<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 10-Q
[Mark One]
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________.
Commission File No. 1-11822
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TRANSCOR WASTE SERVICES, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
Florida 65-0369288
------------------------------- -------------------------------
(State of incorporation) (I.R.S. Employer
Identification Number)
1502 Second Avenue, East, Tampa, Florida 33605
(Address of registrant's principal executive offices,
including zip code)
----------------------------------------
(Registrant's telephone number, including area code):
(813) 248-3878
Not applicable
----------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]
No [ ]<PAGE>
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by a check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
Applicable Only to Corporate Issuers
The number of shares of Common Stock outstanding on
August 14, 1998, was 4,000,000 shares.<PAGE>
TRANSCOR WASTE SERVICES, INC.
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated balance sheets at
December 31, 1997 and June 30, 1998
(unaudited) . . . . . . . . . . . . . . . . . . 1 - 2
Consolidated statements of operations for the
three and six months ended June 30, 1997
and 1998 (unaudited) . . . . . . . . . . . . . . 3 - 4
Consolidated statements of cash flows for
the six months ended June 30, 1997
and 1998 (unaudited) . . . . . . . . . . . . . . . . 5
Notes to consolidated financial statement . . . 6 - 13
Item 2. Management's discussion and analysis of
financial condition and results of
operations . . . . . . . . . . . . . . . . . . 14 - 19
Item 3. Quantitative and qualitative disclosures about
market risk . . . . . . . . . . . . . . . . . . . 19
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . . . . 20
Item 2. Changes in securities . . . . . . . . . . . . . . . 20
Item 3. Defaults upon senior securities . . . . . . . . . . 20
Item 4. Submission of matters to a vote of security holders 20
Item 5. Other information . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and reports on Form 8-K . . . . . . . . . . 20
Signatures . . . . . . . . . . . . . . . . . . . . . 21<PAGE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1997 1998
------------- -------------
(unaudited)
Current assets:
Cash . . . . . . . . . . . . . . . . . . $ 2,115,510 $ 4,272,946
Accounts receivable - trade, net . . . . 1,364,772 1,544,473
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . 415,514 414,893
Income tax refund receivable . . . . . . 143,672 -
Deferred income taxes . . . . . . . . . . 720,410 720,410
Property held for sale . . . . . . . . . 410,681 475,681
Other current assets . . . . . . . . . . 48,771 122,674
Due from affiliate - current . . . . . . - 6,703,363
Net assets of discontinued solid waste
management operations . . . . . . . . . 7,265,280 4,696,613
------------- -------------
Total current assets . . . . . . . . 12,484,610 18,951,053
------------- -------------
Property and equipment, net . . . . . . . . 312,748 323,195
Due from affiliate . . . . . . . . . . . . 4,040,110 4,040,110
------------- -------------
Total assets . . . . . . . . . . . . . $ 16,837,468 $ 23,314,358
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1997 1998
------------- -------------
(unaudited)
Current liabilities:
Accounts payable, trade . . . . . . . . . $ 541,104 $ 1,097,844
Income tax payable . . . . . . . . . . . - 2,052,855
Accrued expenses . . . . . . . . . . . . 954,432 1,163,972
Billings in excess of costs and estimated
earnings on uncompleted contracts . . . 15,978 225,563
------------- -------------
Total current liabilities . . . . . . . 1,511,514 4,540,234
------------- -------------
Long-term debt, net of current maturities
(including debt owed to Kimmins of
$2,003,258 at December 31, 1997
and June 30, 1998) . . . . . . . . . . . 2,003,258 2,003,258
Deferred income taxes . . . . . . . . . . . 2,267,742 2,267,742
Commitments and contingencies . . . . . . . - -
Stockholders' equity:
Preferred stock, $.001 par value;
1,000,000 shares authorized; none issued
and outstanding . . . . . . . . . . . . - -
Capital stock, $.001 par value; 10,000,000
shares authorized; 4,010,000 shares
issued and 4,000,000 shares
outstanding . . . . . . . . . . . . . . 4,010 4,010
Capital in excess of par value . . . . . 12,193,547 12,193,547
Retained earnings (deficit) . . . . . . . (1,094,597) 2,353,573
------------- -------------
Less treasury stock, at cost 11,102,960 14,551,130
(10,000 shares) . . . . . . . . . . . . (48,006) (48,006)
------------- -------------
Total stockholders' equity . . . . . . 11,054,954 14,503,124
Total liabilities and stockholders' ------------- -------------
equity . . . . . . . . . . . . . . . $ 16,837,468 $ 23,314,358
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30,
---------------------------
1997 1998
------------- -------------
(unaudited) (unaudited)
Revenue . . . . . . . . . . . . . . . . . . $ 3,122,585 $ 2,441,968
Expenses:
Operating expenses . . . . . . . . . . . 2,622,018 2,121,678
Selling, general, and administrative
expenses . . . . . . . . . . . . . . . . 148,068 165,204
------------- -------------
Operating income . . . . . . . . . . . . . 352,499 155,086
Interest income, net of expense . . . . . . 71,386 83,685
------------- -------------
Income from continuing operations before
income taxes . . . . . . . . . . . . . . 423,885 238,771
Provision for income taxes . . . . . . . . 165,315 102,771
------------- -------------
Income from continuing operations . . . . . 258,570 136,000
Discontinued operations:
Income (loss) from discontinued solid
waste division (less applicable tax
provision of ($263,286) and $2,051,315 in
1997 and 1998, respectively) . . . . . . (411,804) 3,091,044
------------- -------------
Net income (loss) . . . . . . . . . . . . . $ (153,234) $ 3,227,044
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(continued)
