management services. On October 9,
1997, Kimmins Corp. submitted a proposal (the "Proposal") to
the Company's Board of Directors regarding a stock-for-stock
merger. The Proposal provided for a fixed price of $4.00 per
share of TransCor, to be payable by Kimmins Corp. in the form
of Kimmins Corp. Common Stock valued at its average New York
Stock Exchange trading price for the month of November 1997,
provided that the Kimmins Common Stock would not be valued at
not less than $5.50 per share. If the proposed plan of a merger
had been approved by TransCor's Board of Directors, it would
have required approval by a majority of disinterested
shareholders.
In November 1997 the Company provided certain historical and
projected financial information to its financial advisors, Kendrick,
Pierce & Co., Inc. (the "Financial Advisor") for the purpose of
studying such data and making recommendations as to the Company's
current value for the purpose of assessing a recently received bid
from Kimmins Corp. of a $4 per share merger. Based on a full review
of financial alternatives and an analysis of such projections
(furnished in summary form in response to Item 9 of this Statement),
the Company's Board of Directors did not accept Kimmins Corp.'s
offer. After failure to agree on a merger price, Kimmins Corp.
withdrew its offer in December 1997.<PAGE>
(b) Since the commencement of the Company's second full fiscal year
preceding the date of this Statement, there have not been any
contacts or negotiations between (i) any affiliates of the Company,
or (ii) the Company or any of its affiliates, on the one hand, and
any other person, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer for or other
acquisition of securities of any class of the Company, an election
of directors of the Company or a sale or other transfer of a
material amount of assets of the Company or any of its subsidiaries
except as follows: In November 1997, the Company, in response to a
merger offer from Kimmins Corp., solicited bids from outside,
independent parties in an attempt to maximize shareholder value. The
Company had an outstanding offer from Kimmins Corp. to merge into
Kimmins Corp. in a stock-for-stock transaction at $4.00 per share.
The Company wanted to determine its current value with outside
parties and solicited bids from certain competitors to establish
whether interest existed in the solid waste market for the Company
as a merger or takeover candidate. At that time, none of the
competitors expressed an interest in acquiring the Company.
ITEM 4. TERMS OF THE TRANSACTION
(a) On July 15, 1998, the Board of Directors of the Company authorized
the purchase of up to 250,000 shares of the Company's Common Stock
through open market purchases (the "Market Purchases"), subject to
the filing and dissemination of this Statement in accordance with
Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the expiration of thirty (30) days from the date of
such filing prior to the commencement of any such purchases pursuant
to the requirements of such rule. The Company intends to conduct
such purchases in compliance with Rule 10b-18 of the 1934 Act, which
requirements include the following:
The following is a summary of the Rule 10b-18 limitations.
I. OPEN MARKET PURCHASES (NOT INVOLVING A "BLOCK")
A. Nasdaq Listed Securities
Broker - Bids and purchases may be made from or through only
one broker or dealer on any one day, except for purchases not
solicited by or on behalf of the issuer.
Time - No bid or purchase may be made until after the opening
Nasdaq transaction. No bid or purchase may be made during the
last half hour of trading on Nasdaq. In addition, no bid or
purchase may be made during the last half hour of last sale
reporting.<PAGE>
Price - No bid or purchase may be made above the highest
current independent bid or last independent sale reported on
Nasdaq, whichever is higher, plus a commission paid to a broker
or mark-up paid to a dealer.
Volume - Purchases each day cannot exceed 25 percent of the
average daily composite volume in the four calendar weeks
preceding the current week. At a minimum, however, an issuer
may purchase 100 shares a day. The calculation of average
trading volume requires the exclusion of any "blocks," but
permits inclusion of daily non-block purchases. Rule 10b-18
permits the inclusion of the aggregate reported volume on all
exchanges, regardless of the exchange utilized for the
purchase.
B. OTC Traded Securities
If the Company's Common Stock ceases to be listed on the Nasdaq
SmallCap Market but remains eligible to be quoted on the Nasdaq
over-the-counter ("OTC") list, the following limits will apply.
See "Item 7 - The Effects on Nasdaq Listing."
Broker - The requirements are the same as for Nasdaq
securities. Bids or purchases may be made from or through only
one broker or dealer on any one day. An exception is made for
purchases not solicited by or on behalf of the issuer. Thus,
purchases may be made from more than one dealer, if the dealer
is not directly or indirectly purchasing on behalf of the
issuer.
Time - No bid or purchase may be made until after a current
independent bid is reported in the Nasdaq system.
Price - Bids may not be above lowest current independent offer
inclusive of remuneration aid to a broker or dealer.
Amount - Purchases each day cannot exceed 25 percent of average
daily volume during four preceding calendar weeks. At a
minimum, however, an issuer may purchase 100 shares per day.
II. BLOCK PURCHASES
In addition to the regular daily amount, an issuer may purchase
"blocks" in the market. Broker-dealers may not accumulate or
sell short to "create" a block.
A. Block Test - A single purchase qualifies as a block by
meeting either the volume test or the price test.<PAGE>
Volume Test - A purchase qualifies as a block if it involves a
number of shares equal to at least 150 percent of the average
daily trading volume during the preceding four calendar weeks,
as long as the amount is at least 2,000 shares (if OTC and non-
Nasdaq, at least 20 round lots and 1/10th of 1 percent (.001)
of the outstanding shares, exclusive of shares owned by
affiliates).
Price Test: A purchase qualifies as a block if the total price
paid is at least (1) $200,000 or (2) 5,000 shares and a price
of at least $50,000.
B. Price - Same requirements as for purchases in less than
block size.
The Company will endeavor to limit such Market Purchases so as to
continue to comply with the listing requirements for trading of the
shares of Common Stock in The Nasdaq Stock Market. See "Purpose(s),
Alternatives, Reasons and Effects." While the Company currently has
no plans, proposals or arrangements which would result in a merger,
reorganization or liquidation of the Company, Kimmins Corp, the
Company's parent company, previously sought to reach an agreement to
acquire the shares of Company Common Stock not owned by Kimmins
Corp. in a stock-for-stock merger as described under "Past Contacts,
Transactions or Negotiations" Kimmins Corp. continues to believe
such a merger or other transaction resulting in Kimmins Corp. owning
all of the shares of Common Stock of the Company (a "Second Step
Transaction") would be in the best interest of the respective
shareholders of Kimmins Corp. and the Company. As there currently
exists no plan or arrangement for any such Second Step Transaction,
the terms of any such transaction have not been established;
however, Kimmins Corp. anticipates that the price per share of
Common Stock for any such Second Step Transaction would be higher
than the closing sale price of $2.50 per share for the Common Stock
as reported by The Nasdaq Stock Market for July 15, 1998. Kimmins
Corp. had proposed a price of $4.00 per share of Company Common
Stock in its proposal to the Company's Board of Directors for a
stock-for-stock merger with Kimmins Corp.
The Company is not committing to purchase any minimum number of
shares of Common Stock or spend any minimum amount of funds for
purchases of such shares of Common Stock in connection with any
Market Purchases, and the Company may discontinue its plan for the
Market Purchases or cease Market Purchases at any time.
(b) To the extent that this Statement or the consummation of Market
Purchases has the effect of raising the value of shares of Common
Stock, Kimmins Corp. and its affiliates will benefit from such
increase in value commensurate with the benefit to other
shareholders of the Company. In the event of the consummation of a
Second Step Transaction, the ownership of shares of Common Stock by
shareholders in the Company other than Kimmins Corp. would be
terminated for a consideration to be set at such time, if any, as
such Second Step Transaction is negotiated or concluded.<PAGE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
As disclosed in the filing of the 1997 Form 10-K, in June 1998 the
Company sold all of its operating assets that were related to its
Jacksonville facility and certain business lines of its Miami operations.
The Company continues to evaluate its remaining operating assets, which
may result in additional sales of operating assets in the future.
Other than described above, the Company currently has no plans or
proposals relative to, and to the knowledge of TransCor, Kimmins Corp.
has no plans or proposals relative to any merger, reorganization or
liquidation of the Company, a sale or transfer of a material amount of
assets of the Company, a change in the present Board of Directors or
management of the Company, any material change in the dividend rate or
policy or indebtedness or capitalization of TransCor, any other material
change in TransCor's corporate structure, causing the Common Stock of the
Company to become eligible for termination of registration pursuant to
Section 12(g)(4) of the 1934 Act or cause the Company's obligations to
file a report under the 1934 Act to be suspended, except as elsewhere
described in this Statement.
The Company has two objectives in planning to make the Market Purchases.
