Document/Exhibit Description Pages Size
1: 10-K Rrt, Inc. 10-K 45± 220K
5: EX-10.CC Agreement of Ltd. Partnership 31± 118K
6: EX-10.FF Assignment Agreement 3 18K
7: EX-10.KK Collateral Mortgage Agrmnt. 7± 30K
8: EX-10.PP Confirmation of Agreement 5± 24K
2: EX-11 Computation Earnings/Share 1 7K
3: EX-22 List of Subsidiaries 1 5K
4: EX-24 Consent of Ind Accts 1 6K
9: EX-27 FDS for Rrt 10-K 1 6K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to ______________.
Commission file number: 1-6774
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RESOURCE RECYCLING TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 16-1352980
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
300 Plaza Drive, Vestal, New York 13850
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(607) 798-7137
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Securities registered pursuant to section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $1 Par American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
As of March 24, 1995, the aggregate market value of the Registrant's voting
stock (common) held by non-affiliates of the Registrant was approximately
$18,593,899. (Excludes shares held by officers, directors and controlling
stockholders.)
As of March 24, 1995, the number of shares of Common Stock outstanding was:
2,675,773.
Documents Incorporated by Reference - Part III - Proxy Statement accompanying
the notice of 1994 Annual Meeting of the Registrant.
Indicate by check mark if disclosure of delinquent filers Pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form-K or any amendment to this
Form 10-K. (x) Exhibit Index - Page 35
PART I
Item 1. Business.
Introduction
Resource Recycling Technologies, Inc. (the "Company") is an enterprise
primarily engaged in several solid waste materials management activities: 1) the
operation and management of Company or municipally owned material recycling
facilities ("MRFs") ("MRF Operations") which the Company has designed and built;
2) the scrap processing, data collection and providing of accounting services to
beverage distributors in compliance with the New York State Beverage Container
Return Act (the "Bottle Bill") in upstate New York ("Bottle Bill Business"); and
3) the design and project management of the construction and installation of
separated and mixed waste recycling systems and facilities, which are intended
to be operated either by the Company, municipalities or other commercial
enterprises ("Design & Construction Business"). (See "History and Material
Developments" below). Although the Company is involved in several solid waste
materials activities, it only operates in one industry segment, as scrap and
waste materials.
History
Formation of the Company - The Company was originally incorporated in
the state of Ohio in 1960, and was merged into a wholly owned Delaware
subsidiary in 1989, so it is now a Delaware corporation. The Company's business,
financial position and capitalization were altered substantially on May 26, 1988
with the acquisition by the Company of all of the outstanding capital stock of
RRT Empire Returns Corp. ("RRT Empire"). Through RRT Empire, the Company entered
the waste materials management business.
Bottle Bill Business - RRT Empire was organized in 1983 for the
principal purpose of collecting, processing and recycling beverage containers
pursuant to Title 10 of the New York State Environmental Conservation Law. In
1987, given certain inherent limitations in expanding the deposit legislation
business and given the potential risk that new mandatory recycling legislation
could replace or eliminate the need for deposit legislation, the Company
actively pursued expansion into the municipal recycling and waste materials
management business.
MRF Operations - MRF Operations commenced in 1988 when RRT Empire began
processing and brokering materials collected under curbside recycling programs.
These programs were created as a result of various legislative requirements that
a percentage of the solid waste stream be recycled as opposed to landfilled or
incinerated.
Design and Construction Business - In 1989 after the acquisition of RRT
Empire, the Company formed a wholly owned subsidiary, RRT Design & Construction
Corp. ("RRT D&C"), in order to enhance the Company's in-house capability of
responding to municipal requests for proposals to turnkey the design,
construction and operation of MRFs. Design and construction activities have
become a significant business for the Company with respect to both MRFs and
other waste material handling equipment systems.
Discontinued Operations - In May 1990 the Company acquired
substantially all of the operating assets of the Ricard Group, a group of
companies engaged at that time in the trading and compounding of off-grade and
scrap industrial plastic resins (primarily polystyrene). In November 1992, the
Company completed and began commercial operation of a new $4.3 million
Polyethylene Terephthalate Polymer (PET) processing facility in Trenton, New
Jersey. The Company discontinued the business in 1992 and has completed the
liquidation of the assets of that business. In addition, the Company sold the
assets of the PET processing facility to Pure Tech International, Inc. on
February 2, 1993 for a purchase price of $4.3 million. The purchase price was
paid by the assumption of term debt in the amount of $2.5 million and issuance
of $1.8 million of registered Pure Tech International, Inc. common stock, valued
at $11.25 per share. The stock has been sold and the Company has realized a gain
of $334,000. Although the Company is no longer in the plastics manufacturing
business, it is still in the plastics brokerage business.
In July 1992 the Company installed equipment in its Syracuse facility
which was capable of processing large quantities of color sorted glass cullet
into furnace ready cullet for primarily one customer, Owens-Illinois, Inc.,
pursuant to a 3 year supply agreement. In 1994 sales from this activity were
$4,594,000. On February 1, 1995 the Company sold these assets and the business
associated with it to Continental Recycling, Inc. ("Continental") for a cash
purchase price of $1.75 million. The Company realized a gain on the sale of
$690,000 on the sale of those assets. In addition, the Company entered into an
operations and management agreement with Continental, which provides for the
Company to operate the equipment for the period of time the equipment remains in
the Company's facility. Payments under this agreement will continue for two
years, even if the equipment is moved from the site, and could be in excess of
$1 million, depending upon performance. (A description of the sale of this
business is contained in the Company's current Report on Form 8-K filed February
14, 1995 and incorporated by reference herein).
Change in Control - After purchasing 914,806 shares or 34.7% of the
then-outstanding common stock of the Company in October 1991 and thereafter, in
1992, abandoning an attempt to merge with the Company, JWP Inc. sold its entire
position in the Company to the investment banking firm of Allen & Company
Incorporated ("Allen & Co.") and Paul A. Gould on December 30, 1993 (see the
Company's Current Report on Form 8-K dated December 30, 1993 incorporated by
reference herein). On February 22, 1994, Allen & Co. sold 100,000 shares of the
Company's common stock that it had purchased to Andrew Dwyer, Chairman of the
Company and the former Chairman of JWP Inc.
Material Developments
On March 17, 1995, the Company, Waste Management, Inc. ("WMI"), and WMI
Acquisition Sub, Inc. ("WMI Subsidiary"), executed an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which the Company is expected to be
acquired by WMI through a cash tender offer by WMI Subsidiary for 100% of the
outstanding common stock, $1.00 par value (the "Common Stock"), of the Company
for $11.50 per share. Following completion of the tender offer, WMI Subsidiary
will be merged (the "Merger") with and into the Company, with the Company
surviving as an indirect wholly owned subsidiary of WMI. Stockholders of the
Company who do not tender their Common Stock to WMI Subsidiary pursuant to the
tender offer will receive the same consideration pursuant to the Merger that
they would have received if they had tendered their Common Stock in response to
the tender offer. Upon consummation of the Merger, the Common Stock will not
trade publicly and WMI will be the sole holder of the capital stock of the
Company.
The tender offer is expected to be completed on or before May 1, 1995.
The principal conditions to the consummation of the tender offer are (i)
termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1986, as amended, and (ii) the valid tender of at
least 50.1% of the outstanding Common Stock (on a fully diluted basis), and such
shares not being withdrawn prior to the expiration date of the offer.
If WMI Subsidiary acquires 90% or more of the outstanding Common Stock
pursuant to the tender offer, the Merger Agreement provides that, as soon as
practicable following consummation of the offer, a certificate of merger will be
filed with the Delaware Secretary of State and other actions necessary to
accomplish the Merger of WMI Subsidiary into the Company pursuant to Section 253
of the Delaware General Corporation Law. If WMI Subsidiary does not acquire 90%
or more of the outstanding Common Stock pursuant to the tender offer, it is
expected that a special meeting of the Company's stockholders will be held as
soon as practicable after the consummation of the tender offer to approve and
adopt the Merger Agreement and consummation of the Merger.
The Company's Schedule 14D-9 and Information/Solicitation Statement
related to the tender offer were filed with the Securities and Exchange
Commission on March 23, 1995 and mailed to the Company's stockholders of record
shortly thereafter, and are incorporated by reference herein. Although the
Company believes at the present time that the WMI tender offer and Merger will
be consummated, there can be no assurances that these events will occur.
On December 30, 1994, the Company and one of its subsidiaries invested
as a limited and a general partner, respectively, in American RRT Fiber Supply,
L.P., a newly formed Pennsylvania limited partnership ("American RRT"). American
RRT was formed by the Company and two companies affiliated with American Power
Corp., a developer of paper mills that use recycled materials, to design, build
and operate a mixed office waste paper processing facility (the "American RRT
Project") in Philadelphia, Pennsylvania. The American RRT Project is being
financed through the issuance in December 1994 of $15,900,000 of Philadelphia
Authority for Industrial Development Solid Waste Disposal Facility Revenue
Bonds, and capital contributions of $300,000 from the Company and its subsidiary
and an additional $300,000 from the American Power Corp. affiliates. Another
subsidiary of the Company, RRT D&C, has entered into a $10,000,000 turnkey
engineering, procurement and construction contract with American RRT to build
the facility in Philadelphia. Construction of the American RRT Project began in
early February 1995 and is expected to be completed by the end of 1995.
Principal Products and Services
The Company divides the products and services it provides primarily
into two divisions: the Material Recycling Division and the Design &
Construction Division. These divisions are supported by a corporate
administrative staff performing activities such as business development,
finance, information systems and general management. In 1994 the Company formed
a third division for marketing its commodities, however, in 1995 it has
abandoned this structure. Instead, commodity sales and transportation from the
MRD Division now are reported in that division and commodity brokerage sales are
reported as a business development activity in corporate administration.
Material Recycling Division
The Material Recycling Division is further divided into two operating
segments: Bottle Bill Operations (formerly called Deposit Legislation) and MRF
Operations.
Each operation produces salable scrap commodities in the form of
aluminum beverage containers, clear, amber, green and mixed glass cullet, PET
and high-density polyethylene ("HDPE") plastic containers, various grades of
waste paper (including news and corrugated) and tin cans. In 1994, the Company
sold nearly 420,000 tons of commodities and expects to sell more than 470,000
tons in 1995. The Company has entered into long-term direct-supply agreements
for certain quantities of news, corrugated, glass and PET containers with
various mills. The Company estimates that approximately 54% of its commodities
available for sale in 1994 and 1995 were, and will be, subject to long-term
contracts. In 1994 this represented approximately 38% of total revenue from the
sale of scrap. Nearly all long-term contracts contain pricing adjustment
mechanisms tied to certain published indices. The Company intends to maintain a
balance between long-term contracts and spot-market sales in order to minimize
its exposure to fluctuations in the markets. In 1994 commodity pricing increased
dramatically in the second half of the year. As of the first quarter of 1995,
pricing has remained high, although aluminum has begun to decline.
In 1994, one glass recycler, Owens-Illinois, accounted for 10% of total
consolidated revenue. No other single customer accounted for more than 10% of
the Company's total consolidated revenue in 1994.