Three months ended June 30,
---------------------------
1997 1998
------------- -------------
(unaudited) (unaudited)
Share data:
Basic income per share from continuing
operations . . . . . . . . . . . . . . . $ .06 $ .04
============= =============
Diluted income per share from continuing
operations . . . . . . . . . . . . . . . $ .06 $ .04
============= =============
Basic income (loss) per share from
discontinued operations . . . . . . . . $ (.10) $ .77
============= =============
Diluted income (loss) per share from
discontinued operations . . . . . . . . $ (.10) $ .76
============= =============
Total basic income (loss) per share . . . $ (.04) $ .81
============= =============
Total diluted income (loss) per share . . $ (.04) $ .80
============= =============
Weighted average number of shares
outstanding used in computations:
Basic . . . . . . . . . . . . . . . . 4,000,000 4,000,000
============= =============
Diluted . . . . . . . . . . . . . . . 4,000,000 4,042,151
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30,
---------------------------
1997 1998
------------- -------------
(unaudited) (unaudited)
Revenue . . . . . . . . . . . . . . . . . . $ 7,059,381 $ 4,310,377
Expenses:
Operating expenses . . . . . . . . . . . 5,391,182 3,552,655
Selling, general, and administrative
expenses . . . . . . . . . . . . . . . . 559,532 365,417
------------- -------------
Operating income . . . . . . . . . . . . . 1,108,667 392,305
Interest income, net of expense . . . . . . (135,969) (171,794)
------------- -------------
Income from continuing operations before
income taxes . . . . . . . . . . . . . . 1,244,636 564,099
Provision for income taxes . . . . . . . . 485,408 194,649
------------- -------------
Income from continuing operations . . . . . 759,228 369,450
Discontinued operations:
Income (loss) from discontinued solid
waste management operations (less
applicable tax benefit of $570,409 in
1997 and $2,001,878 tax provision in
1998 . . . . . . . . . . . . . . . . . . (892,177) 3,078,720
------------- -------------
Net income (loss) . . . . . . . . . . . . $ (132,949) $ 3,448,170
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(continued)
Six months ended June 30,
---------------------------
1997 1998
------------- -------------
(unaudited) (unaudited)
Share data:
Basic income per share from continuing
operations . . . . . . . . . . . . . . . $ .19 $ .09
============= =============
Diluted income per share from continuing
operations . . . . . . . . . . . . . . . $ .19 $ .09
============= =============
Basic income (loss) per share from
discontinued operations . . . . . . . . $ (.22) $ .77
============= =============
Diluted income (loss) per share from
discontinued operations . . . . . . . . $ (.22) $ .77
============= =============
Total basic income (loss) per share . . . $ (.03) $ .86
============= =============
Total diluted income (loss) per share . . $ (.03) $ .86
============= =============
Weighted average number of shares
outstanding used in computations:
Basic . . . . . . . . . . . . . . . . 4,000,000 4,000,000
============= =============
Diluted . . . . . . . . . . . . . . . 4,000,000 4,042,151
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30,
---------------------------
1997 1998
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income from continuing operations . . $ 759,228 $ 369,450
Adjustments to reconcile net income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization . . . . . 2,114,766 41,615
Gain on disposal of equipment . . . . . (354,739) -
Changes in operating assets and
liabilities:
Accounts receivable . . . . . . . . 257,946 (253,604)
Costs and estimated earnings in
excess of billings on uncompleted
contracts . . . . . . . . . . . . . (423,136) 621
Income tax refund receivable/
payable . . . . . . . . . . . . . . 51,753 2,196,527
Other assets . . . . . . . . . . . . (509,094) -
Accounts payable . . . . . . . . . . (522,278) 556,740
Accrued expenses . . . . . . . . . . (90,422) 209,540
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . . (114,609) 209,585
------------- -------------
Total adjustments . . . . . . . . . . . . 410,187 2,961,024
Net cash provided by continuing ------------- -------------
operations . . . . . . . . . . . . . . . 1,169,415 3,330,474
Net loss from discontinued operations . . (892,177) (2,184,536)
Changes in net assets of discontinued
operations . . . . . . . . . . . . . . . - 2,979,348
Net cash provided by operating ------------- -------------
activities . . . . . . . . . . . . . . . 277,238 4,125,286
------------- -------------
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
TRANSCOR WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Six months ended June 30,
---------------------------
1997 1998
------------- -------------
(unaudited) (unaudited)
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . (2,398,444) (527,743)
Proceeds from sale of property and
equipment . . . . . . . . . . . . . . . 1,108,883 -
Gain on sale of assets of discontinued
operations . . . . . . . . . . . . . . . - 5,263,256
Net cash provided by (used in) investing ------------- -------------
activities . . . . . . . . . . . . . . . (1,289,561) 4,735,513
------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt . . . . . . 2,088,212 -
Repayment of long-term debt . . . . . . . (2,385,806) -
Proceeds from advances to Kimmins . . . . - (6,703,363)
Repayment of advances from Kimmins . . . 1,747,376 -
Net cash provided by (used in) financing ------------- -------------
activities . . . . . . . . . . . . . . . 1,449,782 (6,703,363)
------------- -------------
Net increase (decrease) in cash . . . . . 437,459 2,157,436
Cash, beginning of period . . . . . . . . . 1,437,788 2,115,510
------------- -------------
Cash, end of period . . . . . . . . . . . . $ 1,875,247 $ 4,272,946
============= =============
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 ).