First, the Company believes that the trading price for shares of Common
Stock currently undervalues such shares and that this Statement or the
Market Purchases may cause the value of such shares to increase. The
Market Purchases could cause the Common Stock of the Company to become
eligible for termination of registration pursuant to Section 12(g)(4) of
the 1934 Act by causing the number of record holders of the Common Stock
to fall below 300, or otherwise make the Common Stock ineligible for
trading on The Nasdaq Stock Market. See "Purpose(s) Alternatives, Reasons
and Effects." According to information obtained from the Company, as of
June 30, 1998, there were approximately 38 holders of record of the
Common Stock. The Company, therefore, believes that it would be able to
acquire an additional 250,000 shares of Common Stock and thereby own in
excess of 80 percent of the outstanding Common Stock of the Company
without causing the number of record shareholders of the Company Common
Stock to approach 300.
Although there are no current plans for a Second Step Transaction, it is
anticipated that at least a component of such transaction would include a
merger pursuant to which all owners of Common Stock, except Kimmins
Corp., would cease to own such Common Stock for a consideration to be
determined in connection with the approval of such Second Step
Transaction. As a result of such Second Step Transaction, it is further
expected that the composition of the Board of Directors of the Company
would be modified by the removal of the independent directors of the
Company. Such Second Step Transaction would also result in a termination
of the Company's obligations to file reports under the 1934 Act and a
termination of registration of the Common Stock under the 1934 Act.<PAGE>
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION
(a) The estimated cost of the Market Purchases is $625,000 (based on the
average of the high and low sales price on Nasdaq of $2.50 on July
15, 1998), which will be paid by the Company from cash on hand. The
estimated cost of a Second Step Transaction, if consummated, is not
known. A portion of the Second Step Transaction cost may be paid by
issuing Common Stock of Kimmins Corp.. Otherwise the Second Step
Transaction cost will be paid by Kimmins Corp. from cash on hand or
financing which may need to be secured.
(b) The estimated expenses of the Market Purchases are set forth below.
All of such fees would be payable by the Company.
Bank Commitment Fees . . . . . $ N/A
Legal Fees . . . . . . . . . . 10,000
Accounting Fees . . . . . . . . N/A
Commission Filing Fees . . . . N/A
Printing and Mailing Expenses . N/A
Depositary Fees . . . . . . . . N/A
Information Agent Fees . . . . N/A
Miscellaneous . . . . . . . . . 6,250
----------------
Total . . . . . . . . . . $ 16,250
================
ITEM 7. PURPOSE OF THE TRANSACTION AND ALTERNATIVES
(a) The Company has two purposes for the Market Purchases. First the
Company believes the price at which shares of Common Stock are
traded is undervalued.
While the Company currently has no plan, proposal or arrangement to
engage in the Second Step Transaction, the ultimate purpose of the
Second Step Transaction would be to acquire all of the Common Stock
of the Company and thereby reduce the expenses of the Company in
complying with the requirements of the 1934 Act and requirements for
listing of the Common Stock on The Nasdaq Stock Market. At an
appropriate price per share of Common Stock, the Company believes
that such a transaction would be in the best interest of the
shareholders of each of Kimmins Corp. and the Company.
(b) As described under "Past Contacts, Transactions or Negotiations" of
this Statement, Kimmins Corp. previously proposed to the Board of
Directors of the Company that a Special Committee of the Company's
Board of Directors submit to the Company shareholders a proposal to
merge the Company with Kimmins Corp. in a transaction pursuant to
which the shareholders of the Company would receive $4.00 in value
of Kimmins Corp.'s Common Stock for each share of the Company's
Common Stock. The Special Committee of the Board of Directors of the
Company, comprised of Messrs. Ridings and Finn, rejected such offer
based on price and negotiations relative to such transaction have
accordingly terminated. Kimmins Corp. believed that such a stock-
for-stock merger would constitute the most appropriate structure
for such a business<PAGE>
combination transaction as it would allow the shareholders of the
Company to avoid or reduce tax expenses related to the conversion of
the Company's Common Stock into Kimmins Corp.'s Common Stock, avoid
brokerage expenses for such conversion and allow shareholders of the
Company who desire to continue their investment to continue to do so
through the ownership of equity in the combined company resulting
from such merger transaction.
The Company also considered alternative structures for such
transaction but rejected such alternative structures as such
alternatives either would not be as beneficial to the Company's
shareholders or would require the same approval by shareholders of
the Company as required in the aforementioned stock-for-stock merger
structure. Requiring shareholders of the Company to receive cash in
exchange for their Common Stock would cause such shareholders to
incur taxes as a result of such transaction and prevent such
shareholders from having the opportunity to participate in the
growth potential of a continued investment in the Company's business
without incurring brokerage commissions for the purchase of shares
of Kimmins Corp.'s Common Stock. In addition, by reason of that
certain Affiliate Transaction Agreement dated as of March 25, 1993,
between the Company and Kimmins Corp., any merger between the
Company and Kimmins Corp. would require the approval of the
disinterested members of the Board of Directors of the Company and
the approval of no less than a majority of the Common Stock of the
Company owned by the Company's shareholders who are not affiliates
of the Company. Accordingly, in the event Kimmins Corp. made an
offer to exchange shares of the Company's Common Stock for a
specified number of shares of Kimmins Corp.'s Common Stock, Kimmins
Corp. would remain unable to effectively acquire 100 percent of the
shares of the Company's Common Stock absent obtaining the approval
of a majority of the Common Stock of the Company owned by
shareholders who are not affiliates of the Company.
(c) For the reasons described above, Kimmins Corp. withdrew its offer to
proceed with the stock-for-stock merger, and the Company decided
that it would be in the best interest of the shareholders of the
Company to proceed with the Market Purchases, while reserving the
possibility of ultimately engaging in a Second Step Transaction for
which the Company currently has no arrangements, proposals or plans.
(d) In addition to potentially raising the value of shares of the Common
Stock, the Market Purchases or, if consummated, the Second Step
Transaction, or both, may potentially have certain effects relative
to the continued listing of the shares of Common Stock for trading
on The Nasdaq Stock Market, 1934 Act registration and certain
federal income tax consequences.<PAGE>
The Effects on Nasdaq Listing. The purchase of the shares of Common
Stock as a result of the Market Purchases will reduce the number of
shares of Common Stock that might otherwise trade publicly and could
reduce the number of holders of Common Stock, which could adversely
affect the liquidity and market value of the remaining Common Stock
held by the public. Depending upon the number of shares of Common
Stock purchased pursuant to the Market Purchases, the Common Stock
may no longer meet the standards for continued inclusion in the
Nasdaq Small Cap Market, which require that an issuer have at least
500,000 publicly held shares with a market value of at least
$1,000,000, held by at least 400 shareholders or 300 shareholders of
round lots. If these standards are not met, the Common Stock might
nevertheless continue to be quoted in the over-the-counter
"additional list" or in one of the "local lists," but if the number
of holders of the Common Stock falls below 300, or if the number of
publicly held shares of Common Stock falls below 100,000 or there
are not at least two registered and active market makers for the
Common Stock, the Common Stock would no longer be "qualified" for
Nasdaq reporting and Nasdaq would cease to provide any quotations.
Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10 percent of the Common Stock
(which would include Kimmins Corp.) are not considered as being
publicly held for this purpose. If the Common Stock is no longer
eligible for Nasdaq quotation, quotations might still be available
from other sources. The extent of the public market for the Shares
and the availability of quotations would, however, depend on the
remaining number of holders of Common Stock, the interest of
securities firms in maintaining a market in the Common Stock, the
possible termination of registration under the 1934 Act, as
described below, and other factors. According to the Company, as of
June 30, 1998, there were approximately 38 holders of record of
Common Stock and approximately 450 beneficial owners of Common Stock
and as of July 1, 1998, there were 4,000,000 shares of Common Stock
outstanding, of which 2,950,000 were owned by Kimmins Corp.
The Effect on the 1934 Act Registration. The Common Stock is
currently registered under the 1934 Act. That registration may be
terminated upon application of the Company to the Securities and
Exchange Commission if the Common Stock is not listed on a national
securities exchange or quoted on Nasdaq or there are fewer than 300
record holders of the Common Stock. The termination of registration
of the Common Stock under the 1934 Act would substantially reduce
the information required to be furnished by the Company to holders
of Common Stock and to the Commission and would make certain
provisions of the 1934 Act, such as the short-swing profit recovery
provisions of Section 16(b) of the 1934 Act, the requirement of
furnishing a proxy statement in connection with shareholders'
meetings pursuant to Section 14(a) of the 1934 Act, and the
requirements of Rule 13e-3 under the 1934 Act with respect to
"going-private" transactions, no longer applicable to the Company.