The approximate percentages of the Company's sales of its principal
services by dollar volume for the years ended December 31, 1994, 1993, and 1992,
are as follows:
[Download Table]
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Year Ending Dec. 31
1994 1993 1992
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Material Recycling Division
MRF Operations
Service Fees ............................ -5 6 9
Scrap Sales ............................. 53 39 16
Materials Brokerage .......................... 8 4 2
Bottle Bill Operations
Collection & Accounting.................. 11 15 13
Scrap Sales ............................. 14 14 12
Design and Construction Division
Internal Projects ............................ 5 2 15
External Projects ............................ 14 20 24
Plastics Division
(Discontinued 1992) .......................... - - 9
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100 100 100
Bottle Bill Operations
Bottle Bill Operations provide transportation arrangements, scrap
processing, data collection and accounting services to certain regional
retailers and beverage wholesalers subject to the New York State Bottle Bill.
Bottle Bill Operations have processed more than four and one half billion
containers totaling more than 750 million pounds of aluminum, glass and plastic
since the inception in 1983. Services are provided to over 125 beverage
distributors and 2000 retail grocery stores and redemption centers in a
geographic area encompassing metropolitan and suburban Rochester and Syracuse.
Bottle Bill Operations offer customers a proprietary "Supermarket System," and
an "AccuSort" in-store statistical sampling system, both of which are
incorporated into computerized cash registers and scanners to identify deposit
container brand, type, size and quantity information at the point of redemption.
The transportation and accounting services provided by the Company
consist of arranging for the pick-up and transportation of used beverage
containers for which a deposit has been paid, and the enumeration of these
containers by type and by distributor. The Company provides an accounting of
these containers to distributors and retailers, which facilitates the clearing
of deposit and handling fees.
Sales of beverages in the consumer marketplace and corresponding
redemption of used beverage containers are seasonal, with volume usually
increasing in the warmer months. Sixty-four percent of the Bottle Bill dollar
volume of business occurred between June and November of 1994.
MRF Operations
MRF Operations receive, separate, process and market recyclable
materials collected under a local community's overall recycling program. MRF
Operations commenced in 1987. There are currently seven locations which the
Company operates as MRFs and three additional locations from which it
exclusively brokers recyclables for other operators. The volume of recyclables
processed in each plant is generally dependent upon how aggressively the local
municipal recycling program is communicated and enforced by the applicable
governmental agency, as well as seasonality and general economic conditions.
Except for its Syracuse, New York MRF, the Company does not charge a "tipping
fee" for the disposal of recyclables and thus does not have any pricing control
over volume. With the significant rise in commodity prices in the second half of
1994, at some locations the Company has had to pay for various recyclable
commodities. However, the Company has generally been able to maintain profitable
operating margins under these circumstances.
MRF Operations produce and purchase significant amounts of PET which
are generally resold to Pure Tech International, Inc. (the purchaser of the
Company's former PET facility), pursuant to a long-term supply agreement.
Availability of raw materials is based on competitive pricing, as well as
seasonality and general economic conditions.
Six of the seven MRFs operated by the Company are the result of the
award of turnkey contracts for the design, construction and operation of MRFs
for municipalities or agencies thereof. The terms of the operating contracts for
these facilities range from five to ten years, with some containing a customer
option to extend the terms for an additional five years.
In 1994 the Company was awarded design and construction contracts, and
in 1995 the Company entered into two additional turnkey MRF Operations
contracts, in Massachusetts and Illinois for which it must finance all or a part
of the physical assets. In addition, in December 1994 the Company entered into a
limited partnership with affiliates of American Power Corporation, which
completed the non-recourse financing of a $15.9 million paper sorting facility
in Philadelphia, Pennsylvania. (See "Recent Developments").
Although contractual arrangements vary widely depending upon the needs
and interests of each municipal client, where municipalities finance and own the
facility, contracts generally range from five to ten years. After the completion
of construction and acceptance testing (which requires 9 to 12 months on
average), the municipality typically agrees to pay a minimum annual service fee
(which is generally tonnage-sensitive) during the term of the contract.
The construction price of a turnkey MRF has generally ranged from $2.5
to $15 million, depending upon the tonnage processed and whether a new building
is required. When the municipal customer owns the facility, the Company shares
the revenue from the sale of commodities with the municipal customer. The
municipalities' share of revenue ranges from 50% to 100%. In 1994 annual revenue
from the sale of commodities for each municipally owned facility ranged from
$119,000 to $4,247,000.
The Company's primary marketing technique to increase the number of its
turnkey contracts had been through the process of responding to municipal
requests for proposals to provide the turnkey services described above. Because
of fewer projects being let by public agencies, the Company has sought to
increase its activities in brokering recycled commodities, manage recycling
facilities that it does not build, and attempt to develop merchant facilities
based on a long-term supply of recyclables from municipalities, such as the one
the Company owns and operates in Syracuse, New York. In addition the Company
believes that the rapid and substantial increase in commodity prices in 1994 has
led to increased competition for recyclables from existing and new recyclers.
The Company does not believe that federal, state or local laws or
regulations regarding the discharge of materials into the environment or those
otherwise relating to the protection of the environment will have a material
effect on the earnings, capital expenditures or competitive position of the
Company. Although the Company is subject to standards relating to the protection
of the environment, due to the nature of its operations, it has not been
required to incur material expenditures for environmental control projects. Some
of the Company's facilities maintain pollution control equipment, such as dust
collectors, but the Company's operations do not cause or allow significant
discharges of hazardous materials into the environment. The Company's facilities
do not emit hazardous air pollutants, and do not discharge industrial
wastewater. The Company does not accept hazardous waste at its MRFs, and the
quantities of hazardous wastes generated by its facilities are minimal. It has
not been identified as a "potentially responsible party" at any "Superfund"
sites and, based on the Company's historic waste disposal practices, management
does not believe that the Company's exposure for remediation of waste disposal
sites is significant.
The operation of the Company's facilities may be affected by federal,
state, and local laws and regulations relating to the ownership and disposal of
solid waste, in particular those that (i) have the effect of requiring the
disposal of or treatment of solid waste at a facility designated by the local
government (usually referred to as "flow control"); (ii) attempt to restrict the
flow of solid waste or recyclable materials into a jurisdiction; and (iii)
mandating waste reduction and recycling.
Flow control laws may be used by local governments to restrict the
exportation of solid waste and recyclable materials so as to guarantee the flow
of such materials to a facility sponsored by the municipality. For facilities
operated by the Company under contract with a municipality, flow control
provisions may help to ensure the delivery of an adequate volume of materials to
provide revenues to the Company as required by the municipality's contract with
the Company. With respect to facilities for which some or all of the capacity is
supplied other than through contracts with the local government, flow control
may adversely affect the ability of the Company to secure materials by enabling
municipalities in which the waste originates to divert that waste to other
facilities.
A recent U.S. Supreme Court decision made clear that flow control
provisions that adversely affect interstate commerce may be unenforceable
because they violate the Interstate Commerce Clause of the U.S. Constitution;
however, legislation has been introduced in the U.S. Congress that would enable
municipalities to implement flow control under certain circumstances even if it
adversely affects interstate commerce. In addition, flow control provisions
affecting recyclable materials may be subject to challenge under the takings
clause of the U.S. and applicable state constitutions. The imposition of flow
control and challenges to its implementation should not have a material adverse
effect on the Company's operations because (i) most of the Company's municipal
contracts do not depend on flow control to assure a flow of materials, and those
contracts that rely on flow control do not appear to affect interstate commerce;
(ii) other means may be available to municipalities to assure a flow of
materials to the Company's facilities or to make damage payments if materials
are not delivered; and (iii) with respect to capacity that is not subject to
municipal contracts, the invalidity of flow control provisions would favorably
affect the Company's ability to obtain materials.
Laws and regulations restricting the importation of solid waste into
states and localities are not likely to have a material effect on the Company's
operations. Few of the Company's facilities receive significant amounts of
materials that have originated in another state. In general, laws restricting
the importation of waste into a jurisdiction have been invalidated by the courts
as violative of the Interstate Commerce Clause of the U.S. Constitution.
Although legislation has been introduced in the U.S. Congress in the recent past
that would allow states and localities to impose such restrictions under certain
circumstances, such restrictions are more likely to affect the interstate flow
of non-recyclable waste than recyclable materials.
Laws and regulations mandating waste reduction and recycling would have
the effect of increasing demand for MRFs in general, and, because such laws
often impose requirements that local governments achieve certain recycling
goals, are likely to spur municipal governments to procure MRFs and enter into
contracts for their operation. Such laws also might have the effect of reducing
market prices for recyclable materials, which could affect the price the Company
receives for such materials. Laws and regulations that attempt to reduce the
amount of waste generated by outlawing or taxing packaging materials could
ultimately reduce the amount of recyclable materials available to the Company,
although such approaches currently appear less likely to be implemented than
mandated recycling programs.
Design and Construction Division
RRT Design & Construction Corp. (RRT D&C) was formed in 1989 as a full-service
design/build company to develop and market leading technologies for the recovery
of recyclables. Since 1989, RRT D&C has designed and built over thirty such
facilities utilizing advanced technology for the processing of solid waste and
materials recovery. Total RRT D&C revenue for 1994 was $7,946,000.
RRT D&C has expanded its technology expertise to include glass
beneficiation, automated paper sorting, ferrous processing, compost feedstock
preparation and fiber fuel. Additionally, RRT D&C created in 1993 a Field
Service Division for the installation and customer service of all its equipment
systems. The Field Service Division successfully completed its first
international installation in 1994.
RRT D&C maintains a flexible staff of professional engineers,
designers, drafters, project engineers and project managers in Melville, New
York. RRT D&C also provides engineering support services to the Company for
significant repair and maintenance projects, retrofits and plant inspection. RRT
D&C has a full computer network service for CAD as well as accounting for
management and other software products.
Facilities Completed - In 1994 RRT D&C completed the construction of
$5,700,000 of various projects. These projects included a $1,100,000 compost
pre-processing system in East Hampton, NY, a Company retrofit of a MRF for
$1,300,000, a trashline system in West Palm Beach, FL, and a MRF in Arkansas.
Facilities Under Construction - RRT D&C was selected in 1994 to
construct several projects utilizing RRT's technologies. Current projects under
design and construction include: MRFs, paper processing, and an incendiary ash
management system. Additionally, RRT D&C was awarded a contract to design and
build a $10,000,000 MRF (paper processing) in Philadelphia, Pennsylvania.
Collectively all contracts in progress at the end of 1994 exceed $17,000,000 in
remaining contract value.
RRT D&C also performs maintenance engineering and technology upgrades
for all Company operated facilities.
Facilities Under Development - RRT D&C has been selected to design and
build a $10,000,000 MRF for a customer in Lake County, Illinois.
Additionally, RRT D&C in association with the Company has been selected
to design and build significant expansions to the Company's operating facility
in Syracuse, NY. This project will increase the capacity of the facility.
Construction will commence in May 1995, and is scheduled to be completed in the
first quarter of 1996.
Principal Markets
The Company markets its Bottle Bill services predominantly in upstate
New York (between Albany and Rochester, and north to the Canadian border); these
services center around plants or transfer stations in Rochester, Syracuse, and
Utica. The Company markets the balance of its products and material services
throughout the United States and Canada.