As of June 30, 1998, 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. The Company also provides
demolition services in conjunction with, and as an economic complement,
to its solid waste management services.
Basis of presentation - The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do
not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three- and six-month periods ended
June 30, 1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information,
refer to the consolidated financial statements and notes thereto as of
and for the year ended December 31, 1997, included in the Company s Form
10-K dated December 31, 1997, as filed with the United States Securities
and Exchange Commission.
Certain amounts in the 1997 consolidated financial statements have
been reclassified to conform to the 1998 presentation.
Intangible assets - Intangible assets consist primarily of the excess
of cost over fair market value of the net assets of the acquired
business, which will be amortized on a straight-line basis over twenty
years, and customer contracts, which will be amortized on a straight-line
basis over five years. Amortization expense was approximately $247,000
and $37,000 for the six months ended June 30, 1997 and 1998,
respectively. Accumulated amortization was $245,000 and $0 at December
31, 1997, and June 30, 1998, respectively. The intangible assets,
including customer contracts, were sold on May 31, 1998, as part of the
sale of the Jacksonville operations to Eastern Environmental Services of
Florida, Inc. See Note 3 for additional information. The balance of
intangible assets was $81,000 and $607,000 as of June 30, 1998, and
December 31, 1997, respectively. These amounts are reflected in net
assets of discontinued operations. <PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
Other assets - Other assets consist primarily of pre-contract costs
associated with residential solid waste management contracts obtained
during 1997 and 1998, 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 $83,000
and $131,000 for the six months ended June 30, 1997 and 1998,
respectively. Accumulated amortization was $533,000 and $664,000 at
December 31, 1997, and June 30, 1998, respectively. The net balance of
other assets was $896,000 and $1,142,000 as of June 30, 1998, and
December 31, 1997, respectively. All pre-contract costs capitalized as of
December 31, 1997, and June 30, 1998, are held by KRC, which is being
sold effective August 31, 1998. Accordingly, pre-contract costs are
included in net assets of discontinued operations.
As of June 30, 1998, other assets include approximately $787,000 of
pre-contract costs. As explained above, these costs are currently being
amortized over the terms of the related contracts. However, the American
Institute of Certified Public Accountants ( AICPA ) has recently issued
Statement of Position 98-5 ( SOP ), Reporting on the Costs of Start-up
Activities, which requires all start-up costs, including pre-contract
costs, to be expensed as incurred. The SOP is effective in the first
quarter of 1999 and will require the Company to write off the remaining
unamortized balance of approximately $330,000. If the anticipated sale of
the Company s solid waste subsidiary occurs, the Company will have no
capitalized start-up costs remaining at December 31, 1998.
Earnings per share - Net income (loss) per share is computed based on
the weighted average number of shares of capital stock and stock options
outstanding. Diluted earnings per share includes unexercised stock
options assuming an average stock price. The convertible subordinated
debt was not included in the computations because the assumed conversion
would be antidilutive.
2. 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.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Property held for sale (continued)
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 the land of approximately $476,000 for the period ended June 30,
1998, net of the impairment loss $25,000, is classified as a current
asset under the caption Property Held for Sale in this consolidated
balance sheet. The carrying value of the land and buildings associated
with discontinued operations of approximately $734,000 for the period
ended December 31, 1997, net of the impairment loss of $90,000, is
included in net assets of discontinued solid waste management operations
on the balance sheet.
3. Property and equipment, net
December 31, June 30,
1997 1998
------------- -------------
(unaudited)
Land . . . . . . . . . . . . . . . . . $ 3,019,969 $ 2,606,831
Buildings and improvements . . . . . . 4,068,476 3,163,389
Vehicles . . . . . . . . . . . . . . . 16,936,386 13,426,334
Waste containers and equipment . . . . 13,133,877 9,775,438
Furniture and fixtures . . . . . . . . 700,711 698,969
Construction in progress . . . . . . . 48,419 203,473
------------- -------------
37,907,838 29,874,434
Less accumulated depreciation . . . . . (12,846,420) (10,347,868)
------------- -------------
25,061,418 19,526,566
Less net property and equipment included
in net assets of discontinued solid
waste management operations . . . . . (24,748,670) (19,203,371)
------------- -------------
Net property and equipment attributable
to assets of continuing operations . $ 312,748 $ 323,195
============= =============
Property and equipment is recorded at cost. Depreciation is provided
using the straight-line method over estimated useful lives, which range
from 3 to 30 years. Depreciation expense was $1,785,000 and $1,853,000
for the six months ended June 30, 1997 and 1998, respectively. For the
six months ended June 30, 1998, $42,000 of depreciation expense was
attributable to continuing operations and $1,811,000 was attributable to
discontinued operations.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Property and equipment, net (continued)
On May 31, 1998, the Company sold its Jacksonville area waste
collection and recycling operating 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.
The proceeds exceeded the net book value of the underlying assets sold by
approximately $5,200,000. This gain is shown in the Consolidated
Statements of Operations as part of income from discontinued
operations.