In addition, "affiliates" of the Company and persons holding
"restricted securities" of the Company may be deprived of the
ability to dispose of those securities pursuant to Rule 144 under
the Securities Act. If registration of the Common Stock under the
1934 Act were terminated, the Common Stock would no longer be
eligible for quotation on Nasdaq. If the registration of the Common<PAGE>
Stock under the 1934 Act is terminated before shareholder action is
taken regarding any Second Step Transaction, then (i) if the Second
Step Transaction requires a solicitation of proxies, the proxy
solicitation materials will not be subject to the Commission's proxy
rules, and (ii) if no solicitation of proxies is necessary, the
Company will not be subject to a requirement of the Commission's
proxy rules that it distribute an Information Statement which
complies with those rules before the any Second Step Transaction
takes place.
Certain Federal Income Tax Consequences. The following summary is a
general discussion of certain of the expected Federal income tax
consequences of the Market Purchases. The summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and
published regulations, rulings and judicial decisions in effect at
the date of this Statement, all of which are subject to change. The
summary does not discuss all aspects of Federal income taxation that
may be relevant to a particular holder in light of his or her
personal circumstances or to certain types of holders subject to
special treatment under the Federal income tax laws, such as life
insurance companies, financial institutions, tax-exempt
organizations and non-U.S. persons. The following summary may not be
applicable with respect to shares of Common Stock acquired through
exercise of employee stock options or otherwise as compensation. It
also does not discuss any aspects of state or local tax laws or of
tax laws of jurisdictions outside the United States of America.
THE DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW
IS FOR GENERAL INFORMATION ONLY. HOLDERS ARE URGED TO CONSULT THEIR
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
SALE OF THEIR SHARES, INCLUDING THE APPLICATION OF FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS.
Sales of shares of Common Stock in response to the Market Purchases
will be taxable transactions for Federal income tax purposes, and
may also be taxable transactions under applicable state, local,
foreign and other tax laws. For Federal income tax purposes, a
selling shareholder will generally recognize a gain or loss equal to
the difference between the amount of cash received by the
shareholder upon sale of the shares and the aggregate tax basis in
the shares which are sold. Under present law, gain or loss will be
calculated separately for each block of shares tendered and
purchased pursuant to the Market Purchases.<PAGE>
If shares of Common Stock are held by a tendering shareholder as
capital assets, gain or loss recognized by the tendering shareholder
will be capital gain or loss, which will be long-term capital gain
or loss if the tendering shareholder's holding period for the shares
exceeds one year. Long-term capital gains recognized by a tendering
individual shareholder will generally be taxed at a maximum Federal
marginal tax rate of 28 percent as to Shares held between 12 and 18
months and 20 percent as to shares held more than 18 months. Long-
term capital gains recognized by a corporate shareholder will be
taxed at a maximum Federal marginal tax rate of 35 percent.
A shareholder (other than certain exempt shareholders, including all
corporations and certain foreign individuals) who sells shares of
Common Stock may be subject to 31 percent backup withholding unless
the shareholder provides its taxpayer identification number ("TIN")
and certifies that the TIN is correct or properly certifies that it
is awaiting a TIN. A shareholder that does not furnish its TIN also
may be subject to a penalty imposed by the IRS.
If backup withholding applies to a shareholder, the broker executing
the sale is required to withhold 31 percent from each payment to
that shareholder. Backup withholding is not an additional tax.
Rather, the amount of the backup withholding can be credited against
the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a
refund can be obtained by the shareholder upon filing an income tax
return.
The federal income tax consequences of any Second Step Transaction
cannot be evaluated until such time, if any, as the structure of the
Second Step Transaction is agreed upon and the facts and
circumstances surrounding such structure are known. The Market
Purchases could adversely affect certain requirements to avoid
federal income taxation of the Second Step Transaction which might
otherwise qualify as a reorganization for federal income tax
purposes under Section 368(a) of the Code.
ITEM 8. FAIRNESS OF THE TRANSACTION
(a) The Company believes that the closing sale price of the Company's
Common Stock as reported by The Nasdaq Stock Market for July 15,
1998 of $2.50 per share undervalues the the Company's Common Stock.
Based in part on such belief, the Company has determined to adopt a
plan to effect the Market Purchases. See "Terms of the Transaction."
Insofar as the market has all material information available to make
an informed decision relative to the value of the Company's Common
Stock and because the decision to sell the Company's shares which
may result in Market Purchases is entirely discretionary to the
Company's Shareholders, assuming that the market adequately factors
such information into the trading price of the Company's Common
Stock, then the market purchases would theoretically be fair to the
unaffiliated security holders of the Company. Insofar as within the
control or knowledge of the Company, the Company intends that it
will not make any Market Purchases at such time as Kimmins Corp. is
aware that<PAGE>
material non-public information exists with respect to the Company.
For these purposes, the Company will limit its market purchases to
window periods beginning two days after announcement of quarterly
operating results and ending ten days prior to the end of any fiscal
quarter of the Company.
The Company is unable to form a belief as to whether or not any
Second Step Transaction is fair or unfair to unaffiliated security
holders as no plan, proposal or arrangement exists with respect to
any such transaction.
The possibility exists that a Second Step Transaction, if one should
occur, could value the Common Stock at a price which is higher than
trading prices for such Common Stock at which Market Purchases are
affected.
(b) By virtue of the Affiliate Transaction Agreement, any Second Step
Transaction would be anticipated to require the approval of not less
than the majority of the shares of the Company's Common Stock owned
by the Company's shareholders who are not affiliates of the Company.
See "Purpose(s), Alternatives, Reasons and Effects."
(c) In connection with prior merger negotiations between Kimmins Corp.
and a Special Committee of the Company's Board of Directors, such
Special Committee retained the Financial Advisor to assist it in
connection with evaluating the Kimmins Corp. proposal by preparing a
report concerning the fairness of such transaction. See "Reports,
Opinions, Appraisals and Certain Negotiations." As there are
currently no proposals, plans, or arrangements for a Second Step
Transaction, no such representative or advisor is currently retained
by such Special Committee of the Board of Directors of TransCor.
(d) As there is currently no proposal, plan, or arrangement for a Second
Step Transaction, there is no approval by any of the Board of
Directors of TransCor relative to any such transaction. As described
under "Past Contacts, Transactions or Negotiations," a majority of
the directors of the Company who are not employees of the Company
did not approve the prior merger proposal of Kimmins Corp.
(e) There were no third party offers to acquire the Company.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
(a) No report, opinion or appraisal from any outside party has been
obtained by the Company relating to the Market Purchases or the
Second Step Transaction. However, the Company retained the Financial
Advisor to assess the valuation of the Company's Common Stock in
connection with the Proposal. The Financial Advisor provided a
preliminary analysis to the effect that the value of all the
Company's Common Stock sold in a single transaction would be
approximately $5 per share. The Financial Advisor, as part of its
investment banking business, is continually engaged in the valuation
of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings,
private placements,<PAGE>
and valuations for estate, corporate and other purposes. Since
negotiations between Kimmins Corp. and the Company, terminated, a
final report was not required. In addition, the Company provided
Kimmins Corp. with copies of its financial projections which were
also provided to the Financial Advisor. These projections indicated
that the Company would return to profitability in the second quarter
of 1998, and that the net income of the Company would be $780,000
for 1998 and $1,320,000 for 1999. The Financial Advisor's
conclusions resulting from the projections were never formally
presented to the Company.
(b) No report was completed.
(c) No report was completed.<PAGE>
ITEM 10. INTERESTS IN SECURITIES OF THE ISSUER
(a) The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of December 31, 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
executive officers of the Company and Kimmins Corp., (iii) each
director of the Company and Kimmins Corp., and (iv) all executive
officers and directors of the Company and Kimmins Corp. 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) 72.8%
Francis M. Williams
1501 Second Avenue, East
Tampa, FL 33605 . . . . 3,261,200 (2)(3)(4) 80.4%
Joseph M. Williams
1501 Second Avenue, East
Tampa, FL 33605 . . . . 23,000 (5) *
John V. Simon, Jr. . . . 31,000 (8) *
Barry W. Ridings . . . . 22,000 (6) *
R. Donald Finn . . . . . 7,000 (7) *
Michael D. O'Brien . . . 19,400 (8) *
All officers and (2)(3)(4)
directors of TransCor 3,376,800 (5)(6)(7) 83.3%
as a group (7 persons) (8)
-------------------------
* 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 Corp. Kimmins Corp. 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 Corp. and, accordingly, controls Kimmins
Corp.. As of March 13, 1998, 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 Corp.