Competition
Bottle Bill Operations: Competition in this area falls into three
categories: (1) distributors and bottlers electing to collect and process their
own containers; (2) other third-party services; and (3) individual retailers
processing the containers of all their distributors. The Company believes that
it provides economies of scale which have enabled it to remain the dominant
service provider within its market area. The Company believes that other third-
party services have not been effective in penetrating the area served by the
Company due to the high capital costs necessary to enter the market.
Recently, the Company has experienced a threat from a technology used
in other market places in which some of the company's customers have expressed
an interest. This technology, known as "Reverse Vending", can reduce the
operating costs of both a large supermarket and a beverage distributor. In
response to this threat the Company has entered into an agreement with a leading
provider of reverse vending technology, TOMRA of North America, whereby the
Company will subsidize the placement of these machines in its marketplace in
consideration of having the exclusive right to receive, manage and process the
collection data and containers which flow through the machines. The reverse
vending machines allow consumers to redeem deposit containers without the
assistance of retail store personnel by feeding the containers to be redeemed
into a machine approximately the size of a soft drink vending machine. The
machine scans the bar code imprinted on the can, determines that the container
is valid for deposit redemption, records the brand for later use by the
retailer, crushes the can for easier disposal, and issues a receipt to the
consumer that can be exchanged for cash. The reverse vending machine may
potentially reduce costs by crushing the cans for easier transportation for
disposal as well as reducing the requirement of store personnel needed in the
redemption process.
MRF Operations: Competition for providing MRF Operations may be divided
as follows:
National. Competition from national enterprises can be divided into two
types. Certain companies that are recycling specialists -- such as New England
Container Recovery, Inc., a subsidiary of Wellman, Inc., Resource Recovery
Systems, Inc. FCR Corporation, and Prins Recycling, Inc. -- are in direct
competition with the Company for recycling projects. Other competition comes
from companies that offer collection and processing of recyclables including
multi-national waste companies such as Waste Management, Inc., Browning-Ferris
Industries, Inc. and Laidlaw. The Company also encounters other large,
international companies from time to time (for instance, Anheuser-Busch,
Commercial Metals Corporation and Weyerhaeuser Company.) Several of the national
waste-hauling concerns which have entered the MRF market have significantly
greater resources than the Company.
Local. Almost every bid will be responded to by one or more local scrap
processors or waste haulers. The Company believes that such entities represent
significant competition in instances where a site must be provided by the
vendor. The Company will usually choose not to bid projects in which it has to
provide a site unless arrangements with a local entity regarding provision of a
site can be attained.
High commodity prices, the lack of enforceability of flow control
legislation and a trend toward privately owned and financed facilities have
increased the growth of the number of participants involved in the business of
responding to the municipal bids for collection, processing and marketing of
recyclables. Management believes certain major waste haulers will at times
propose exceptionally low fees for recycling services in order to either enter
or defend a market. Accordingly, there can be no assurance that the Company will
continue to be a successful bidder in the procurement of new facilities. In
addition, the Company is generally at a disadvantage in bidding against waste
haulers when the bid requires the full service of collection, processing and
marketing of recyclables.
Design and Construction. Competition for the design and construction of
MRFs and other waste recycling facilities depends upon whether or not operations
are included. Where operations are included, the competition is the same as
experienced by MRF Operations. Where operations are not included, competition
comes from a broad array of local and national engineering firms, as well as
equipment suppliers and local construction companies. The Company believes that
its application of technologies, hands on experience in operations and its
ability to offer marketing services to prospective customers gives RRT D&C a
competitive advantage from time-to-time.
Performance Guarantees, Bonding and Letters of Credit
In general, construction and operations bonding is required to guaranty
the performance of the Company to its municipal customers under existing and new
MRF operating contracts. Over the past several years, the Company has been able
to bond all construction activities. In addition, in those circumstances where
the Company could not post an operations bond, it was able to post letters of
credit. The Company has an informal arrangement with a nationally recognized
general contractor (who has built many projects for the Company), to provide
construction bonding for an additional fee. The Company has established a
bonding line with a new surety for both construction and operating bond
requirements.
Financing and Working Capital
The Company refinanced certain existing loans with its primary lender
and issued a consolidated and restated note payable in July 1994. In November
1994 the Company's primary lender also agreed to increase a revolving line of
credit to $3,000,000. In February 1995 the Company sold its glass processing
assets and reduced its long-term debt approximately $640,000 with a part of the
$1,750,000 proceeds. The disposition of certain assets, a new line of credit and
better cash management resulted in the Company achieving all of its cash flow
objectives for 1994. The Company continues to try to improve cash flow by
aggressively collecting receivables and limiting its new investments.
Employee Relations
As of December 31, 1994, the Company had approximately 350 persons in
its employ, of which 70 were members of a collective bargaining unit. The
Company's agreement with the bargaining unit, which represents production
employees of the Monroe County MRF, will expire on August 5, 1996. The Company
believes its relations with its employees are satisfactory.
Item 2: Properties.
Material Recycling Division Facilities
Bottle Bill Operations: Bottle Bill Operations are conducted in
facilities located in Syracuse and Rochester, New York. In Syracuse,
approximately 34,000 square feet of a total of 70,000 square feet are used for
Bottle Bill operations. The facility is owned by a subsidiary of the Company and
is financed with a mortgage held by the Binghamton Savings Bank. The remainder
of the facility is used by Materials Recycling Division ("MRD") Operations. In
Rochester, Bottle Bill Operations use approximately 12,000 square feet of a
45,000 square-foot facility. This facility is owned by the Monroe County Solid
Waste Authority and is made available to Bottle Bill Operations under a ten-year
agreement terminating December 31, 2001 with a subsidiary of the Company for its
operation of a MRF, which uses the remaining square footage. Comparable space
for Bottle Bill Operations is available should the ten-year contract not be
renewed.
MRF Operations
New York:
Syracuse: MRF Operations use approximately 36,000 square feet of this
facility. In accordance with a 3-year licensing agreement terminating December
31, 1995 with the Onondaga County Resource Recovery Agency, a subsidiary of the
Company is one of two designated MRF operators in the county. Under this
agreement MRF Operations receives approximately 30,000 tons per year of mixed
paper and mixed containers from various waste haulers within the County, based
upon a monthly competitive tipping fee bid. The Company believes it processes
approximately 75% of the available recyclables in the county. Recyclables from
other municipalities are also received and processed at the facility from time
to time. In addition, MRF Operations also receive and process grades of
commercial paper other than news, which it must purchase from waste generators
and haulers in the community.
The Company's glass processing system receives color sorted glass from
its own operations and from other processors of recyclables and further cleans
and pulverizes the material for sale, primarily to a glass bottle manufacturing
facility near Syracuse. The facility processed 95,000 tons of glass in 1994. The
assets used for glass processing were sold in 1995. (See Item 1.
Business-Material Developments).
Monroe County: MRF Operations began in this facility in January 1992
under a 10-year service agreement with the county. The facility is capable of
processing 2,100 tons of mixed recyclables per week and currently operates at
approximately 1,700 tons per week. The Company receives a variable service fee
plus a percentage of scrap revenue for managing the operations. In order to
further improve the operating capability of the facility, the Company financed a
number of improvements to the facility, totaling approximately $300,000, in
return for an increased service fee and the elimination of a $900,000 letter of
credit previously required to guaranty the Company's performance.
New Jersey:
Cape May County: Originally constructed in 1989, this
34,000-square-foot, 30,000-tons-per-year county-owned facility was the Company's
first turnkey MRF operation and the first of its kind in New Jersey. The
original operating agreement was for five years; however, in 1992 the Company
entered into a new 10-year agreement with the Cape May County Municipal
Utilities Authority, in return for the Company financing a $2.6 million
improvement to the facility, which was completed in July 1992. These
improvements allow the Company to more efficiently process the mixed recyclables
in the county, which are subject to extreme seasonal fluctuation and which
contain a mixed commercial and residential paper stream not generally collected
in other communities. The Company used internal funds to finance this expansion.
The Company receives a fixed monthly service fee, plus a percentage of scrap
revenues in excess of an agreed upon base amount.
Ocean County: This 38,000-square-foot, 65,000- ton-per-year
county-owned facility is operated by the Company pursuant to a contract that was
originally scheduled to expire on January 1, 1996. The Company receives a base
operating fee and a percentage of scrap revenues, which under a 1992 contract
change can increase based upon out-of-county materials that are processed at the
facility. The Company expects to process about 21,000 out-of-county tons in 1995
in the facility. The Company and the County have recently entered into an
amendment to the contract which provides for an extension of the contract until
January 1, 2001 in return for the Company financing 20% of a $1.2 million
capital improvement. The improvements were completed in mid-1994 and are
expected to result in a substantial increase in the plant's throughput.
Connecticut:
Hartford: In 1992 the Company completed the construction and started
operations of a 20,000-ton-per-year, agency-owned, commingled-container-only MRF
for the Connecticut Resource Recovery Agency in an existing facility. The
contract is for an initial term of 5 years, with agency options to renew for up
to 20 years. The Company receives a fixed service fee, plus a percentage of
scrap revenues. At the agency's request, the Company has proposed improvements
to the facility, which the Company may be willing to finance in part, in return
for a contract extension and an increased service fee. The Company is awaiting
the response of the agency.
Florida:
West Palm Beach: This 39,000-square-foot, 90,000-tons-per-year,
municipally-owned facility is operated by the Company pursuant to a contract
that expires in October 1996. The Company receives a fixed and variable tonnage
service fee, plus a percentage of scrap revenue. In 1993 the Company entered
into an agreement to expand the facility and increase its revenue share.
Improvements of which 80% were financed by the customer were completed in the
spring of 1994.
Vermont:
Brattleboro: This 20,000-square-foot, 10,000-tons-per-year,
municipally-owned facility is operated by the Company pursuant to a contract
that expires in July, 1997. The Company receives a fixed and variable tonnage
service fee, plus a percentage of scrap revenue.
Design and Construction Division - Design and construction activities
are operated out of approximately 7,300 square feet of office space in Melville,
New York (Long Island); this space has been leased until March 31, 2000. The
facility is occupied by the Company's design and engineering department,
consisting of approximately twenty-nine professional and administrative staff.
Corporate Offices - The Company's administrative and executive offices
are located in Vestal, New York in two offices (comprising approximately 10,000
square feet), one of which is leased from affiliates of a director and former
controlling stockholder of the Company. Both leases expire in 1999.
Item 3. Legal Proceedings
The Company is one of seven defendants in a lawsuit entitled Myrtha Hernandez
d/b/a Upstate Returns vs. RRT Empire Returns Corporation et al., filed in the
Western district of the United States District Court on August 19, 1992. The
suit alleges violations of the Sherman Anti-Trust Act. The other defendants are
six beverage distributors in Monroe County, New York. The suit alleges that the
Company conspired with defendant beverage distributors to prohibit the plaintiff
from entering the bottle redemption business; the suit is seeking compensatory
damages of $1 million and punitive damages of $15 million against all
Defendants. Based upon the advice of the Company's counsel, Harter, Secrest &
Emery, the Company believes the complaint is without merit, is vigorously
defending itself, and has moved for summary judgment dismissing the suit.