4. Long-term debt
December 31, June 30,
1997 1998
------------- -------------
(unaudited)
Notes payable, due through March 1,
2001, payable in monthly installments
with interest at varying rates up to
9.75 percent, collateralized by
equipment . . . . . . . . . . . . . . . $ 14,191,400 $ 11,334,470
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 . 4,860,013 3,231,573
------------- -------------
Total long-term debt . . . . . . . . . 21,054,671 16,569,301
Less debt of discontinued operations:
Long-term debt . . . . . . . . . . . (14,389,103) (9,345,087)
Current portion of long-term debt . . (4,662,310) (5,220,956)
------------- -------------
Long-term debt of continuing
operations . . . . . . . . . . . . . $ 2,003,258 $ 2,003,258
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Long-term debt (continued)
As of June 30, 1998, the Company is a co-borrower with joint and
several liability on approximately $4,244,000 of financial institution
debt of Kimmins. The debt agreements contain certain covenants, the most
restrictive of which require, for Kimmins for 1998, maintenance of a
consolidated tangible net worth, as defined, of not less than $7,500,000
and net income not less than $3,000,000. In addition, the covenants
prohibit the payment of dividends by the Company without lender approval.
For all periods presented and for all of 1998, the Company believes that
Kimmins has complied with or obtained waivers for all loan covenants.
Francis M. Williams has guaranteed approximately $7,817,000 of the
total notes payable of $11,334,000.
The lenders prime and base rates under the Company s notes were 8.5
percent at June 30, 1998.
Included in the notes payable of approximately $11,334,000 are
equipment notes of the Company for $3,647,000 that are due in July 1998.
The Company has executed a commitment agreement that refinances the
$3,647,000 until January 1, 2000 and, accordingly, has classified the
debt pursuant to the expected maturity schedule.
5. Stockholders equity
The Company has authorized 1,000,000 shares of preferred stock with a
par value of $.001 per share, none of which has been issued. Such
preferred stock may be issued in series and will have such designations,
rights, preferences, and limitations as may be fixed by the Board of
Directors.
The convertible subordinated term note is convertible into 400,652
shares of the Company s capital stock at the time the market value per
share equals or exceeds $9.00 for twenty consecutive trading days.
Warrants to purchase 100,000 shares of the Company s common stock at
$6.00 per share were issued in 1993 to the underwriters of the Company s
initial public offering. Warrants to purchase 10,000 shares of common
stock were exercised during March 1996. The remaining warrants to
purchase 90,000 shares expired on March 25, 1998, without being
exercised.
6. Subsequent events
On August 14, 1998, Kimmins, the parent of the Company, acquired an
additional 297,200 shares of common stock of the Company from Francis M.
Williams, President and Chief Executive Officer of Kimmins. The
acquisition increased Kimmins ownership percentage to 81 percent from 74
percent and results in the ability to consolidate the Company and Kimmins
for federal income tax purposes on a prospective basis.<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Discontinued operations
On July 20, 1998, the Company executed an agreement to sell all of
the common stock of its wholly-owned operating subsidiary, Kimmins
Recycling Corp. ( KRC ), for $51.1 million in cash and stock to Eastern
Environmental Services of Florida, Inc., an unrelated competitor. This
transaction, coupled with the earlier sale this year of KRC s
Jacksonville and Miami operations, results in the Company s exit from the
solid waste industry. The transaction will result in a gain as the
proceeds of $41.1 million in cash and $10 million in stock of Eastern
Environmental Services of Florida, Inc., exceed the Company s carrying
value of the underlying investment in KRC. The transaction is expected to
close by August 31, 1998.
Information related to the discontinued operations of KRC for the
three- and six-month periods ended June 30, 1998, are as follows:
Three months Six months
ended ended
June 30, 1998 June 30, 1998
------------- -------------
(unaudited) (unaudited)
Net revenue . . . . . . . . . . . . . . $ 8,099,000 $ 16,693,000
Operating expenses . . . . . . . . . . 6,743,000 13,831,000
Selling, general and administrative
expenses . . . . . . . . . . . . . . 1,178,000 2,352,000
------------- -------------
Operating income . . . . . . . . . . . 178,000 510,000
Non-operating gain on sale of assets . 5,263,000 5,263,000
Interest expense, net . . . . . . . . . 299,000 692,000
------------- -------------
Income before provision for income
taxes . . . . . . . . . . . . . . . 5,142,000 5,081,000
Income taxes . . . . . . . . . . . . . 2,051,000 2,002,000
------------- -------------
Net income . . . . . . . . . . . . . . $ 3,091,000 $ 3,079,000
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Discontinued operations (continued)
The net assets and liabilities of the discontinued operations of KRC
included in the accompanying consolidated balance sheets as of December
31, 1997, and June 30, 1998, respectively, are as follows:
December 31, June 30,
1997 1998
------------- -------------
(unaudited)
Current assets:
Accounts receivable - trade, net . . $ 3,677,670 $ 2,506,482
Property held for sale . . . . . . . 322,978 -
Other current assets . . . . . . . . 265,770 107,895
------------- -------------
Total current assets . . . . . . . . 4,266,418 2,614,377
Property and equipment, net . . . . . . 24,748,670 19,203,371
Property held for sale . . . . . . . . 1,510,723 1,493,311
Intangible assets, net . . . . . . . . 606,975 81,333
Other assets . . . . . . . . . . . . . 1,142,205 895,509
------------- -------------
Total assets . . . . . . . . . . . . 32,274,991 24,287,901
------------- -------------
Current liabilities:
Accounts payable, trade . . . . . . . 3,748,911 2,892,564
Accrued expenses . . . . . . . . . . 2,209,387 2,132,681
Current portion of long-term debt . . 4,662,310 5,220,956
------------- -------------
Total current liabilities . . . . . 10,620,608 10,246,201
Long-term debt . . . . . . . . . . . 14,389,103 9,345,087
------------- -------------
Total liabilities . . . . . . . . . 25,009,711 19,591,288
------------- -------------
Net assets of discontinued
operations . . . . . . . . . . . . . $ 7,265,280 $ 4,696,613
============= =============
<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Earnings per share
As required by Financial Accounting Standards Board Statement No.