(3) Excludes 400,652 shares issuable upon the conversion of the Kimmins
Corp. 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; 197,200 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 23,000 shares that may be purchased by Mr. Joseph M.
Williams pursuant to immediately exercisable options. Does not
include 32,000 shares issuable to him upon exercise of options
vesting at various times commencing in October 1998.
(6) Includes 15,000 shares owned by Mr. Ridings, and 7,000 shares that
may be purchased by Mr. Ridings pursuant to immediately exercisable
options. Does not include 13,000 shares issuable to him upon
exercise of options vesting at various times commencing in October
1998.
(7) Represents 7,000 shares that may be purchased by Mr. Finn pursuant
to immediately exercisable options. Does not include 13,000 shares
issuable to him upon exercise of options vesting at various times
commencing in October 1998.
(8) Includes 5,000 shares owned by Mr. Simon and 26,000 shares that may
be purchased by Mr. Simon pursuant to immediately exercisable
options. Does not include 9,000 shares issuable to him upon exercise
of options vesting at various times commencing in October 1998. Also
includes 24,600 shares and 8,000 shares that may be purchased by Mr.
O'Brien and Mr. Dominiak pursuant to immediately exercisable
options.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO 'THE
ISSUER'S SECURITIES
The following is a description of contracts, arrangements and
relationships between Kimmins Corp. and the Company, which involve or may
affect the securities of the Company.<PAGE>
Since its inception, the Company has entered into various transactions
with Kimmins Corp. and companies affiliated through common ownership with
Kimmins Corp. To date, the Company has been substantially dependent on
Kimmins Corp. for various management, administrative, and financial
services; and Kimmins Corp. 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, 1995, 1996, and 1997, Kimmins Corp. billed the
Company an aggregate of approximately $617,000, $671,000, and $1,315,000,
respectively, for such services. As of March 25, 1993, Kimmins Corp. and
the Company formalized this arrangement by executing a Management
Services Agreement. The agreement provides that Kimmins Corp. 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 Corp.), Norman S. Dominiak (Chief Financial
Officer and Treasurer), Joseph M. Williams (Secretary of Kimmins Corp.),
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, President and Secretary, and Vice President,
respectively, of the Company. Pursuant to the agreement, the Company
will continue to pay Kimmins Corp. an annual fee, payable monthly, equal
to the lower of actual costs of such services or 3.0 percent for 1997 and
1.5 percent for 1996 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
Corp.
Effective July 1, 1997, employees associated with the Company's
demolition contract services unit were transferred to Kimmins Contracting
Corp. ("KCC"), a wholly-owned subsidiary of Kimmins Corp. for
administrative and accounting purposes. As a result, contracting
services previously performed by employees of the Company were
subcontracted to KCC. For the year ended December 31, 1997, the Company
subcontracted $3,417,574 with KCC. In addition, the Company rents
equipment from KCC for use in performing demolition contracts. The
Company incurred approximately $670,000, $2,103,000 and $2,573,000 in
equipment rental charges with KCC for the years ended December 31, 1995,
1996 and 1997, respectively.
As of December 31, 1997, the amount of the Company's total outstanding
indebtedness to Kimmins Corp. was $2,003,258 that had been consolidated
into the Kimmins Corp. 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 Corp. Note may be converted, at the option of
Kimmins Corp., 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 Corp. 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 Corp. Note is subordinated to all
senior indebtedness of the Company. Payments of principal and interest
are based on certain net<PAGE>
income levels of the Company. No payments of principal or interest are
required prior to the maturity date in 2003 unless the Company earns in
excess of $1,500,000 earnings before interest and taxes.
In March 1990, the Company, along with Kimmins Corp. and other
subsidiaries of Kimmins Corp., 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 Corp. 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, 1997, $1,440,000 of such indebtedness remained outstanding.
On November 12, 1992, the Company and Kimmins Corp. 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 Corp.' 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 Corp. 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 Corp. entities
on various insurance policies of the Company or Kimmins Corp. 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, 1995, 1996 or 1997, the Company paid Kimmins
Corp. approximately $811,000, $849,000, and $1,205,000, respectively. The
Company pays directly for any coverage for which it is the only insured.
As of December 31, 1996 and 1997, the Company had working capital
advances due from an affiliate of approximately $8,425,000 and
$4,040,000, respectively. These advances are unsecured and accrue
interest at a rate of 10 percent per annum. The Company collected
$4,385,000 during 1997.
In addition, the Company has a convertible subordinated note payable to
Kimmins Corp. in the amount of $2,003,258. See Note 9 for additional
information.<PAGE>
Effective as of March 25, 1993, the Company and Kimmins Corp. 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 Corp. have agreed to evaluate and
extend the affiliate transactions agreement on an annual basis.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION
(a) The officers and directors of the Company and Kimmins Corp. do not
intend to sell shares of Common Stock of TransCor owned by them to
the Company in connection with the Market Purchases.
(b) The directors of Kimmins Corp. (with Francis M. Williams abstaining)
have made a recommendation supporting the Market Purchases for the
reasons described in Item 7 above. Mr. Williams abstained from the
vote due to his interest as a shareholder in and director of the
Company; however, Mr. Williams has stated that he supports the
transaction for the reasons described in Item 7 above. The Company's
executive officers support the transaction for the reasons described
in Item 7 above. The Company's Board of Directors have made no
statements regarding the transaction.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) The Florida Business Corporation Act (" FBCA ") provides appraisal
rights in connection with (i) a merger, except that such rights are
not provided when (a) no vote of the shareholders is required for
the merger or (b) shares of the corporation are listed on a national
securities exchange, traded on The Nasdaq National Market, or held
of record by not fewer than 2,000 shareholders; (ii) a sale of
substantially all the assets of a corporation; (iii) amendments to
the articles of incorporation that may adversely affect the rights
or preferences of shareholders; and (iv) a Control Share Acquisition
(as described below).
Section 607.0901 of the FBCA, informally known as the Fair Price
Statute, provides that the approval of the holders of two-thirds of
the voting shares of a corporation, other than the shares owned by
an Interested Shareholder (as hereinafter defined) would be required
in order to effectuate certain transactions including without
limitation a merger, sale of assets, sale of shares and
reclassification of securities involving a corporation and an
Interested Shareholder (an "Affiliated Transaction"). An Interested
Shareholder is defined under the FBCA as beneficial owner of more
than 10 percent of the voting shares outstanding. The foregoing
special voting requirement is in addition to the vote required by
any other provision of the FBCA or a corporation's articles of
incorporation.<PAGE>
The special voting requirement does not apply in any of the
following four circumstances: (i) the Affiliated Transaction is
approved by a majority of the corporation's disinterested directors;
(ii) the Interested Shareholder has beneficially owned 80 percent of
the corporation's voting shares for five years; (iii) the Interested
Shareholder beneficially owns 90 percent of the corporation's voting
shares; or (iv) all of the following conditions are met: (A) the
cash and fair value of other consideration to be paid per share to
all holders of voting shares equals the highest per share price
calculated pursuant to various methods set forth in Section 607.0901
of the FBCA, (B) the consideration to be paid in the Affiliated
Transaction is in the same form as previously paid by the Interested
Shareholder, and (C) during the portion of the three years preceding
the announcement date that the Interested Shareholder has been an
Interested Shareholder, except as approved by a majority of the
disinterested directors, there shall have been no default in payment
of preferred stock dividends, no decrease in Common Stock dividends,
no increase in the voting shares owned by the Interested
Shareholder, and no benefit to the Interested Shareholder from
loans, guaranties or other financial assistance or tax advantages
provided by the corporation.
A person who inadvertently becomes an Interested Shareholder (for
example, as a result of a corporation's repurchase of some of its
shares) may promptly divest himself of enough stock to fall below
the 10 percent threshold so that no special vote would apply to a
transaction with that shareholder, so long as such person has not
otherwise been an Interested Shareholder within the five years
preceding the first public announcement of the transaction.
Section 607.0902 of the FBCA, informally known as the Florida
Acquisition Statute, provides that the voting rights to be accorded
Control Shares (as defined below) of a Florida corporation that has
(i) 100 or more shareholders, (ii) its principal place of business,
its principal office, or substantial assets in Florida, and (iii)
either (A) more than 10 percent of its shareholders residing in
Florida, (B) more than 10 percent of its shares owned by Florida
residents, or (C) 1,000 shareholders residing in Florida, must be
approved by a majority of each class of voting securities of the
corporation, excluding those share held by interested persons,
before the Control Shares will be granted any voting rights.