RRT Design & Construction Corp. ("RRT D&C"), a subsidiary of the
Company, has filed a proof of claim in the U.S. Bankruptcy Court for the Eastern
District of New York (the "Bankruptcy Court") against Babylon Recycling Center,
Inc. ("BRCI") for payment of $263,000 plus interest of $107,000. The BRCI
obligation arose out of a note payable to RRT D&C for engineering, design,
construction and testing services provided to BRCI at its commercial mixed waste
processing facility pursuant to a contract between RRT D&C and BRCI (the "BRCI
Contract"). BRCI is a debtor-in-possession operating pursuant to Chapter 11 of
the U.S. Bankruptcy Code. In 1994, the Company wrote-off the receivable based on
management's determination that recovery is doubtful and further action is not
expected to be taken with respect to this matter.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 4 is inapplicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock, par value $1.00 ("Common Stock"), is listed
and principally traded on the American Stock Exchange ("AMEX"). The high and low
sales prices of the Common Stock on the AMEX, by calendar quarter from January
1, 1993, as reported in published financial sources, are as follows:
[Download Table]
High Low
---- ---
1993:
First Quarter 3-1/8 2-1/16
Second Quarter 2-7/8 2
Third Quarter 2-3/4 2-1/2
Fourth Quarter 4 2-1/4
1994:
First Quarter 3-3/16 2-1/4
Second Quarter 3-1/4 2-3/4
Third Quarter 3-7/8 2-3/4
Fourth Quarter 5-7/8 3-3/4
1995:
First Quarter
(through March 24, 11-3/8 4-3/4
1995)
As of March 24 ,1995, the approximate number of record holders of the Company's
Common Stock was 406.
Dividend Policy: No dividends were paid on the Common Stock in 1994 or 1993. The
Company currently anticipates that earnings will be retained for use in the
operation and expansion of its business.
SELECTED FINANCIAL DATA
Item 6.
The Selected Financial Information set forth below reflects the recycling
operations as "continuing operations" and the Plastics Division as "discontinued
operations."
[Enlarge/Download Table]
Year ended December 31,
---------------------------------------------------------------------
Operations: 1994 1993 1992 1991 1990
---------------------------------------------------------------------
(Dollars in Thousands except per share data)
Revenues from continuing
operations ................ $ 41,794 $ 33,040 $ 39,210 $ 35,985 $ 28,357
Income (loss) from
continuing operations ..... 1,209 27 (3,697) 490 (692)
Income (loss)from
discontinued operations ... -- (923) (445) 66
Loss on disposal ........... -- (1,778) -- --
Extraordinary credit ....... -- -- 29 --
--------- --------- --------- --------- ---------
Net income (loss) .......... $ 1,209 $ 27 $ (6,398) $ 74 $ (626)
========= ========= ========= ========= =========
Data Per Share (1):
Earnings(loss) per common
and common equivalent
share:
From continuing operations . $ 0.45 $ 0.01 $ (1.41) $ .18 $ (.29)
From discontinued operations -- (.35) .17 .02
Loss on disposal ........... -- (.67) -- --
From extraordinary credit .. -- -- .01 --
--------- --------- --------- --------- ---------
Net income (loss) .......... $ 0.45 $ 0.01 $ (2.43) $ .02 $ (.27)
========= ========= ========= ========= =========
Book value per common
share ..................... $ 3.85 $ 3.43 $ 3.42 $ 5.86 $ 5.83
Cash dividend per share .... -- -- -- -- --
[Download Table]
Financial Position: December 31,
-------------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------------
Working capital ........... $ 2,105 $ 1,293 $ 1,992 $ 9,061 $ 9,938
Total assets .............. $20,300 $16,807 $20,480 $25,335 $23,775
Total long term obligations
and redeemable preferred
stock .................... $ 1,818 $ 1,784 $ 2,513 $ 2,842 $ 1,615
Shareholders' equity ...... $10,232 $ 9,032 $ 9,018 $15,432 $15,492
(1) Based on 2,658,000, 2,633,000, 2,637,000, 2,684,000, and 2,432,000 weighted
average common and common equivalent shares for the years ended December 31,
1994, 1993, 1992, 1991, and 1990, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in thousands, except per share data)
Results of Operations
Results of operations reflect the Company's two principal operating
divisions: the Design and Construction Division (RRT-D&C)and the Material
Recycling Division (MRD). Included in the MRD are Material Recycling Facilities
(MRF Operations), Bottle Bill Operations and Materials Brokerage Operations.
Given state legislative developments in recent years, and given the potential
risk that new mandatory recycling legislation could replace or eliminate the
need for deposit legislation, the Company has actively pursued expansion into
the municipal recycling and waste materials management business. The Company
commenced commercial operations at its first material recycling facility March
of 1988 and currently operates seven facilities.
The Company's revenues from its two operating divisions for the past
three years were:
[Download Table]
Years Ended December 31,
-------------------------------
1994 1993 1992
-------------------------------
Design & Construction Division $ 7,946 $ 7,177 $16,949
Material Recycling Division
MRF Operations ............... 20,089 15,228 10,982
Bottle Bill Operations ....... 10,462 9,629 10,621
Materials Brokerage Operations 3,297 1,006 658
------- ------- -------
Total Revenues ................ $41,794 $33,040 $39,210
======= ======= =======
1994 Compared to 1993:
Revenues. Revenues for the year ended December 31, 1994 increased $8,754 (or
26.5%) compared with the year ended December 31, 1993. The increase resulted
from a $7,985 or 30.9% increase in revenues from the MRD, and a $769 or 10.7%
increase in revenues from construction projects in RRT D&C. The $7,985 increased
revenues from the MRD includes $4,861 of increased revenues from the MRFs,
$2,291 increased material brokerage revenues, and an $833 increase in Bottle
Bill Operations revenues. The majority of the $4,861 increased revenues from the
MRFs was attributable to the Syracuse, NY plant while the other six MRFs
experienced modest increases.
Nearly 67% of the increase in revenues in the Syracuse, NY plant is due to price
increases, while approximately 33% of the increase in revenues is due to volume
increases. The glass beneficiation system at the Syracuse plant contributed
nearly 6% of the price-related increases and nearly 55% of the volume-related
increase. In February 1995, the Company sold its glass processing assets as
further discussed under "Material Developments." The revenue increases at the
other MRFs as well as revenue increases in Bottle Bill Operations are
principally attributable to price increases. The $2,291 increase in material
brokerage revenues is due principally to increased volume.
The $769 increase in revenues from RRT D&C is due principally to $1,772 of new
construction projects for the Company related to the West Palm Beach, FL, Ocean
County, NJ, and Syracuse, NY MRFs, offset by reductions of $1,003 in new
construction projects due to the decline in the number and value of projects in
process.
Cost of Sales. Cost of Sales from the Company's operating divisions for the past
three years were:
[Download Table]
Years Ended December 31,
-------------------------------
1994 1993 1992
-------------------------------
Design & Construction Division $ 6,878 $ 6,101 $14,484
Material Recycling Division
MRF Operations ............... 15,559 14,532 12,559
Bottle Bill Operations ....... 9,202 7,345 8,584
Materials Brokerage Operations 3,293 815 577
------- ------- -------
Total Cost of Sales ........... $34,932 $28,793 $36,204
======= ======= =======
Cost of Sales. Cost of sales for the year ended December 31, 1994 increased
$6,139 or 21.3% when compared with the year ended December 31, 1993. A
significant portion of the increase totaling $5,362, relates to the MRD which
experienced higher volumes of processing and service volumes at existing
facilities as well as increased materials brokerage activities. RRT D&C
experienced a $777 or 12.7% increase in cost of sales due to increases in the
number and value of new construction projects for the Company at its existing
MRFs. The gross profit margin for the year ended December 31, 1994 increased to
16.4% from 12.9% in 1993. The RRT D&C gross profit margin declined based on the
overall mix of construction contracts from 15.0% to 13.4% in 1994, while the MRD
experienced an increase in the gross profit margin from 12.3% in 1993 to 17.1%
in 1994. The MRD 1994 margins increased principally due to improved commodity
prices as well as higher processing volumes in the Syracuse, NY plant.
Selling, General and Administrative Expenses. Selling, general and
administrative costs increased $768 or 17.1% as compared to 1993. There was a
$36 decrease in RRT D&C related to support staff reductions, which was offset by
an $804 increase in corporate expenses at the Vestal, NY headquarters. Corporate
expenses showed the following increases: $151 for professional fees related to
legal, financial and marketing services and $350 in variable compensation
related to the Company's improved operating performance, with the balance of
$303 due primarily to costs related to centralized services (i.e. human
resources and marketing) to support the Company's expanded business development
and marketing activities.
Interest and Other Income, Net. The Company provided $263 in 1994 to write-off a
note receivable and recorded a $334 gain in 1993 on the sale of Pure Tech
International, Inc. common stock received in conjunction with the sale of
certain assets of the Plastics Division. Interest expense net of interest income
increased by $38 caused by higher interest rates on term debt due to increases
in the prime rate.
Provision for Income Taxes. The Company provided $100 for income taxes in 1994
as compared to $70 in 1993. The low effective rate in 1994 is principally due to
the availability of previously unrecognized Federal net operating loss
carryforwards.
1993 Compared to 1992:
Revenues. Revenues for the year ended December 31, 1993 decreased $6,170 (or
16%) compared with the year ended December 31, 1992. The decrease resulted from
a $9,772 decline in revenues from RRT D&C that was only partially offset by a
$3,602 increase in revenues from the MRD. The $3,602 increased revenues from the
MRD includes $4,246 of increased revenues from the MRFs and $348 increased
material brokerage revenues, offset by a $992 decline in Bottle Bill Operations
revenues. The majority of the $4,246 increased revenues from the MRFs was
attributable to the Syracuse, NY plant while the other six MRFs experienced
modest increases.
Nearly 68% of the increase in revenues in the Syracuse, NY plant is due to price
increases, while approximately 32% of the increase in revenues is due to volume
increases. The glass beneficiation system at the Syracuse plant contributed
nearly 58% of the price-related increases and nearly 96% of the volume-related
increase. The revenue increases at the other MRFs as well as revenue increases
in material brokerage revenues are principally attributable to volume increases.
The $992 decrease in Bottle Bill Operations revenues is due principally to
decreased volume.
The $9,772 decline in revenues from RRT D&C is due to the completion of a $6,330
construction project in 1992 that was not replaced with a comparable project in
1993; however a number of lesser projects partially offset the decline from
1992. Additionally, RRT D&C completed approximately $6,000 of construction
projects for the Company in 1992 at the Cape May, NJ, Hartford, CT, and Monroe
County, NY MRFs, which projects were replaced with projects of approximately 10%
of the revenue value of the 1992 projects.
In order to increase revenues in future years, RRT D&C has expanded its
technology expertise to include glass beneficiation, automated paper sorting,
ferrous processing, compost feedstock preparation and fiber fuel. Additionally,
RRT D&C created in 1993 a Field Services Division for the installation and
customer service of all its equipment systems.