128, the following tables set forth the computation of basic and diluted
earnings per share:
Three months ended
June 30,
---------------------------
1997 1998
------------- -------------
Numerator:
Income from continuing operations . . . $ 258,570 $ 136,000
Adjustment for basic earnings per
share . . . . . . . . . . . . . . . . - -
------------- -------------
Numerator for basic earnings per share -
income available to common
stockholders . . . . . . . . . . . . 258,570 136,000
Effect of dilutive securities:
Interest on convertible subordinated
term note . . . . . . . . . . . . . . - -
Less tax effect of interest . . . . . . - -
------------- -------------
Numerator for diluted earnings per
share:
Income from continuing operations . . 258,570 136,000
Income (loss) from discontinued
operations . . . . . . . . . . . . . (411,804) 3,091,044
------------- -------------
Income (loss) applicable to common
stockholders after assumed
conversions . . . . . . . . . . . . $ (153,234) $ 3,227,044
============= =============
<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Earnings per share (continued)
Three months ended
June 30,
---------------------------
1997 1998
------------- -------------
Denominator:
Denominator for basic earnings per
share - Weighted-average shares . . . 4,000,000 4,000,000
Effective of dilutive securities:
Stock options . . . . . . . . . . . . . - 42,151
Warrants . . . . . . . . . . . . . . . - -
Convertible subordinated term note . . - -
------------- -------------
Dilutive potential common shares . . . - 42,151
------------- -------------
Denominator for diluted earnings per
share - Adjusted weighted-average
shares and assumed conversions . . . 4,000,000 4,042,151
============= =============
Basic income (loss) per share from
continuing operations . . . . . . . . $ (.06) $ .04
============= =============
Diluted income (loss) per share from
continuing operations . . . . . . . . $ (.06) $ .04
============= =============
Basic income (loss) per share from
discontinued operations . . . . . . . $ (.10) $ .77
============= =============
Diluted income (loss) per share from
discontinued operations . . . . . . . $ (.10) $ .76
============= =============
Total basic income (loss) per share . . $ (.04) $ .81
============= =============
Total diluted income (loss) per share . $ (.04) $ .80
============= =============<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Earnings per share (continued)
Six months ended
June 30,
---------------------------
1997 1998
------------- -------------
Numerator:
Income from continuing operations . . . $ 759,228 $ 369,450
Adjustment for basic earnings per
share . . . . . . . . . . . . . . . . - -
------------- -------------
Numerator for basic earnings per share -
income available to common
stockholders . . . . . . . . . . . . 759,228 369,450
Effect of dilutive securities:
Interest on convertible subordinated
term note . . . . . . . . . . . . . . - -
Less tax effect of interest . . . . . . - -
------------- -------------
Numerator for diluted earnings per
share:
Income from continuing operations . . 759,228 369,450
Income (loss) from discontinued
operations . . . . . . . . . . . . . (892,177) 3,078,720
------------- -------------
Income (loss) applicable to common
stockholders after assumed
conversions . . . . . . . . . . . . . . $ (132,949) $ 3,448,170
============= =============
<PAGE>
TRANSCOR WASTE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Earnings per share (continued)
Six months ended
June 30,
---------------------------
1997 1998
------------- -------------
Denominator:
Denominator for basic earnings per
share - weighted-average shares . . . 4,000,000 4,000,000
Effective of dilutive securities:
Stock options . . . . . . . . . . . . . - 31,407
Warrants . . . . . . . . . . . . . . . - -
Convertible subordinated term note . . - -
------------- -------------
Dilutive potential common shares . . . - 31,407
------------- -------------
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions . . . 4,000,000 4,031,407
============= =============
Basic income per share from continuing
operations . . . . . . . . . . . . . $ .19 $ .09
============= =============
Diluted income per share from
continuing operations . . . . . . . . $ .19 $ .09
Basic income (loss) per share from
discontinued operations . . . . . . . $ (.22) $ .77
============= =============
Diluted income (loss) per share from
discontinued operations . . . . . . . $ (.22) $ .77
============= =============
Total basic income (loss) per share . . $ (.03) $ .86
============= =============
Total diluted income (loss) per share . $ (.03) $ .86
============= =============
Unexercised options to purchase 209,000 shares of common stock for
1998 are included in the above calculations. The convertible subordinated
debt and unexercised options to purchase 92,000 shares of common stock
for 1997 were not included in the computations of diluted income per
share because the assumed conversion would be antidilutive.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Revenue for the three months ended June 30, 1998, was $2,442,000,
representing a decrease of $681,000, or approximately 22 percent, from
$3,123,000 for the three months ended June 30, 1997. The decrease in
total revenue was attributable to the Company s demolition operations,
which generated revenue of approximately $2,442,000 for the three months
ended June 30, 1998, compared to approximately $3,123,000 for the same
period in 1997. In addition, discontinued operations from solid waste
management services experienced a decrease in revenue of $273,000 to
$8,099,000 for the three months ended June 30, 1998, compared to
$8,372,000 for the same period in 1997 primarily as a result of closures
of facilities and sales of operating assets, including customer
contracts.