Control Shares are defined in the FBCA to be shares acquired in a
Control Share Acquisition (as defined below) that, when added to all
other shares of the issuing corporation owned by such person, would
entitle such person to exercise, either directly or indirectly,
voting power within any of the following ranges: (a) 20 percent or
more but less than 33 percent of all voting power of the
corporation's voting securities, (b) 33 percent or more but less
than a majority of all voting power of the corporation's voting
securities, or (c) a majority or more of all of the voting power or
the corporation's voting securities. A Control Share Acquisition is
defined in the FBCA as an acquisition, either directly or
indirectly, by any person of ownership of, or the power to direct
the exercise of voting power with respect to, outstanding Control
Shares.<PAGE>
Section 607.0902 also states that, if provided in the articles of
incorporation or bylaws of a corporation prior to their acquisition,
Control Shares may be redeemed by the corporation for fair value in
certain circumstances. Finally, unless otherwise provided in a
corporation's articles of incorporation or bylaws prior to a Control
Share Acquisition, in the event Control Shares are accorded full
voting rights and the acquiring person has acquired Control Shares
with a majority or more of all voting power, all shareholders shall
have dissenters' rights.
Section 607.0902 further provides that, in certain circumstances, an
acquisition of shares that otherwise would be governed by its
provisions does not constitute a Control Share Acquisition. Among
such circumstances are acquisitions of shares approved by the
company's Board of Directors and mergers effected in compliance with
the applicable provisions of the FBCA, it the corporation is a party
to the agreement of merger.
(b) No provision has been made by the Company in connection with the
Market Purchases or any Second Step Transaction to allow the
unaffiliated shareholders to obtain access to the corporate files of
the Company or obtain counsel or appraisal services at the Company's
expense.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION
(a) Reference is hereby made to the Company's financial statements for
the years ended December 31, 1996 and 1997 as set forth in Exhibit
D-1 hereto, all of which are incorporated by reference herein. The
Company's ratio of earnings to fixed charges for fiscal 1997 was .6x
and for fiscal 1996 was .9x The book value per share of the
Company's Common Stock was $2.76 as of December 31, 1997.
(b) The Company does not anticipate that the Market Purchases will have
any impact on the financial statements of the Company.
Consequently, no pro forma financial information is required.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
(a) Pursuant to the Management Services Agreement, certain members of
Kimmins Corp.'s staff serve as officers or employees of the Company,
as follows: Francis M. Williams, Joseph M. Williams, Norman S.
Dominiak, and John V. Simon, Jr. Kimmins Corp. anticipates that one
or more of these officers and employees will be involved with the
implementation of the Market Purchases and any Second Step
Transaction which may occur. See "Item 11, contracts, Arrangements
or Understandings with Respect to the Issuer's Securities." <PAGE>
(b) Officers and employees of Kimmins Corp. (including those named in
Item 15(a) above) will be involved in the effecting the Market
Purchases, and may be involved in the solicitation of proxies in the
event that Kimmins Corp. proceeds with efforts to consummate the
Second Step Transaction. Such officers and employees will not
receive any additional compensation or any separate agreement for
such solicitation.
ITEM 16. ADDITIONAL INFORMATION
Management of the Company considers the information contained in
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Certain Transactions," "Business" and the Financial
Statements contained -in the Annual Report on Form 10-K of TransCor for
the year ended December 31, 1997 to be material to the discussion of the
13e-3 transaction contained herein. The Company files periodic reports,
proxy statements and other information with the Commission pursuant to
the 1934 Act, relating to its business, financial statements and other
matters. This Statement as well as the exhibits hereto, as well as
reports, proxy statements and other information of the Company, may be
inspected at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and should also be available for inspection and copying at the
regional offices of the Commission located in the Jacob K. Javits Federal
Building, 26 Federal Plaza, New York, New York 10278; the Everett
McKinley Dirksen Building, 219 South Dearborn Street, Chicago, Illinois
60604; and Museum Square Building, Suite 500 East, 5757 Wilshire
Boulevard, Los Angeles, California 90036. Copies of such material can
also be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Common Stock is listed on the Nasdaq SmallCap Market and such reports,
proxy statements, and other information can also be inspected at the
offices of the Nasdaq at 1735 K Street, N.W., Washington, D.C. 20006-
1500.
Where any document or part thereof is incorporated by reference in this
Statement, but not delivered with this Statement, the Company will
provide without charge to each stockholder of record upon written request
of such person, a copy of any and all information that has been
incorporated by reference in this Statement (not including exhibits to
the information that is incorporated by reference unless such exhibits
are specifically incorporated by reference into the information that this
Statement incorporates). Any such request should be directed to Kimmins
Corp. at 1501 Second Avenue East, Tampa, FL 33605, Attn: Norman S.
Dominiak, telephone (813) 248-3878.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
(a) Management Services Agreement (Exhibit A-1) and the Affiliate
Transaction Agreement (Exhibit A-2).
(b) Financial Statements of the Company (Exhibit D-1).
(c) Sections 1301, 1302 and 1320 of FBCA regarding "Dissents' Rights"<PAGE>
(Exhibit E).
(d) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
July 17, 1998
TRANSCOR WASTE SERVICES, INC.
By: /S/JOSEPH M. WILLIAMS
-------------------------
Joseph M. Williams
President and Secretary<PAGE>
EXHIBIT D-1 TO SCHEDULE 13E-3
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
---------------------------
1996 1997
------------- -------------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . $ 1,437,788 $ 2,115,510
Accounts receivable - trade, less allowance
for doubtful accounts of $543,770 and
$891,300 at December 31, 1996 and 1997,
respectively . . . . . . . . . . . . . . . 6,230,484 5,170,966
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . . 230,869 415,514
Income tax refund receivable . . . . . . . 422,567 143,672
Deferred income taxes . . . . . . . . . . . 639,079 720,410
Property held for sale . . . . . . . . . . - 733,659
Other current assets . . . . . . . . . . . 255,552 186,017
------------- -------------
Total current assets . . . . . . . . . . . 9,216,339 9,485,748
------------- -------------
Property and equipment, net . . . . . . . . . 26,115,277 25,061,418
Property held for sale . . . . . . . . . . . - 1,510,723
Intangible assets, net . . . . . . . . . . . 898,853 606,975
Due from affiliate . . . . . . . . . . . . . 8,425,553 4,040,110
Other assets . . . . . . . . . . . . . . . . 985,608 1,142,205
------------- -------------
$ 45,641,630 $ 41,847,179
============= =============
The accompanying notes are an integral part
of these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
---------------------------
1996 1997
------------- -------------
Current liabilities:
Accounts payable - trade . . . . . . . . . $ 4,255,150 $ 4,290,015
Accrued expenses . . . . . . . . . . . . . 4,536,778 3,163,819
Billings in excess of costs and estimated
earnings on uncompleted contracts . . . . 170,771 15,978
Current portion of long-term debt . . . . 3,453,168 4,662,310
------------- -------------
Total current liabilities . . . . . . . . 12,415,867 12,132,122
------------- -------------
Long-term debt, net of current maturities
(including debt owed to Kimmins of
$2,003,258 at December 31, 1996
and 1997) . . . . . . . . . . . . . . . . . 16,807,059 16,392,361
Deferred income taxes . . . . . . . . . . . . 3,299,355 2,267,742
Commitments and contingencies (Note 11) . . . - -
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; 4,010,000 shares issued
and 4,000,000 shares outstanding . . . . . 4,010 4,010
Capital in excess of par value . . . . . . 12,193,547 12,193,547
Retained earnings (deficit) . . . . . . . . 969,798 (1,094,597)
------------- -------------
13,167,355 11,102,960
Less treasury stock,
at cost (10,000 shares) . . . . . . . . . (48,006) (48,006)
------------- -------------
Total stockholders' equity . . . . . . . . 13,119,349 11,054,954
------------- -------------
$ 45,641,630 $ 41,847,179
============= =============
The accompanying notes are an integral part
of these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Revenue . . . . . . . . . . . . $ 41,118,762 $ 44,193,226 $ 43,829,908
Expenses:
Operating expenses . . . . . 30,462,528 33,587,242 33,348,316
Depreciation . . . . . . . . 2,288,452 3,309,439 3,625,043
Selling, general, and
administrative
expenses . . . . . . . . . . 5,047,180 6,133,338 7,726,101
Management fee to
affiliate . . . . . . . . . 616,601 671,000 1,314,897
------------- ------------- -------------
Operating income (loss) . . . . 2,704,001 492,207 (2,184,449)
Interest expense, net of
interest income from affiliate
of $492,000, $596,000, and
$563,000 for the years ended
December 31, 1995, 1996, and
1997, respectively . . . . . 548,203 1,354,406 1,137,965
------------- ------------- -------------
Income (loss) before provision
for income taxes (benefit) . 2,155,798 (862,199) (3,322,414)