Cost of Sales. Cost of sales for the year ended December 31, 1993 decreased
$7,411 or 20.5% when compared with the year ended December 31, 1992. The
significant portion of the decrease ($8,383) relates to RRT D&C, which
experienced a decline in the number and value of projects. RRT D&C completed a
$6,330 construction project in 1992 that was not replaced with a comparable
project in 1993 and RRT D&C also completed approximately $6,000 of construction
projects for the Company in 1992 at the Cape May County, NJ, Hartford, CT, and
Monroe County, NY MRFs, which essentially completed the expansion projects of
the existing MRFs and these projects were not replaced with comparable projects
in 1993. Partially offsetting these decreases was a net increase in the MRD of
$972 due to higher volumes of processing and service costs at existing
facilities, the fully operational glass processing system in the Syracuse plant
and the increased material brokerage activities. The gross profit margin for the
year ended December 31, 1993 increased to 12.9% from 7.7% in 1992. The RRT D&C
gross profit margin increased from 14.5% to 15.0% in 1993, while the MRD
experienced an increase in the gross profit margin from 2.4% in 1992 to 12.3% in
1993. The RRT D&C gross profit margin improved although revenues decreased
significantly in 1993. During 1993, RRT D&C increased subcontract services for
various construction projects, which essentially reduced costs and improved the
gross profit margin. The MRD 1993 margins improved as experience was gained and
equipment was adjusted for the three new operating MRFs that were added in 1992.
By improving the equipment throughput of material, the Company has been able to
reduce the labor required to support the equipment, which reduces operating
costs and increases gross profit margins.
Selling, General and Administrative Expenses. Selling, general and
administrative costs decreased $1,128 or 20% as compared to 1992. There was a
$524 decrease related to 1993 staff reductions at headquarters as part of the
Company's overall cost reduction program and a $116 reduction for professional
fees related to legal, accounting and financial management associated with the
Company's restructuring in 1992. There was an additional $349 reduction in
overhead expenses related to benefits and centralized services at Corporate
headquarters associated with the cost reduction program. RRT-D&C's expenses
decreased approximately $139 due to decreases in general business activity.
Interest and Other Income, Net. Interest and other income, net of interest
expense, decreased $70 from l992. The net decrease was due to an $86 decrease in
consulting and royalty income and a $35 increase in interest income. Interest
expense increased $19 primarily due to capitalizing approximately $82 in 1992
relating to construction of certain plant and equipment while no comparable
capitalization occurred in 1993. Interest income increased due to increased
earnings on a contract receivable related to a plant renovation project that was
completed in 1992, which was partially offset by decreased earnings on lower
average cash and short-term investments in 1993.
Loss (Gain) on Investments. The gain on investments increased $621 as compared
to 1992. The increase is due to a $334 gain on the sale of Pure Tech
International, Inc. common stock received in conjunction with the sale of
certain assets of the Plastics Division. Additionally, a $287 provision for
losses on marketable securities was charged in 1992, while there were no
comparable charges for the same period in 1993.
Liquidity and Capital Resources
Working capital amounted to $2,105 at December 31, 1994, compared to $1,293 at
December 31, 1993. Cash and cash equivalents totaled $1,969, which was up $952
from $1,017 at December 31, 1993.
In July 1994, the Company refinanced certain existing loans with its primary
lender and issued a consolidated and restated note payable in the amount of
$1,943 which included $1,657 of balances due under previous loans and $286 of
additional funds. The new note bears interest at prime plus 1.5% (10.5% at
December 31, 1994) and is payable in 60 monthly installments of $19 plus
interest with the balance due in July 1999. The note may be prepaid without
penalty. The refinanced consolidated and restated note with the primary lender
is secured by property, plant and equipment and carries covenants which require
the Company to maintain certain minimum financial ratios and to obtain lender's
approval for issuances of new debt.
In February 1995, the Company paid $400 additional principal on the consolidated
and restated note and paid off the $253 JDA loan balance in connection with the
sale of its equipment used in its glass processing activities. The equipment was
sold for $1,750 and resulted in a $690 gain which will be recognized in the
first quarter of 1995.
In November 1994, the Company's primary lender agreed to a revolving line of
credit of up to $3,000 of borrowings which are secured by accounts receivable
and inventories. Under this arrangement, the Company may borrow up to 80% of
non-RRT D&C accounts receivable and 50% of inventories, as defined. The interest
rate is prime plus 1%. No line of credit borrowings were outstanding as of
December 31, 1994 or 1993; however a $500 letter of credit was drawn against the
line for a plant operating guaranty and a $150 letter was drawn to guarantee
construction bonding as of December 31, 1994.
The Company's primary lender has committed to loan the Company $2,500 to finance
the design and construction of a materials recycling facility for the
Commonwealth of Massachusetts Department of Environmental Protection in
Springfield, Massachusetts. The loan will bear interest at prime plus 1.5% with
interest only payable during construction (maximum six months) and thereafter
payments of $21 per month plus interest over a ten-year period.
Construction is scheduled to commence in the spring of 1995.
The Company has approved 1995 capital expenditures which aggregate $975. These
capital expenditures principally relate to various processing system upgrades
and expansions in its MRF operations.
In December 1994, the Company invested $300 in exchange for a 50% interest in a
partnership with an unaffiliated party formed for the purpose of developing,
owning, constructing and operating a paper recycling facility located in
Philadelphia, Pennsylvania. RRT of Pennsylvania, Inc., a wholly-owned subsidiary
of the Company, is one of two general partners each having a 1% interest in the
Partnership while the Company is a 49% limited partner. American RRT Fiber
Supply, L.P. (the "Partnership") is expected to commence operations in 1995. RRT
D&C has been awarded the contract for design and construction of the facility in
the amount of $10,000.
A combination of funds available through line of credit sources, anticipated
cash flows from operations and existing cash balances is expected to provide
adequate funds to meet planned requirements for the coming year; however the
Company's ability to provide equity contribution for unplanned privatized
projects will be limited.
Net cash provided by operating activities was $3,089 in 1994 compared to cash
used of $61 in 1993. The change was due principally to higher net income and
increases in accrued expenses and payables offset by larger increases in
accounts receivable, inventories, and other assets. Net cash used in investing
activities was $1,667 in 1994 as compared to net cash provided of $2,090 in
1993. The change was primarily due to proceeds from the sale of an investment in
1993 and higher payments on notes receivable in 1993 offset by higher 1994
additions to property, plant and equipment, and an investment in a partnership
in 1994. Cash used in financing activities was $470 in 1994 which were used
primarily for the payment of long-term debt and preferred stock redemptions,
offset by cash provided from the proceeds of refinancing long-term debt. For
1993, net cash used in financing activities was $2,872, which was used primarily
for the payment of demand notes, long-term debt and preferred stock redemptions.
Item 8. Financial Statements and Supplementary Data
The Company's 1994 Financial Statements, together with the report thereon of
Price Waterhouse LLP dated March 10,1995, are included elsewhere herein. See
Item 14 for a list of Financial Statements and Financial Statement Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Item 9 is inapplicable.
PART III
The Company intends to file with the Securities and Exchange Commission within
120 days of the close of its year ended December 31, 1994 a definitive Proxy
Statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 for
its Annual Meeting of Shareholders, or an amendment to this Form 10-K that
contains the information required in Part III.
Item 10. Directors and Executive Officers of the Registrant.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
Item 11. Executive Compensation.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
Item 13. Certain Relationships and Related Transactions.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Index to Financial Statements:
(a)(1) List of Financial Statements
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1994 and 1993
Consolidated Statement of Operations for the three years ended December
31, 1994
Consolidated Statement of Cash Flows for the three years ended December
31, 1994
Consolidated Statement of Changes in Common Shareholders' Equity for the
three years ended December 31, 1994
Notes to Consolidated Financial Statements
(2) List of Financial Statement Schedules
Valuation and Qualifying Accounts (Schedule II)
All other schedules have been omitted because they are not applicable, or
the required information is shown in the financial statements or notes
thereto.
(3) List of Exhibits
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Form 10-K. Exhibits constituting management contracts or
compensatory plans or arrangements are denoted by a "+" on the Exhibit
Index.
The financial statements and schedules referred to above are included on
pages F-1 through F-18 in this Form 10-K.
(b) Reports on Form 8-K
On February 14, 1995, the Company filed a Current Report on Form 8-K
dated February 2, 1995, to report the sale of the Company's assets used
in the glass processing business. Financial statements filed with the
Form 8-K consisted of an Unaudited Pro Forma Consolidated Balance Sheet
at September 30, 1994, Unaudited Pro Forma Consolidated Statements of
Income for the Nine Months Ended September 30,1994 and the Year Ended
December 31, 1993 and accompanying notes to Unaudited Pro Forma
Consolidated Financial Information.
(c) Exhibits
3(a) Certificate of Incorporation of the Company(filed as Exhibit 3(a) to the
Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
3(b) By Laws of the Company(filed as Exhibit 3(b) to the Company's Form 8-B
filed July 25, 1989, File No. 1-6774).*
4(a) Certificate of Incorporation of the Company (filed as Exhibit 3(a) to the
Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
4(b) Certificate of Designations, Preferences and Rights of the Company's
8.25% cumulative Convertible Preferred Stock (filed as Exhibit 3(a) to
the Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
4(c) Agreement and Plan of Merger dated May 15, 1989 between Resource
Recycling Technologies, Inc., an Ohio corporation, and Resource Recycling
Technologies, Inc., a Delaware corporation (filed as Exhibit 1 to the
Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
4(d) Agreement and Plan of Merger dated March 17, 1995 among Waste Management,
Inc., WMI Acquisition Sub, Inc. and the Company (filed as Exhibit 1 to
the Company's Schedule 14D-1 filed March 23, 1995).*
10(a) Employment Agreement dated as of October 3, 1988 between the Company and
Lawrence J. Schorr (filed as Exhibit 10(c) to Annual Report on Form 10-K
for year ended December 31, 1988, File No. 1-6774).* +
10(b) Employment Agreement dated as of November 28, 1988 between the Company
and David C. Jones (filed as Exhibit 10(e)to Annual Report on Form 10-K
for year ended December 31, 1988, File No. 1-6774).* +
10(c) Amended and Restated Incentive Stock Option Plan as of June 8, 1990
(filed as Exhibit B to the Company's Proxy Statement dated May 14, 1990
for its Annual Meeting of Shareholders held June 8, 1990).* +
10(d) Amendment No. 1 dated May 6, 1991 to Employment Agreement dated November
28, 1988 between the Company and David Jones (filed as Exhibit 10(b) to
Quarterly Report on Form 10-Q for the period ended June 30, 1991, File
No. 1-6774).* +
10(e) Employment Agreement dated January 2, 1991 between the Company and
Richard E. Koffman (filed as Exhibit 10(c)to Quarterly Report on Form
10-Q for the period ended June 30, 1991, File No. 1-6774).* +
10(f) Employment Agreement dated January 2, 1991 between the Company and Burton
I. Koffman (filed as Exhibit 10(d) to Quarterly Report on Form 10-Q for
the period ended June 30, 1991, File No. 1-6774).* +
10(g) Amendment No. 1 dated May 6, 1991 to Employment Agreement dated October
3, 1988 between the Company and Lawrence Schorr (filed as Exhibit 10(h)
to Quarterly Report on Form 10-Q for the period ended June 30, 1991, File
No. 1-6774).* +
10(h) Purchase Agreement dated October 1, 1991 by and between the Company and
Milbar Consultants Corp. (filed as Exhibit 10(g) to Current Report on
Form 8-K filed September 13, 1991, File No. 1-6774).*
10(i) Lease Agreement dated as of March 1, 1991 among Elizabeth M. Koffman,
Deborah E. Koffman and the Company (filed as Exhibit 10(h) to Current
Report on Form 8-K filed September 13, 1991, File No. 1-6774).*
10(j) Non-Qualified Stock Option Plan dated as of December 21, 1991 (filed as
Exhibit A to the Company's Proxy Statement dated May 22, 1991 for its
Annual Meeting of Shareholders held June 17, 1991, File No. 1-6774).* +
10(k) Directors and Officers Insurance Policy dated January 1, 1994, with
National Union Fire Insurance Company Policy No. 442-31-11 (filed as
Exhibit 10(k) to Annual Report on Form 10-K for the year ended December
31, 1993, File No. 1-6774.*
10(l) Employment Agreement dated July 31, l991 between the Company and David H.