Operating expenses for the three months ended June 30, 1998, were
$2,122,000, representing a decrease of $500,000, or approximately 19
percent, from $2,622,000 for the three months ended June 30, 1997.
Operating expenses include fees charged by landfills for waste disposal
(which to date has been the largest component of the Company s operating
expenses), direct labor costs associated with the collection, transfer,
and recycling of waste, and depreciation. The decrease in operating
expenses was attributable primarily to volume-related decreases in
certain major operational expenses; such as, landfill fees and direct
labor costs related to the Company s demolition operations.
For continuing operations, selling, general, and administrative
expenses for the three months ended June 30, 1998, were $165,000,
representing an increase of $17,000, or approximately 11 percent, from
$148,000 for the three months ended June 30, 1997. For discontinued
operations, selling, general and administrative expenses for the three
months ended June 30, 1998, were $1,178,000, representing a decrease of
$1,038,000, or 47 percent, from $2,216,000 for the same period in 1997.
The dollar and percentage decrease in selling, general, and
administrative expenses is primarily attributable to reduced overhead
costs, such as administrative, sales, marketing and labor costs that are
associated with facilities that have been closed or sold and from
management s actions to reduce overhead costs.
The Company sold its Jacksonville area waste collection and recycling
operating 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. This transaction,
combined with the Company s sale of certain other vehicles, waste
containers, and equipment during the three months ended June 30, 1998,
resulted in a non-operating gain of approximately $5,263,000. These
assets were primarily utilized in the Company s commercial and
residential waste collection services. This gain is included in the
income from discontinued operations for the three- and six-month periods
ended June 30, 1998.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(continued)
Revenues and costs for the remainder of the year will be
substantially decreased primarily due to the expected sale of the solid
waste operations during the third quarter of 1998. See Note 6 for
additional information regarding the sale. Solid waste operations
comprise approximately 75 percent of revenues and operating expenses.
Interest expense, net of interest income, for the three months ended
June 30, 1998, was $84,000 as compared to $71,000 for the three months
ended June 30, 1997. The average amount of debt outstanding decreased
between periods.
The Company s income tax provision was calculated using a rate of
approximately 43 percent and 39 percent for the three month periods ended
June 30, 1998 and 1997, respectively.
As a result of the foregoing, the Company recorded net income of
$3,227,000 for the three months ended June 30, 1998, as compared to a net
loss of $153,000 for the three months ended June 30, 1997.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Revenue for the six months ended June 30, 1998, was $4,310,000,
representing a decrease of $2,749,000, or approximately 39 percent, from
$7,059,000 for the six months ended June 30, 1997. The decrease in total
revenue was primarily attributable to the Company s demolition
operations, which generated revenue of approximately $4,310,000 for the
six months ended June 30, 1998, compared to approximately $7,059,000 for
the same period in 1997. In addition, discontinued operations from solid
waste management services experienced a decrease in revenue of $86,000 to
$16,693,000 for the six months ended June 30, 1998, compared to
$16,779,000 for the same period in 1997. The decrease was primarily the
result of closures of facilities and sales of operating assets, including
customer contracts, partially offset by revenues generated from new
municipal solid waste service contracts.
Operating expenses for the six months ended June 30, 1998, were
$3,553,000, representing a decrease of $1,838,000, or approximately 34
percent, from $5,391,000 for the six months ended June 30, 1997.
Operating expenses include fees charged by landfills for waste disposal
(which to date has been the largest component of the Company s operating
expenses), direct labor costs associated with the collection, transfer,
and recycling of waste, and depreciation. The decrease in operating
expenses was attributable primarily to volume-related decreases in
certain major operational expenses; such as, landfill fees and direct
labor costs related to the Company s demolition operations.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(continued)
For continuing operations, Selling, general, and administrative
expenses for the six months ended June 30, 1998, were $365,000,
representing a decrease of $195,000, or approximately 35 percent, from
$560,000 for the six months ended June 30, 1997. The decrease in selling,
general and administrative expenses is primarily attributable to lower
costs associated with reduced volumes of services and management s
actions to reduce overhead costs. For discontinued operations, selling,
general and administrative expenses for the six months ended June 30,
1998, were $2,353,000, representing a decrease of $1,611,000, or 41
percent, from $3,964,000 for the same period in 1997. The dollar and
percentage decrease in selling, general, and administrative expenses is
primarily attributable to reduced overhead costs, such as administrative,
sales, marketing and labor costs that are associated with facilities that
have been closed or sold and from management s actions to reduce overhead
costs.
The Company sold its Jacksonville area waste collection and recycling
operating 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. This transaction,
combined with the Company s sale of certain other vehicles, waste
containers, and equipment during the three months ended June 30, 1998,
resulted in a non-operating gain of approximately $5,263,000. These
assets were primarily utilized in the Company s commercial and
residential waste collection services. This gain is included in income
from discontinued operations for the three- and six-month periods ended
June 30, 1998.
Revenues and costs for the remainder of the year will be
substantially decreased primarily due to the expected sale of the solid
waste operations during the third quarter of 1998. See Note 6 for
additional information regarding the sale. Solid waste operations
comprise approximately 75 percent of revenues and operating expenses.