Provision for income taxes
(benefit) . . . . . . . . . . 840,295 (336,258) (1,258,019)
------------- ------------- -------------
Net income (loss) . . . . . . . $ 1,315,503 $ (525,941) $ (2,064,395)
============= ============= =============
Share data:
Basic income (loss)
per share . . . . . . . . . $ .33 $ (.13) $ (.52)
Diluted income (loss) ============= ============= =============
per share . . . . . . . . . $ .32 $ (.13) $ (.52)
============= ============= =============
Weighted average number of
shares outstanding used in
computations:
Basic . . . . . . . . . . . 3,994,334 3,997,842 4,000,000
============= ============= =============
Diluted . . . . . . . . . . 4,049,113 3,997,842 4,000,000
============= ============= =============
The accompanying notes are an integral part
of these consolidated financial statements.<PAGE>
<TABLE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock Capital in Retained Total
----------------- Excess of Earnings Treasury Stockholders'
Shares Amount Par Value (Deficit) Stock Equity
--------- ------- ----------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1995 . . 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
Net loss . . . . . . - - - (2,064,395) - (2,064,395)
--------- ------- ----------- ------------ --------- -------------
Balance at 4,010,000 $4,010 $12,193,547 $(1,094,597) $(48,006) $ 11,054,954
December 31, 1997. . ========= ======= =========== ============ ========= =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Cash flows from operating
activities:
Net income (loss) . . . . . $ 1,315,503 $ (525,941) $ (2,064,395)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and
amortization . . . . . . 2,446,511 3,611,655 4,153,240
Provision for
uncollectible accounts
receivable . . . . . . . 404,455 430,382 772,522
Gain on disposal of
equipment . . . . . . . (109,708) (64,192) (444,488)
Deferred income taxes . . 627,768 75,628 (1,112,944)
Changes in operating
assets and liabilities:
Accounts receivable -
trade . . . . . . . . (1,567,176) 99,306 286,996
Costs and estimated
earnings in excess of
billings on
uncompleted contracts (540,160) 554,604 (184,645)
Income tax refund
receivable . . . . . . (731,951) 309,384 278,895
Other assets . . . . . (727,853) (437,929) (323,381)
Accounts payable -
trade . . . . . . . . 949,400 312,876 34,865
Income taxes payable . (30,933) - -
Accrued expenses . . . 2,228,598 112,491 (1,372,959)
Billings in excess of
costs and estimated
earnings on
uncompleted
contracts . . . . . . 41,694 (14,100) (154,793)
------------- ------------- -------------
Total adjustments . . . . . 2,990,645 4,990,105 1,933,308
------------- ------------- -------------
Net cash provided by operating
activities . . . . . . . . . 4,306,148 4,464,164 (131,087)
------------- ------------- -------------
The accompanying notes are an integral part
of these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Cash flows from investing
activities:
Capital expenditures
including $500,000 of
business acquisitions
during 1996 . . . . . . . $(13,847,589) $ (2,539,304) $ (6,171,915)
Proceeds from sale of
property and equipment . . 402,538 295,130 1,800,837
------------- ------------- -------------
Net cash used by investing
activities . . . . . . . . . (13,445,051) (2,244,174) (4,371,078)
------------- ------------- -------------
Cash flows from financing
activities:
Proceeds from
long-term debt . . . . . . 14,471,763 3,515,315 5,522,064
Repayment of
long-term debt . . . . . . (2,742,364) (4,997,356) (4,727,620)
Purchase of treasury
stock . . . . . . . . . . . (48,006) - -
Issuance of common stock
upon exercise of stock
warrants . . . . . . . . . - 60,000 -
Net (advances) payments from
Kimmins . . . . . . . . . . (2,339,806) (2,774,640) 4,385,443
------------- ------------- -------------
Net cash provided (used) by
financing activities . . . . 9,341,587 (4,196,681) 5,179,887
------------- ------------- -------------
Net increase (decrease)
in cash . . . . . . . . . . . 202,684 (1,976,691) 677,722
Cash, beginning of year . . . . 3,211,795 3,414,479 1,437,788
------------- ------------- -------------
Cash, end of year . . . . . . . $ 3,414,479 $ 1,437,788 $ 2,115,510
============= ============= =============
The accompanying notes are an integral part
of these consolidated financial statements.<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. ("Kimmins").
Kimmins 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.
Net due from affiliate - As of December 31, 1996 and 1997, the
Company had working capital advances due from an affiliate of
approximately $8,425,000 and $4,040,000, respectively. These advances
are unsecured and accrue interest at a rate of 10 percent per annum. The
Company collected $4,385,000 during 1997.
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,
$124,000, and $109,000 for the years ended December 31, 1995, 1996 and
1997, respectively. Accumulated amortization was approximately $191,000
and $245,000 at December 31, 1996 and 1997, respectively.
Other assets - Other assets consist primarily of pre-contract costs
associated with residential solid waste management contracts obtained
during 1996 and 1997, 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 $91,000,
$178,000, and $236,000 for the years ended December 31, 1995, 1996 and
1997, respectively. Accumulated amortization was $296,000 and $533,000 at
December 31, 1996 and 1997, 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
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, 24 percent, and 22 percent of
total revenue during 1995, 1996 and 1997, respectively. No individual
municipal contract contributed revenue greater than 10 percent of total
net revenue in any year presented.
Accounts receivable - trade, includes $1,382,000 ($1,263,000 net of
allowance for doubtful accounts) and $724,000 ($213,000 net of allowance
for doubtful accounts) as of December 31, 1996 and 1997, respectively,
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 and 2,120 individual
properties representing approximately $511,000 and $474,000 of the
balance as of December 31, 1996 and 1997, respectively. 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 in 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. Revenue from demolition contract services
totaled approximately $8,751,000, or 21.3 percent, $9,504,000, or 21.5
percent, and $11,236,000, or 25.6 percent, of the Company's total revenue
for the years ended December 31, 1995, 1996 and 1997, respectively.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
Advertising costs - Advertising costs are expensed as incurred. For
the years ended December 31, 1995, 1996 and 1997, the Company expensed
approximately $88,000, $114,000, and $536,000, respectively, in
advertising costs.
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 of Financial Accounting Standards No. 123, "Accounting
and Disclosure of Stock-Based Compensation" ("SFAS No. 123"), 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 presented in Note 13.
Earnings (loss) per share - In February 1997, the FASB issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"), which establishes standards for computing and
presenting earnings per share. SFAS No. 128 replaces the presentation of
primary and fully diluted earnings per share with basic and diluted
earnings per share, respectively. Basic earnings per share are computed
by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted
earnings per share are computed similar to fully diluted earnings per
share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to SFAS No. 128
requirements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
Recently issued accounting standards - In June 1997, the FASB issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131"),
which supercedes Financial Accounting Standards No. 14. SFAS No. 131 uses
a management approach to report financial and descriptive information
about a Company's operating segments. Operating segments are revenue-
producing components of the enterprise for which separate financial
information is produced internally for the Company's management. SFAS No.
131 is effective for fiscal years beginning after December 31, 1997.
Management is currently assessing the impact of SFAS No. 131, but does
not expect its effects to be material.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income ("SFAS No. 130"). SFAS
No. 130 requires that total comprehensive income and comprehensive income
per share be disclosed with equal prominence as net income and earnings
per share. Comprehensive income is defined as changes in stockholders'
equity exclusive of transactions with owners such as capital
contributions and dividends. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Management is currently assessing the
impact of SFAS No. 130, but does not expect its effects to be material.
Proposed accounting standards - In April 1997, the American Institute
of Certified Public Accountants issued an Exposure Draft of a proposed
SOP, Reporting on the Costs of Start-up Activities. Start-up costs are
defined broadly in the proposed SOP as those one-time activities related
to opening a new facility, introducing a new product or service,
conducting business in a new territory, conducting business with a new
class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. Start-up costs, including
organizational costs, would be expensed as incurred under the proposed
SOP. The proposed SOP would be effective for most entities for fiscal
years beginning after December 15, 1998. The SOP will require the
Company, upon adoption, to write off as a cumulative effect of a change
in accounting principle any previously capitalized start-up or
organization costs. Therefore, in the first quarter of 1999, the Company
will have to write off the remaining unamortized balance of contract
start-up costs, which approximate $875,000 at December 31, 1997.