Weitzman (filed as Exhibit 10(c) to Quarterly Report on Form 10-Q for the
period ended June 30, l992, File No. 1-6774).* +
10(m) Employment Agreement dated July 31, l991, between the Company and Jeffrey
M. Young (filed as Exhibit 10(d) to Quarterly Report on Form 10-Q for the
period ended June 30, l992, File No. 1-6774).* +
10(n) Employment Agreement dated June 1, l992, among the Company, RRT Design &
Construction Corp. and Nathiel G. Egosi (filed as Exhibit 10(e) to
Quarterly Report on Form 10-Q for the period ended June 30, l992, File
No. 1-6774).* +
10(o) Stock Option Agreement dated August 26, l992 between the Company and Neil
Norry (filed as Exhibit 10(b) to Quarterly Report on Form 10-Q for the
period ended September 30, l992, File No. 1-6774).* +
10(p) Promissory Note dated September 16, l992 between RRT Empire Returns Corp.
and Neil Norry, (filed as Exhibit 10(c) to Quarterly Report on Form 10-Q
for the period ended September 30, l992, File No. 1-6774).*
10(q) Amended and Restated PET Supply Agreement dated October 18, 1994 between
the Company and Pure Tech International, Inc. (filed as Exhibit 10(kk) to
Quarterly Report on Form 10-Q for the period ended September 30, 1994,
File No. 1-6774).*
10(r) Employment Agreement dated May 15, 1990 between RRT Plastics Corp. and
Steve Edelson (filed as Exhibit 10(d) to Current Report on Form 8-K filed
on June 1, 1990, File No. 1-6774).* +
10(s) First Amendment to Mortgage dated as of June 7, 1993 between State Street
Bank and Trust Company and RRT Land Corp. (filed as Exhibit 10(f) to
Quarterly Report on Form 10-Q for the period ended June 30, 1993, File
No. 1-6774).*
10(t) Business Loan Agreement dated June 7, 1993 between the Company and
Binghamton Savings Bank ("BSB") (filed as Exhibit 10(g) to Quarterly
Report on Form 10-Q for the period ended June 30, 1993, File No.
1-6774).*
10(u) Commercial Security Agreement dated June 7, 1993 between the Company and
BSB (filed as Exhibit 10(h) to Quarterly Report on Form 10-Q for the
period ended June 30, 1993, File No. 1-6774).*
10(v) Commercial Guaranty dated June 7, 1993 from various subsidiaries of the
Company to BSB (filed as Exhibit 10(i) to Quarterly Report on Form 10-Q
for the period ended June 30, 1993, File No. 1-6774).*
10(w) Amendment No. 1 to Employment Agreement dated as of June 14, 1993 between
RRT Plastics Corp. and Steve Edelson (filed as Exhibit 10(j) to Quarterly
Report on Form 10-Q for the period ended June 30, 1993, File No.
1-6774).* +
10(x) Promissory Note dated as of June 7, 1993 by and between the Company and
BSB (filed as Exhibit 10(a) to Quarterly Report on Form 10-Q for the
period ended September 30, 1993, File No. 1-6774).*
10(y) Agreement dated December 30, 1993 among JWP Inc., the Company, and
certain purchasers (filed as Exhibit 10(a)to Current Report on Form 8-K
filed January 14, 1994, File No. 1-6774).*
10(z) Consulting Agreement dated January 31, 1994 between Andrew T. Dwyer and
the Company (filed as Exhibit 10(dd)to Annual Report on Form 10-K for
year ended December 31, 1993, File No. 1-6774).* +
10(aa) Amendment No 2 dated November 8, 1993 to Employment Agreement dated
November 28, 1988 between the Company and David C. Jones (filed as
Exhibit 10(ee) to Quarterly Report on Form 10-Q for the period ended
March 31, 1994, File No. 1-6774).* +
10(bb) Amendment No. 1 dated January 1, 1994 to Lease Agreement dated March 1,
1991 among Elizabeth M. Koffman, Deborah E. Koffman and the Company
(filed as Exhibit 10(ff) to Annual Report on Form 10-K for year ended
December 31, 1993, File No. 1-6774).*
10(cc) Agreement of Limited Partnership of American RRT Fiber Supply, L.P. dated
as of December 5, 1994 by and among a Subsidiary, the Company, American
Fiber Supply of Philadelphia, Inc. and American Power Investors, Inc.
10(dd) Asset Purchase Agreement dated as of February 1, 1995 between RRT Empire
Returns Corporation and Continental Recycling, Inc. (filed as Exhibit
10(a) to Current Report on Form 8-K filed February 14, 1995, File No. 1-
6774).*
10(ee) Operating and Management Agreement dated as of February 1, 1995 between
RRT Empire Returns Corporation and Continental Recycling, Inc. (filed as
exhibit 10(c) to Current Report on Form 8-K filed February 14, 1995, File
No. 1-6774).*
10(ff) Assignment of Mortgage dated July 29, 1994 from State Street to BSB.
10(gg) Consolidated and Restated Note dated as of July 29, 1994 by and between
the Company and Binghamton Savings Bank ("BSB")(filed as Exhibit 10(gg)
to Quarterly Report on Form 10-Q for the period ended June 30, 1994).*
10(hh) Business Loan Agreement dated as of July 29, 1994 by and between the
Company and BSB (filed as Exhibit 10(hh) to Quarterly Report on Form 10-Q
for the period ended June 30, 1994).*
10(ii) Promissory Note dated as of July 29, 1994 by and between the Company and
BSB (filed as Exhibit 10(ii) to Quarterly Report on Form 10-Q for the
period ended June 30, 1994).*
10(jj) Business Loan Agreement dated as of July 29, 1994 by and between the
Company and BSB (filed as Exhibit 10(jj) to Quarterly Report on Form 10-Q
for the period ended June 30, 1994).*
10(kk) Collateral Mortgage and Modification and Consolidation Agreement dated
July 29, 1994 between RRT Land Corp. and BSB.
10(ll) Stock Tender Agreement dated March 17, 1995 among Allen & Company
Incorporated, Waste Management, Inc. and WMI Acquisition Sub, Inc. (filed
as Exhibit 2 to Company's Schedule 14D-9 dated March 23, 1995).*
10(mm) Stock Tender Agreement dated March 17, 1995 among Paul A. Gould, Waste
Management, Inc. and WMI Acquisition Sub, Inc. (filed as Exhibit 3 to
Company's Schedule 14D-9 dated March 23, 1995.).*
10(nn) Stock Tender Agreement dated March 17, 1995 among Andrew T. Dwyer, Waste
Management, Inc. and WMI Acquisition Sub, Inc. (filed as Exhibit 4 to
Company's Schedule 14D-9 dated March 23, 1995).*
10(oo) Employment Agreement dated March 17, 1995 between the Company and
Lawrence J. Schorr (filed as Exhibit 5 to Company's Schedule 14D-9 dated
March 23, 1995).* +
10(pp) Letter Agreement dated December 14, 1994 between the Company and
Ladenburg, Thalman & Co. Inc.
11 Statement re computation of earnings per share.
21 Proxy Statement for 1995 Meeting of Shareholders (to be filed in second
quarter of 1995, Commission File No. 1-6774).*
22 List of Subsidiaries of the Company.
24 Consent of Independent Accountants.
* Incorporated by reference.
+ Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
act of 1934, the Registrant has duly caused this Annual Report and any
subsequent amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized.
RESOURCE RECYCLING TECHNOLOGIES, INC.
Dated: March 24, 1995 By:_____________________________
Lawrence J. Schorr
President and Director
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons in their respective capacities
with the registrant and on the dates indicated.
Dated: March 24, 1995 ______________________________
Andrew T. Dwyer,
Chairman of the Board
Dated: March 24, 1995 ______________________________
Lawrence J. Schorr,
President and Director
Dated: March 24, 1995 ______________________________
Paul A. Gould, Director
Dated: March 24, 1995 ______________________________
Dean H. Cannon, Director
Dated: March 24, 1995 ______________________________
Burton I. Koffman, Director
Dated: March 24, 1995 ______________________________
Jay R. Petschek, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
act of 1934, the Registrant has duly caused this Annual Report and any
subsequent amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized.
RESOURCE RECYCLING TECHNOLOGIES, INC.
Dated: March 24, 1995 By: /s/Lawrence J. Schorr
----------------------------------
Lawrence J. Schorr
President and Director
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons in their respective capacities
with the registrant and on the dates indicated.
Dated: March 24, 1995 /s/Andrew T. Dwyer
------------------------------
Andrew T. Dwyer,
Chairman of the Board
Dated: March 24, 1995 /s/Lawrence J. Schorr
------------------------------
Lawrence J. Schorr,
President and Director
Dated: March 24, 1995 /s/Paul A. Gould
------------------------------
Paul A. Gould, Director
Dated: March 24, 1995 /s/Dean H. Cannon
------------------------------
Dean H. Cannon, Director
Dated: March 24, 1995 /s/Burton I. Koffman
------------------------------
Burton I. Koffman, Director
Dated: March 24, 1995 /s/Jay R. Petschek
------------------------------
Jay R. Petschek, Director
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Resource Recycling Technologies, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) present fairly, in all material respects,
the financial position of Resource Recycling Technologies, Inc. and its
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", in January 1993.
PRICE WATERHOUSE LLP
March 10, 1995
Syracuse, New York
Resource Recycling Technologies, Inc.