Interest expense, net of interest income, for the six months ended
June 30, 1998, was $172,000 as compared to $136,000 for the six months
ended June 30, 1997. The average amount of debt outstanding was
consistent between periods.
The Company s income tax provision was calculated using a rate of
approximately 35 percent and 39 percent for the six month periods ended
June 30, 1998 and 1997, respectively.
As a result of the foregoing, the Company recorded net income of
$3,448,000 for the six months ended June 30, 1998, as compared to a net
loss of $133,000 for the six months ended June 30, 1997.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had a working capital surplus of
$14,411,000 compared to a working capital surplus of $4,997,000 at
December 31, 1997. Working capital was impacted primarily by increases in
cash, amounts due from affiliates, and income tax payable. Current
financial resources, anticipated funds from operations, and repayment of
receivables from affiliate (if needed) are expected to be adequate to
meet cash requirements in the year ahead and the foreseeable future. At
June 30, 1998, the Company had cash of $4,273,000. On May 31, 1998, the
Company sold its Jacksonville area operating assets and certain of its
Miami area operating assets to Eastern Environmental Services of Florida,
Inc., for $11,600,000 in cash.
Net cash provided by operating activities during the six months ended
June 30, 1998, was $4,125,000 compared to $277,000 for the six months
ended June 30, 1997. The increase in cash provided by operating
activities was due primarily to net income earned during 1998, net of
changes in certain operating assets and liabilities (primarily income
from and changes in net assets in discontinued operations, costs and
estimated earnings in excess of billings on uncompleted contracts,
accounts payable, and accrued expenses).
Net cash provided by investing activities during the six months ended
June 30, 1998, was $4,736,000 as compared to net cash used in investing
activities of $1,290,000 for the six months ended June 30, 1997. The
increase in cash provided by investing activity is primarily attributable
to a gain of $5,263,000 from the sale of assets of discontinued
operations.
Net cash used in financing activities during the six months ended
June 30, 1998, was $6,703,000 as compared to net cash provided by
financing activities of $1,450,000 for the six months ended June 30,
1997. This was primarily a result of repayment of cash advances from
Kimmins Corp., as well as repayments of long-term debt.
During the six months ended June 30, 1998 and 1997, the Company s
average trade receivables were outstanding for 35 and 45 days,
respectively. Both averages were based on the first six months of
revenue annualized and compared to the trade receivable balances at
quarter end. Management believes that the number of days outstanding for
its receivables approximates industry norms. Credit is extended based on
an evaluation of the customer s financial condition. Credit losses are
provided for in the financial statements and have been within
management s expectations.
During the six months ended June 30, 1998 and 1997, the Company s
average trade payables were extended for 36 and 28 days, respectively.
Both averages were based on the first six months of operating and
selling, general, and administrative expenses annualized and compared to
trade payable balances at quarter end.<PAGE>
Item 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (continued)
As of June 30, 1998, the Company is a co-borrower with joint and
several liability on approximately $4,244,000 of financial institution
debt of Kimmins. The debt agreements contain certain covenants, the most
restrictive of which require, for Kimmins for 1998, maintenance of a
consolidated tangible net worth, as defined, of not less than $7,500,000
and net income not less than $3,000,000. In addition, the covenants
prohibit the payment of dividends by the Company without lender approval.
For all periods presented and for all of 1998, the Company believes that
Kimmins has complied with or obtained waivers for all loan covenants.
Francis M. Williams has guaranteed approximately $7,817,000 of the
total notes payable of $11,334,000.
The lenders prime and base rates under the Company s notes were 8.5
percent at June 30, 1998.
Included in the notes payable of approximately $11,334,000 are
equipment notes of the Company for $3,647,000 that are due in July 1998.
The Company has executed a commitment agreement that refinances the
$3,647,000 until January 1, 2000 and, accordingly, has classified the
debt pursuant to the expected maturity schedule.
The Company has no current material commitments for capital
expenditures relating to any other new facilities, other than to acquire
vehicles and equipment estimated to be approximately $3,500,000 for the
City of Cape Coral Contract, which begins October 1, 1998. Cash of
approximately $41,000,000 is anticipated from the sale of the Company s
solid waste subsidiary, which is expected to close on August 31, 1998.
See Note 6 for additional information regarding the sale.
Historically, inflation has not had a material effect on the
Company s operations. If inflation increases, the Company will attempt
to increase its prices to offset its increased expenses. No assurance
can be given, however, that the Company will be able to adequately
increase its prices in response to inflation.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ( FASB )
issued Statement of Financial Accounting Standards No. 128, Earnings per
Share ( SFAS No. 128"). Statement No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted
earnings per share. The Company adopted the provisions of Statement 128
No. effective December 31, 1997. All earnings per share accounts for all
periods presented have been restated to conform to the Statement No. 128
requirements.<PAGE>
Item 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 effect to be material.
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 effect to
be material.
The American Institute of Certified Public Accountants recently
issued Statement of Position 98-5, Reporting on the Costs of Start-up
Activities. Start-up costs are defined broadly in the 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, should be expensed as incurred
under the new SOP. The 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
may have to write off the remaining unamortized balance of contract
start-up costs of approximately $330,000 at December 31, 1998. If the
anticipated sale of the Company s solid waste subsidiary occurs, the
Company will have no capitalized start-up costs remaining at December 31,
1998.