Reclassification - Certain amounts in the 1996 consolidated financial
statements have been reclassified to conform to the 1997 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 for the periods ended December 31, 1996 and 1997.
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 since June 1, 1996.
The Company sold a number of contracts in its Pinellas area. As part
of a deemphasis of paper wholesaling in Pinellas, the Company wrote-off
the net intangible assets of $70,000 associated with the 1996 acquisition
of assets from Paper Stock Dealers, Inc.
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 since April 1, 1995.
The pro-forma effects of the acquisitions are considered by
management to be immaterial for purposes of pro-forma presentation.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Related party transactions
During the years ended December 31, 1995, 1996, and 1997, the Company
entered into transactions with Kimmins and companies affiliated with
Kimmins through common ownership. Kimmins provides the Company
accounting, data processing, financial, tax and other administrative
services for a fee based on gross revenue. In 1997, to reflect the
increased level of services received from Kimmins, the fee was increased
from 1.5 percent of revenue to 3.0 percent of revenue. The amounts
charged were approximately $617,000, $671,000, and $1,315,000, for the
years ended December 31, 1995, 1996, and 1997, respectively.
The Company is insured or co-insured with Kimmins on various
insurance policies of the Company or Kimmins. 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, 1995, 1996, and
1997, the Company paid Kimmins approximately $811,000, $849,000, and
$1,205,000, respectively. The Company pays directly for any coverage for
which it is the only insured.
At December 31, 1995, the Company had $500,000 of mortgage notes
payable to affiliated parties: $400,000 to the president of Kimmins, his
wife, and his son and $100,000 to a director of Kimmins. These notes
were refinanced during 1996 with an unaffiliated lender.
Effective July 1, 1997, employees associated with the Company's
demolition contract services unit were transferred to Kimmins Contracting
Corp. ("KCC"), a wholly-owned subsidiary of Kimmins, for administrative
and accounting purposes. As a result, contracting services previously
performed by employees of the Company were subcontracted to KCC. For the
year ended December 31, 1997, the Company subcontracted $3,417,574 with
KCC. In addition, the Company rents equipment from KCC for use in
performing demolition contracts. The Company incurred approximately
$670,000, $2,103,000 and $2,573,000 in equipment rental charges with KCC
for the years ended December 31, 1995, 1996 and 1997, respectively.
In addition to the above transactions, the Company has advanced funds
to Kimmins for working capital needs. These advances are unsecured and
bear interest at 10 percent. The balances at December 31, 1996 and 1997
were $8,425,553 and $4,040,110, respectively.
In addition, the Company has a convertible subordinated note payable
to Kimmins in the amount of $2,003,258. See Note 9 and Item 13 for
additional information.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Accounts receivable - trade
December 31,
---------------------------
1996 1997
------------- -------------
Contract and trade:
Billed contract receivables:
Completed and uncompleted
contracts . . . . . . . . . . . . . . $ 1,469,473 $ 950,215
Retainage . . . . . . . . . . . . . . 230,409 206,123
Unbilled contract receivables . . . . . 353,708 776,764
Trade receivables . . . . . . . . . . . 4,720,664 4,129,164
------------- -------------
6,774,254 6,062,266
Allowance for doubtful accounts . . . . . (543,770) (891,300)
------------- -------------
$ 6,230,484 $ 5,170,966
============= =============
5. Costs and estimated earnings in excess of
billings on uncompleted contracts
December 31,
---------------------------
1996 1997
------------- -------------
Expenditures on uncompleted contracts . . $ 3,841,201 $ 7,574,018
Estimated earnings on uncompleted
contracts . . . . . . . . . . . . . . . 1,579,433 524,598
------------- -------------
Less actual and allowable billings on 5,420,634 8,098,616
uncompleted contracts . . . . . . . . . 5,360,536 7,699,080
------------- -------------
$ 60,098 $ 399,536
============= =============
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . $ 230,869 $ 415,514
Billings in excess of costs and
estimated earnings on uncompleted (170,771) (15,978)
contracts . . . . . . . . . . . . . . . ------------- -------------
$ 60,098 $ 399,536
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Property held for sale
As a result of management's review of the Company's various regional
solid waste operating facilities, a decision was made to dispose of less
profitable operating assets. The Company sold its residential solid waste
services contract with St. Lucie County to a competitor and ceased
operations at its Lantana, Florida, facility. The Lantana and St. Lucie
facilities contributed losses of approximately $1,111,000 and $476,000,
respectively, of the $2,184,000 operating loss of the Company for the
year ended December 31, 1997. The Company wrote off intangible assets of
$183,000 associated with these operations. Also, in accordance with SFAS
No. 121, "Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," the Company wrote down certain land and buildings that
management believed had carrying amounts higher than their fair market
value.
The impairment loss of $590,000 was determined by comparing the
carrying amount of impaired assets of approximately $2,834,000 with
recent offers on the properties held for sale. The $590,000 impairment
loss is included in selling, general and administrative expenses on the
consolidated statements of operations for the year ended December 31,
1997. The land and buildings that were impaired at December 31, 1997, and
as of the date of these financial statements had executed contracts for
sale, are expected to be sold during 1998. Accordingly, the carrying
value of these assets of approximately $734,000, net of the impairment
loss of $90,000, is classified as a current asset under the caption
"Property Held for Sale" in this consolidated balance sheet.
7. Property and equipment
December 31,
---------------------------
1996 1997
------------- -------------
Land . . . . . . . . . . . . . . . . . . $ 4,610,323 $ 3,019,969
Building and improvements . . . . . . . . 5,621,962 4,068,476
Vehicles . . . . . . . . . . . . . . . . 13,459,891 16,936,386
Waste containers and equipment . . . . . 12,508,751 13,133,877
Furniture and fixtures . . . . . . . . . 547,739 700,711
Construction in progress . . . . . . . . 33,462 48,419
------------- -------------
36,782,128 37,907,838
Less accumulated depreciation . . . . . . (10,666,851) (12,846,420)
------------- -------------
$ 26,115,277 $ 25,061,418
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Property and equipment (continued)
Property and equipment is recorded at cost. Depreciation is provided
using the straight-line method over estimated useful lives, which range
from three to thirty years. Depreciation expense was $2,289,000,
$3,309,000, and $3,625,000 for the years ended December 31, 1995, 1996
and 1997, respectively. Construction in progress is depreciated over the
estimated useful lives when placed into service.
8. Accrued expenses December 31,
---------------------------
1996 1997
------------- -------------
Deferred revenue . . . . . . . . . . . . $ 1,641,857 $ 919,631
Accrued insurance . . . . . . . . . . . . 1,171,965 926,049
Accrued disposal costs . . . . . . . . . 744,229 407,229
Accrued real estate and property taxes . 291,080 349,682
Other . . . . . . . . . . . . . . . . . . 687,647 561,228
------------- -------------
$ 4,536,778 $ 3,163,819
============= =============
9. Long-term debt December 31,
---------------------------
1996 1997
------------- -------------
Notes payable, due through March 1, 2001,
payable in monthly installments with
interest at varying rates up to 13
percent, collateralized by equipment . . $ 13,055,213 $ 14,191,400
Convertible subordinated term note to
Kimmins, interest payable in monthly
installments, principal due December 1,
2003, interest at bank's base rate (8.5
percent) 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 . . 5,201,756 4,860,013
------------- -------------
20,260,227 21,054,671
Less current portion . . . . . . . . . . (3,453,168) (4,662,310)
------------- -------------
$ 16,807,059 $ 16,392,361
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-term debt (continued)
Annual principal maturities for years subsequent to December 31,
1997, are as follows:
1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,662,310
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 4,962,703
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 4,220,631
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 2,512,241
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 975,505
Thereafter . . . . . . . . . . . . . . . . . . . . . . 3,721,284
-------------
$ 21,054,674
=============
As of December 31, 1997, the Company is a co-borrower and has
guaranteed a loan agreement on behalf of Kimmins and other subsidiaries
of Kimmins in connection with the Kimmins Employee Stock Ownership Plan,
which had an outstanding balance of $1,440,000 that is recorded in the
financial statements of Kimmins.
The Company is a co-borrower with joint and several liability on
approximately $5,910,000 of financial institution debt of Kimmins. The
debt agreements contain certain covenants, the most restrictive of which
require, for Kimmins for 1997, maintenance of a consolidated tangible net
worth, as defined, of not less than $6,500,000 and net income not less
than $1,500,000. In addition, the covenants prohibit the payment of
dividends by the Company without lender approval. For all periods
presented, the Company believes that Kimmins had complied with or
obtained waivers for all loan covenants.