Consolidated Financial Statements
(In thousands, except share data)
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
[Download Table]
December 31,
1994 1993
---- ----
Assets
Current assets:
Cash and cash equivalents (Note 1) .................. $ 1,969 $ 1,017
Accounts receivable, less allowance for
doubtful accounts of $96 in 1994 and 1993 .......... 6,566 5,203
Costs and earnings in excess of billings
on uncompleted contracts ........................... 125 264
Note and contract receivable (Note 4) ............... 213 195
Inventories ......................................... 479 277
Deposits and prepaid expenses ....................... 1,003 328
-------- --------
Total current assets ............................. 10,355 7,284
Note and contract receivable (Note 4) ................ 1,962 2,438
Investment in partnership (Note 2) ................... 300
Property, plant and equipment, net (Notes 3 and 5) ... 7,683 7,085
-------- --------
$ 20,300 $ 16,807
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current portion of
long-term debt (Note 5) ............................ $ 410 $ 830
Accounts payable .................................... 5,064 3,777
Billings in excess of costs and earnings
on uncompleted contracts ........................... 688 338
Accrued expenses and other liabilities (Note 1) ..... 2,088 1,046
-------- --------
Total current liabilities ........................ 8,250 5,991
Long-term debt (Note 5) .............................. 1,818 1,721
-------- --------
10,068 7,712
-------- --------
Redeemable preferred stock (Note 9) .................. -- 63
-------- --------
Commitments and contingencies (Note 6)
Common shareholders' equity (Note 10):
Common stock, $1 par value; 5,000,000
shares authorized; 2,794,750 shares issued ......... 2,795 2,795
Paid-in capital ..................................... 13,315 13,315
Accumulated deficit ................................. (4,899) (6,099)
Less cost of 161,677 common shares in treasury ...... (979) (979)
-------- --------
Common shareholders' equity ...................... 10,232 9,032
-------- --------
$ 20,300 $ 16,807
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Resource Recycling Technologies, Inc.
Consolidated Financial Statements
(In thousands, except per share data)
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
[Enlarge/Download Table]
Year Ended December 31,
1994 1993 1992
---- ---- ----
Revenues .............................................. $ 41,794 $ 33,040 $ 39,210
Cost of sales ......................................... 34,932 28,793 36,204
-------- -------- --------
Cross profit ..................................... 6,862 4,247 3,006
-------- -------- --------
Selling, general and administrative expenses .......... 5,253 4,485 5,613
Interest expense ...................................... 311 278 259
Interest and other income, net ........................ (274) (279) (330)
Loss (gain) on investments ............................ -- (334) 287
Provision for loss on note receivable (Note 4) ........ 263 -- --
Nonrecurring charges (Notes 1 and 8) .................. -- -- 838
Total costs and expenses ......................... 5,553 4,150 6,667
Income (loss) before income taxes ..................... 1,309 97 (3,661)
Provision for income taxes (Note 7) ................... 100 70 36
Income (loss) from continuing operations .............. 1,209 27 (3,697)
Discontinued operations (Note 14):
Loss from discontinued operations of
Plastics Division to measurement date ............... -- -- (923)
Loss on disposal of Plastics Division, including
provision of $601 for operating losses
during the phase-out period ......................... -- -- (1,778)
-------- -------- --------
Net income (loss) ..................................... $ 1,209 $ 27 $ (6,398)
======== ======== ========
Earnings (loss) per common and common equivalent share:
Income (loss) from continuing operations ............. $ .45 $ .01 $ (1.41)
Discontinued operations:
Loss from discontinued operations ................ -- -- (.35)
Loss on disposal of Plastics Division ............ -- -- (.67)
-------- -------- --------
Net income (loss) .................................... $ .45 $ .01 $ (2.43)
======== ======== ========
Weighted average common and common
equivalent shares ................................... 2,658 2,633 2,637
===== ===== =====
The accompanying notes are an integral part of these consolidated
financial statements.
Resource Recycling Technologies, Inc.
Consolidated Financial Statements
(In thousands)
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
[Enlarge/Download Table]
Year Ended December 31,
1994 1993 1992
---- ---- ----
Cash flows from operating activities:
Net income (loss) ................................. $ 1,209 $ 27 $(6,398)
Adjustments to reconcile net income (loss)to net
cash provided (used) by operating activities:
Loss from discontinued operations ............... -- -- 2,701
Depreciation and amortization ................... 1,039 840 700
Provision for loss on note receivable ........... 263
Loss on disposal of equipment ................... -- 6 48
Loss (gain) on investment transactions .......... -- (334) 287
Changes in current assets and liabilities net of
effects of discontinued operations (Note 11) .... 578 (600) 2,174
------- ------- -------
Net cash provided (used) by operating activities .. 3,089 (61) (488)
------- ------- -------
Cash flows from investing activities:
Issuance of notes receivable ...................... -- -- (3,270)
Payments on notes receivable ...................... 195 866 271
Investment in partnership ......................... (300) --
Proceeds from sale of investments .................. -- 2,177 --
Proceeds from sale of fixed assets ................ 55 403
Capital expenditures .............................. (1,562) (1,008) (1,895)
Cash flow from discontinued operations ............ -- -- (2,655)
------- ------- -------
Net cash provided (used) by investing activities .. (1,667) 2,090 (7,146)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of notes payable ........... 286 294 1,111
Payments on notes ................................. (684) (3,028) (140)
Proceeds from issuance of short-term demand notes . -- -- 2,950
Preferred stock dividends paid .................... (9) (13) (16)
Redemption of preferred stock ..................... (63) (125) (63)
------- ------- -------
Net cash provided (used) by financing activities .. (470) (2,872) 3,842
------- ------- -------
Net increase (decrease) in cash and cash equivalents 952 (843) (3,792)
Cash and cash equivalents at beginning of year ..... 1,017 1,860 5,652
------- ------- -------
Cash and cash equivalents at end of year ........... $ 1,969 $ 1,017 $ 1,860
======= ======= =======
Cash paid during the year for:
Interest .......................................... $ 337 $ 278 $ 315
Taxes ............................................. $ 52 $ 80 $ 123
The accompanying notes are an integral part of these consolidated
financial statements.
Resource Recycling Technologies, Inc.
Consolidated Financial Statements (In thousands)
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
[Enlarge/Download Table]
Retained
Common Stock Paid-In Earnings Treasury Stock
Shares Amount Capital (Deficit) Shares Amount Total
------ ------ ------- --------- ------ ------ -----
Balance at
December 31,1991 .............................. 2,795 $ 2,795 $ 13,315 $ 301 162 $ 979 $ 15,432
Net loss .................................... -- -- -- (6,398) -- -- (6,398)
Preferred stock dividends ................... -- -- -- (16) -- -- (16)
----- -------- -------- -------- --- -------- --------
Balance at
December 31, 1992 ............................. 2,795 2,795 13,315 (6,113) 162 979 9,018
Net income .................................. -- -- -- 27 -- -- 27
Preferred stock dividends ................... -- -- -- (13) -- -- (13)
----- -------- -------- -------- --- -------- --------
Balance at
December 31, 1993 ............................. 2,795 2,795 13,315 (6,099) 162 979 9,032
Net income .................................. -- -- -- 1,209 -- -- 1,209
Preferred stock dividends ................... -- -- -- (9) -- -- (9)
----- -------- -------- -------- --- -------- --------
Balance at
December 31, 1994 ............................. 2,795 $ 2,795 $ 13,315 $ (4,899) 162 $ 979 $ 10,232
===== ======== ======== ======== === ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Resource Recycling Technologies, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
1. Business and Significant Accounting Policies
Resource Recycling Technologies, Inc. (the "Company"), through its
subsidiaries, is a diversified waste materials management enterprise engaged
in recycling and related businesses. The Company is currently organized into
three operating divisions. The Material Recycling Division is engaged in
providing transportation arrangements, scrap processing and accounting
services for retailers and wholesalers operating under beverage container
redemption legislation in New York ("Bottle Bill Operations") and in the
receipt, separation, processing and marketing of recyclable materials
collected under several municipalities' overall recycling programs (Material
Recycling Facilities, "MRF Operations"). The Material Recycling Division
currently operates seven facilities and brokers recyclables for two other
facilities. RRT Design & Construction Corp. ("RRT D&C") was formed in 1989
and performs design and construction services for recycling facilities both
for Company-owned MRFs and other facilities not owned or operated by the
Company. The Company's Materials Marketing Division acts as a broker for
recycled materials.
The significant accounting policies and practices followed by the Company
are as follows:
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.
Revenue recognition
Revenue is recognized as services are rendered with respect to accounting,
transportation and scrap processing. Revenues from deposit legislation and
material recycling scrap sales are recognized upon shipment to the customer.
Revenues from fixed price construction contracts are recognized ml the
percentage-of-completion method as measured by the percentage of costs
incurred to date compared to the estimated total cost to complete each
contract (cost-to-cost method). This method is used because management
considers incurred cost to be the best available measure of progress on such
contracts. Revenues from cost plus fixed fee contracts are recognized on the
basis of costs incurred during the period plus the fee earned, measured on
the service hours expended.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor and
supplies. Selling, general and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job condition and estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined. Profit incentives are included in
revenues when their realization is assured.
Inventories
Inventories, consisting primarily of sorted and baled newsprint, cardboard,
glass, plastic and aluminum materials to be shipped to recyclers, are
recorded at market prices.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the shorter of the estimated lives of
the various asset groups or the term of the related material recycling
contract. The ranges of estimated lives are as follows:
Building and improvements 10-31 years
Leasehold improvements Lease term
Machinery and equipment 3-10 years
Office furniture and fixtures 3-5 years
Maintenance and repair costs are expensed as incurred while renewals and
betterments are capitalized.
Income taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), Accounting for Income Taxes, and has applied
the provisions prospectively. The adoption of SFAS 109 changes the Company's
method of accounting for income taxes from the deferred method (APB 11) to
an asset and liability approach. The asset and liability approach requires
the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying
amounts and the tax bases of all other assets and liabilities. The adoption
of SFAS 109 did not have a material affect on the Company's financial
position or results of operations.
Earnings per share
Earnings per common and common equivalent share are based upon the weighted
average number of shares of common stock and common stock equivalents
outstanding during the year. Common stock equivalents consist of stock
options and warrants as described in Note 10.
Restricted cash
Pursuant to the Company's MRF revenue share agreement with a municipality,
the Company has recorded both an asset and a corresponding liability for the
municipality's share of the revenue collected by the Company but not yet
drawn by the municipality. Such amounts, which are included in cash and
accrued expenses in the accompanying consolidated balance sheet, were
$1,230,000 and $426,000 at December 31, 1994 and 1993, respectively.
Statement of cash flows
The Company considers any investments purchased with an initial maturity of
three months or less to be cash equivalents.
Nonrecurring charges
Nonrecurring charges in 1992 included the following amounts: $186,000 in
expenses incurred in relation to the terminated JWP Merger Agreement (Note
8); $437,000 representing principally professional and consulting fees
incurred in the development and implementation of a plan to restructure
corporate debt, centralize certain administrative functions and improve
corporate performance; and $215,000 for severance payments and expenses
associated with the reorganization and relocation of the accounting
department into the corporate headquarters. In addition, 1992 cost of sales
includes $678,000 in charges relating to preoperating costs incurred in
connection with four newly established MRFs.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to
current year presentation.
2. Investment in Partnership
In December 1994, the Company invested $300,000 in exchange for a 50%
interest in a partnership with an unaffiliated party formed for the purpose
of developing, owning, constructing and operating a paper recycling facility
located in Philadelphia, Pennsylvania. RRT of Pennsylvania, Inc., a
wholly-owned subsidiary of the Company, is one of two general partners each
having a 1% interest in the Partnership while the Company is a 49% limited
partner. American RRT Fiber Supply, L.P. (the "Partnership") is expected to
commence operations in 1995. RRT D&C has been awarded the contract for
design and construction of the facility in the amount of approximately $10.0
million. The Partnership operations will be accounted for under the equity
method.