Impact of Year 2000
Some of the Company s older computer programs were written using two
digits rather than four digits to define the applicable year. As a
result, those computer programs have time-sensitive software that
recognize a date using 00" as the year 1900 rather than the year 2000.
This could cause a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to
process transactions, send invoices, or engage in similar normal business
activities.<PAGE>
Item 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has completed an assessment and will have to modify or
replace portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter.
The total Year 2000 project is estimated to be immaterial to the
financial statements. To date, the Company s incremental costs for
assessment of the Year 2000 issue, the development of a modification
plan, and the purchase of new software have been insignificant.
The majority of software used by the Company is licensed from various
software providers who are currently updating our programs to be Year
2000 compliant. In-house developed programs comprise a small portion of
the total software utilized, and the majority of these programs are
believed to be Year 2000 compliant.
The project is estimated to be completed not later than December 31,
1998, which is prior to any anticipated impact on its operating system.
The Company believes, with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer systems. However, if
such modifications and conversions are not made, or are not completed
timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to
which the Company s interface systems are vulnerable to those third
parties failure to remediate their own Year 2000 Issues. There is no
guarantee that the systems of other companies on which the Company s
systems rely will be timely converted and would not have an adverse
effect on the Company s systems.
The costs of the project and the date on which the Company believes
it will complete the Year 2000 modifications are based on management s
best estimates, which were derived utilizing numerous assumptions of
future events, including the continued availability of certain resources
and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.<PAGE>
Item 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
The foregoing discussion in Management s Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, that reflect management s current views with respect to
future events and financial performance. Such forward looking statements
include, without limitation, statements regarding the Company s future
capital expenditures, facility closures, service demand and market
growth, competitive position, expected revenues from new contracts,
ability to meet cash requirements, and other statements regarding
anticipated changes in the Company s Nasdaq listing, future plans and
strategies, anticipated events or trends, and similar expressions
concerning matters that are not historical facts. Such statements
involve risks and uncertainties, and there are certain important factors
that could cause actual results to differ materially from those
anticipated. Some of the important factors that could cause actual
results to differ materially from those anticipated include, but are not
limited to, economic conditions, competitive factors, increases in
landfill charges, the outcome of competitive bids, unanticipated costs in
connection with facility closures, and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of the
Company. Due to such uncertainties and risk, readers are cautioned not
to place undue reliance on such forward-looking statements, which speak
only as of the date hereof.
Effect of Inflation
Inflation has not had, and is not expected to have, a material impact
upon the Company s operations. If inflation increases, the Company will
attempt to increase its prices to offset its increased expenses. No
assurance can be given, however, that the Company will be able to
adequately increase its prices in response to inflation.
Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Not required pursuant to Item 305, General Instruction 1.<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
During June 1997, Kimmins Recycling Corp. ( KRC ), St. Lucie County,
a political subdivision of the State of Florida, and the City of Fort
Pierce, a municipality organized under the laws of the State of Florida,
were notified of a class action lawsuit filed in the Nineteenth Judicial
Circuit Court of Florida by three residents of St. Lucie County. This
action challenged the propriety of certain contract provisions included
in KRC s solid waste and recyclable materials collection service
agreement with St. Lucie County, which allow KRC to place liens on the
property of delinquent service recipients. The court, permitting KRC to
file counterclaims against the class members, has with KRC s consent
certified the existence of a class. KRC, the county, and the city have
filed motions for summary judgement against the class plaintiff s claim,
which was heard on May 26, 1998. On June 12, 1998, the Court granted
summary judgement in favor of KRC, the County, and the City. At December
31, 1997, the total amount of lien rights was approximately $474,000.
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
Effective with the close of business on June 10, 1998, the Company s
stock was delisted from the Nasdaq National Market because the Company
could not satisfy the market value public float requirement and was
delinquent in filing its 1997 Form 10-K and its 1998 first quarter Form
10-Q. The Company recently applied to Nasdaq to initiate listing with the
OTC Bulleting Service, which became effective on August 17, 1998.<PAGE>
Item 6. Exhibits and reports on Form 8-K
(a) The following documents are filed as exhibits to
this Form 10-Q:
27.1 - Financial Data Schedule - 1998 (for SEC use only)
27.2 - Financial Data Schedule - 1997 (for SEC use only)
(b) Reports on Form 8-K:
On May 27, 1998, the Company filed a Form 8-K announcing
the sale of operating assets related to the Jacksonville
facility and certain operating assets related to the Miami
facility. On August 4, 1998, the Company filed an amended
Form 8-K that included the Asset Purchase Agreement
relating to the sale.
On July 27, 1998, the Company filed a Form 8-K announcing
the sale of the common stock of Kimmins Recycling Corp. On
August 4, 1998, the Company filed an amended Form 8-K that
included the Stock Purchase Agreement relating to the sale.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRANSCOR WASTE SERVICES, INC.
By: /S/ JOSEPH M. WILLIAMS
---------------------------------------
Joseph M. Williams
President
August 19, 1998
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on August 19,
1998.
Date: August 19, 1998 By: /s/ JOSEPH M. WILLIAMS
----------------- ------------------------------------
-
Joseph M. Williams
President
(Principal Executive Officer)
Date: August, 19, 1998 By: /s/ NORMAN S. DOMINIAK
------------------ ------------------------------------
-
Norman S. Dominiak
Treasurer and Chief Financial
Officer
(Principal Accounting and
Financial Officer)<PAGE>
<PAGE>
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<PERIOD-TYPE> 6-MOS
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