Francis M. Williams has guaranteed approximately $10,455,000 of the
total notes payable of $14,191,000. The Company is also a co-borrower on
approximately $2,645,000 of Kimmins notes payable.
The lenders' prime rate under the Company's notes was 8.5 percent at
December 31, 1997.
Included in the notes payable of approximately $14,191,000 are
equipment notes of the Company for $5,700,000 that are due in July 1998.
The Company has executed a commitment agreement that refinances the
$5,700,000 until January 1, 2000 and, accordingly, has classified the
debt pursuant to the expected maturity schedule.
10. Leasing arrangements
The Company rents equipment and machinery, as needed, as well as
office space, under non-cancellable operating leases for varying periods.
Rental expense for the years ended December 31, 1995, 1996, and 1997 were
approximately $763,000, $2,230,000, and $2,938,000, respectively.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Commitments and contingencies
The Company has no current material commitments for capital
expenditures relating to any other new facilities, other than to acquire
vehicles and equipment for the City of Cape Coral contract, which the
Company estimates to be approximately $3,500,000.
The Company is involved in various legal actions and claims arising
in the ordinary course of its business. After taking into consideration
legal counsel's evaluation of such actions and claims, management is of
the opinion that their outcome will not have a material adverse effect on
the consolidated financial position of the Company.
12. 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 to
purchase 90,000 shares are exercisable through March 25, 1998.
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. Should
this occur, Kimmins, at its option and with written notification to the
Company, can convert the note into common stock in $10,000 increments.
13. Pension and other benefit plans
On January 1, 1989, Kimmins formed the Kimmins Corp. Employee Stock
Ownership Plan Trust (the "ESOP") for the benefit of employees of Kimmins
and its subsidiaries, including those of the Company, to purchase shares
of Kimmins'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 Kimmins.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. 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 TransCor Plan has an option to acquire an aggregate of 250,000
shares of common stock for options 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 422(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
13. Pension and other benefit plans (continued)
The following table summarizes the transactions for the three years
ended December 31, 1997, relating to the TransCor Plan:
Number of Per Share
Shares Option Price
------------- -------------
Outstanding January 1, 1995 . . . . . . 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
Granted . . . . . . . . . . . . . . . 148,000 $ 2.50-$4.00
Exercised . . . . . . . . . . . . . . - $ -
Canceled . . . . . . . . . . . . . . . (80,000) $ 3.12-$4.38
-------------
Outstanding December 31, 1997: . . . . 160,000 $ 2.00-$2.50
=============
Exercisable December 31, 1997: . . . . 80,000
=============
The Board of Directors has reserved 100,000 shares of common stock in
connection with stock warrants that may be issued to consultants of the
Company 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, 1994, 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 1995, 1996 and
1997; 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
13. 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.
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period. The
Company's pro forma information is as follows:
1995 1996 1997
------------- ------------- -------------
Pro forma net income (loss)
attributable to
stockholders . . . . . . . . $ 1,302,869 $ (539,486) $ (2,080,437)
Pro forma income (loss) per
common share:
Basic income (loss) .33 (.13) (.52)
per share . . . . . . . .
Diluted income (loss)
per share . . . . . . . . .32 (.13) (.52)<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. 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,
---------------------------
1996 1997
------------- -------------
Deferred tax liabilities:
Tax over book depreciation . . . . . . $ 3,457,713 $ 3,537,148
Costs deferred for books expensed for
tax . . . . . . . . . . . . . . . . . 328,433 416,850
------------- -------------
Total deferred tax liabilities . . . . 3,786,146 3,953,998
------------- -------------
Deferred tax assets:
Allowance for doubtful accounts . . . . 209,552 343,352
Accrued workers' compensation . . . . . 409,644 356,529
AMT credit carryforward . . . . . . . . 172,730 32,924
Federal and state NOL carryforwards . . 240,082 1,545,618
State credit carryforwards . . . 32,730 52,730
Costs deferred for tax expensed for
books . . . . . . . . . . . . . . . . 61,132 75,513
------------- -------------
Total deferred tax assets . . . . . . . 1,125,870 2,406,666
------------- -------------
Net deferred tax liabilities . . . . . . 2,660,276 1,547,332
Current deferred assets . . . . . . . . . 639,079 720,410
------------- -------------
Net non-current deferred liabilities . $ 3,299,355 $ 2,267,742
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income taxes (continued)
The components of the provision for income taxes are as follows:
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Current . . . . . . . . . . $ 212,527 $ (411,886) $ (145,075)
Deferred . . . . . . . . . 627,768 75,628 (1,112,944)
------------- ------------- -------------
$ 840,295 $ (336,258) $ (1,258,019)
============= ============= =============
As of December 31, 1997, the Company had consolidated regular tax net
operating loss carryforwards for federal tax purposes of approximately
$3,982,000 available to be carried to future periods. The loss
carryforward expires through the year 2012 if not used. The net operating
loss carryforward available for alternative minimum tax is $1,900,000.
The Company has alternative minimum tax credit carryforwards of
approximately $33,000 at December 31, 1997, that are available to reduce
future federal regular income taxes. The alternative minimum tax net
operating loss and credit carryforwards can be utilized over an
indefinite period.
Factors causing the effective tax rate to differ from the statutory
rate are as follows:
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Federal statutory rate . . 34.0% (34.0%) (34.0%)
State income taxes . . . . 5.0% (5.0%) (3.8%)
Effective tax rate . . . . ------------- ------------- -------------
39.0% (39.0%) (37.8%)
============= ============= =============
15. Supplemental disclosures of cash flow information
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Cash paid:
Interest . . . . . . . . $ 1,040,000 $ 1,950,000 $ 1,640,000
Income taxes . . . . . . $ 960,000 $ 2,000 $ 2,000 <PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. 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, 1996 December 31, 1997
--------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ------------- ------------- -------------
Liabilities:
Notes
payable . . $ 20,260,227 $ 20,076,000 $ 21,055,000 $ 20,874,000 <PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Earnings (loss) per share
As required by FASB Statement No. 128, the following table sets forth
the computation of basic and diluted earnings per share:
Year ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
NUMERATOR:
Net income (loss) . . . . . $ 1,315,503 $ (525,941) $ (2,064,395)
Adjustment for basic
earnings per share . . . 0 0 0
------------- ------------- -------------
Numerator for basic
earnings per share -
income available to
common stockholders . . . 1,315,503 (525,941) (2,064,395)
Effect of dilutive
securities:
Interest on convertible
subordinated term note . 0 0 0
Less tax effect of
interest . . . . . . . . 0 0 0
------------- ------------- -------------
Numerator for diluted
earnings per share -
income available to
common stockholders after
assumed conversions . . . $ 1,315,503 $ (525,941) $ (2,064,395)
============= ============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Earnings (loss) per share (continued)
Year ended December 31,
----------------------------------------
1995 1996 1997
DENOMINATOR: ------------- ------------- -------------
Denominator for basic
earnings per share -
weighted-average shares . 3,994,334 3,997,842 4,000,000
Effective of dilutive
securities:
Stock options . . . . . . . 54,779 0 0
Warrants . . . . . . . . . 0 0 0
Convertible subordinated 0 0 0
term note . . . . . . . . ------------- ------------- -------------
Dilutive potential common 54,779 0 0
shares . . . . . . . . . ------------- ------------- -------------
Denominator for diluted
earnings per share -
adjusted weighted-average
shares and assumed
conversions . . . . . . . 4,049,113 3,997,842 4,000,000
============= ============= =============
Basic earnings per
share . . . . . . . . . . $ 0.33 $ (0.13) $ (0.52)
============= ============= =============
Diluted earnings per
share . . . . . . . . . $ 0.32 $ (0.13) $ (0.52)
============= ============= =============
Unexercised options to purchase 92,000 and 160,000 shares of common
stock for 1996 and 1997, respectively, and the convertible subordinated
debt (Note 12) were not included in the computations of diluted loss per
share because the assumed conversion would be antidilutive.
18. Fourth quarter 1996 and 1997 adjustments
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.
During the fourth quarter of 1997, the Company revised its estimate
for accrued workers' compensation insurance claims, resulting in a pre-
tax reduction to costs of operations of approximately $200,000, and
recorded $229,000 of compensation expense associated with the start-up of
the Hillsborough County residential solid waste services contract.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Subsequent event to December 31, 1997
On May 31, 1998, the Company sold its Jacksonville area waste
collection and recycling operations assets and certain assets of the
Miami front-end load and rear-load commercial waste and recycling
business to Eastern Environmental Services of Florida, Inc., for
$11,600,000 in cash, which exceeded the carrying value of the underlying
assets.<PAGE>