3. Property, Plant and Equipment
Property, plant and equipment are summarized as follows (in thousands):
[Download Table]
December 31,
1994 1993
------- -------
Land and improvements $ 179 $ 162
Building and improvements 2,581 2,573
Leasehold improvements 53 13
Office furniture and fixtures 1,233 1,157
Machinery and equipment 7,207 4,021
Construction in progress 568 2,263
------- -------
11,821 10,189
Less-accumulated depreciation and
amortization (4,138) (3,104)
------- -------
$ 7,683 $ 7,085
======= =======
The Company currently leases certain office space and equipment under
noncancellable operating leases. Aggregate future minimum rental payments
required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1994 are
as follows (in thousands):
1995 $ 634
1996 585
1997 283
1998 238
1999 236
Thereafter 184
Rental expense relating to the Company's operating leases amounted to
$324.000, $198,000 and $528,000 for the years ended December 31, 1994, 1993
and 1992, respectively.
The Company has entered into certain capital leases for equipment to be used
in connection with a contract to operate the Monroe County Landfill Transfer
Station effective January 1, 1995. The present value of the minimum lease
payments is approximately $560,000 and will be recorded as of January 1,
1995.
4. Note and Contract Receivable
Note and contract receivable consisted of the following (in thousands):
[Download Table]
December 31,
1994 1993
------ ------
From Cape May, New Jersey:
9% contract receivable, payable in
monthly instalments of $33
commencing July 1, 1992 $2,175 $2,370
From Babylon Recycling Center, Inc:
10% note receivable - 263
------ ------
2,175 2,633
Less-current portion (213) (195)
------ ------
$1,962 $2,438
====== ======
During 1992, the Company renegotiated its operating agreement with the
County of Cape May, New Jersey (the "County") for the operation of its MRF.
This renegotiation included substantial facility renovations at the cost of
the Company, which cost totaled $2,630,000. In return for these renovations,
the revised monthly service fee includes a principal and interest payment
against the cost of the renovations. In the event of termination of the
agreement for certain reasons, the County is obligated to pay the Company
the then outstanding principal balance.
The Company completed the engineering, design, construction and testing of
equipment for a commercial mixed waste processing facility in accordance
with a contract with Babylon Recycling Center, Inc. ("BRCI") in 1992. BRCI
was in debt to the Company for $640,000 at December 31, 1992, which amount
included retainage and overdue contract billings. Under an agreement dated
March 12, 1993, BRCI agreed to make minimum payments of $10,000 per week in
accordance with a graduated payment schedule, with any remaining outstanding
balance payable in December 1993. The note was not paid on the due date and
BRCI filed for bankruptcy protection in December 1993. The Company wrote off
the note receivable balance in the amount of $263,000 in 1994 based on
management's determination that realization of the receivable is doubtful.
5. Notes Payable and Long-Term Debt
Notes payable and long-term debt consisted of the following (in thousands):
[Download Table]
December 31,
1994 1993
------ ------
Consolidated and restated note payable to a bank,
prime plus 1.5% $ 1,846 $ 2,010
Instalment loan, 6.90%, payable in monthly
instalments of $2.5 through January 1, 1997 58 --
Secured time note, 8%, payable in monthly instalments
of $5 through September 1, 1995 48 107
New York Job Development Authority (JDA) Loan,
4.75%, payable in monthly instalments of $8
through October 1, 1997 253 344
Other instalment loans 23 90
-------- --------
2,228 2,551
Less-current portion (410) (830)
-------- --------
$ 1,818 $ 1,721
======== ========
In July 1994, the Company refinanced certain existing loans with its primary
lender and issued a consolidated and restated note payable in the amount of
$1,943,000 which included $1,657,000 of balances due under previous loans
and $286,000 of additional funds. The new note bears interest at prime plus
1.5% (10.5% at December 31, 1994) and is payable in 60 monthly instalments
of $19,430 plus interest with the balance due in July 1999. The note may be
prepaid without penalty. The refinanced consolidated and restated note with
the primary lender is secured by property, plant and equipment and carries
covenants which require the Company to maintain certain minimum financial
ratios and to obtain the lender's approval for issuances of new debt.
In February 1995, the Company paid $400,000 additional principal on the
consolidated and restated note and paid off the JDA loan in connection with
the sale of certain assets (see Note 15).
In November 1994, the Company's primary lender agreed to a revolving line of
credit of up to $3,000,000, borrowings under which are secured by accounts
receivable and inventories. Under this arrangement, the Company may borrow
up to 80% of non-RRT D&C accounts receivable and 50% of inventories, as
defined. The interest rate is prime plus 1%. No line of credit borrowings
were outstanding as of December 31, 1994 or 1993; however, a $500,000 letter
of credit has been drawn against the line for a plant operating guaranty and
a $150,000 letter of credit has been drawn to guarantee construction
bonding.
The other instalment loans referred to above are generally secured by
equipment. The primary lender's prime interest rate was 9% and 6% at
December 31, 1994 and 1993, respectively.
Aggregate maturities of the long-term debt are as follows (in thousands):
1995 $ 410
1996 354
1997 316
1998 233
1999 915
------
$2,228
======
The Company's primary lender has committed to loan the Company $2.5 million
to finance the design and construction of a materials recycling facility for
the Commonwealth of Massachusetts Department of Environmental Protection in
Springfield, Massachusetts. The loan will bear interest at prime plus 1.5%
with interest only payable during construction (maximum six months) and
thereafter payments of $20,833 per month plus interest over a ten-year
period. Construction is scheduled to commence in the spring of 1995.
6. Commitments and Contingencies
The Company has been awarded contracts to design, build and operate a number
of public MRFs. Each project typically involves a fixed fee to design/build
the facility, as well as a contract to operate the facility for a fee which
is escalated annually by a predetermined formula. Each project also requires
certain construction and operating performance bonds to be posted during
various phases of the contract. The Company utilizes a national surety for
the majority of its bonding requirements supplementing the balance with
letters of credit through its credit facility.
7. Income Taxes
The Company files a consolidated federal income tax return with its
subsidiaries. As of December 31, 1994, the Company had federal net operating
loss carryforwards of approximately $6.3 million available to offset future
taxable income. The net operating loss carryforwards expire in varying
amounts from 1999 through 2008.
The total income tax provision (benefit) has been allocated as follows (in
thousands):
1994 1993 1992
------ ------ ------
Current $ 100 $ 70 $ 36
Deferred -- -- --
----- ---- ----
Total income tax provision $ 100 $ 70 $ 36
====== ====== ======
The Company's deferred tax assets (liabilities) were comprised of the
following (in thousands):
[Download Table]
December 31,
1994 1993
------- -------
Assets
NOL carryforwards $ 2,142 $ 2,618
Reserves and accrued expenses 474 98
Allowance for doubtful accounts 32 33
------- -------
2,648 2,749
------- -------
Liabilities
Depreciation (644) (568)
------- -------
Valuation allowance (2,004) (2,181)
------- -------
Net deferred tax asset $ -- $ --
======= =======
A reconciliation of the provision for income taxes on income at the
statutory Federal rate to the total tax provision is as follows (in
thousands):
[Download Table]
1994 1993 199Z
----- ----- -----
Provision at Federal statutory rate $ 445 $ 33 $ --
Federal alternative minimum tax
and state taxes 100 70 36
Benefit of NOL carryforwards (445) (33)
----- ----- -----
$ 100 $ 70 $ 36
===== ===== =====
8. Majority Shareholders and Related Party Transactions
On March 4, 1992, JWP Inc. (then owner of approximately 34% of the Company's
common stock) tendered an offer to acquire the balance of the Company's
outstanding shares not already owned by JWP. On June 3, 1992, the Company
and JWP executed an Agreement and Plan of Merger (the "Merger Agreement"),
whereby the Company would have been acquired by JWP in a stock for stock
merger. On July 2, 1992, the Company and JWP mutually agreed to terminate
the Merger Agreement without liability to either party. The parties
subsequently discontinued discussion with respect to acquisition by JWP of
any additional interest in the Company and JWP sold its 34% to Allen and
Company Incorporated in 1993. Costs incurred by the Company in conjunction
with the proposed JWP transaction were $186,000, which are included as
nonrecurring charges in the 1992 statement of operations.
9. Redeemable Preferred Stock
The Company paid $63,000 for the scheduled redemption of outstanding 8.25%
cumulative convertible preferred stock in 1994 and accrued the redemption of
the remaining amount at December 31, 1994 which will be paid in 1995. The
remaining balance of $62,000 is included in accrued expenses and other
liabilities in the accompanying consolidated balance sheet.
10. Stock Options
In accordance with the Incentive Stock Option Plan adopted June 1982, as
restated and amended June 1990, options to purchase 350,000 common shares
can be granted to officers and key employees. Options are granted at market
value on the date of the grant and become exercisable in part one year from
the date of grant and terminate ten years from grant date. Incentive stock
options available for grant total approximately 113,000 at December 31,
1994.
Non-qualified stock options for 34,376 common shares previously granted to
an officer of the Company in connection with a contract agreement at or
above market price were forfeited in 1994.
On December 21, 1990, the Board adopted a Non-Qualified Stock Option Plan
for directors and senior executives. Options to purchase up to 400,000
shares may be granted under the Plan. Options may be granted at market price
on the date of grant and are exercisable beginning one year from date of
grant and terminate ten years from date of grant. Non-Qualified Stock
Options available for grant total approximately 149,000 at December 31,
1994.
In connection with the 1990 public offering, the Company issued warrants to
purchase 100,000 shares of common stock to the underwriter. The warrants
became exercisable one year from the date of the offering at an initial
price of $10.35 per share (120% of the public offering price). Pursuant to
the warrant agreement and as a result of stock options granted subsequent to
the warrant, the warrant shares and per share price have been adjusted to
113,362 and $9.13, respectively, as of December 31, 1994. Such warrants
expire in April 1995.
In August 1992, the Company settled with the landlord of a facility
previously utilized in the Rochester, New York Bottle Bill Operations for
damages allegedly incurred during the Company's operation of the facility.
Such settlement included the issuance of options to purchase 25,000 shares
of the Company's common stock at an exercise price of $3 per share
exercisable during the period September 3, 1994 through September 3, 1997.
The following is a summary of incentive and non-qualified stock option
activity (shares in thousands):
[Download Table]
Shares Price Per Share
------ ---------------
Outstanding at December 31, 1991 232 $4.38 - $8.50
Granted 25 $6.88
Exercised
Forfeited (28)
---
Outstanding at December 31, 1992 229 $4.38 - $8.50
Granted
Exercised
Forfeited (42)
---
Outstanding at December 31, 1993 187 $4.38 - $8.50
Granted 346 $3.42 - $5.25
Exercised
Forfeited (44)
---
Outstanding at December 31, 1994 489 $3.42 - $8.50
===
Exercisable at December 31, 1994 268 $3.42 - $8.50
===
11. Statement of Cash Flows (Supplemental Disclosures)
Presented below is a schedule of supplemental cash flow information
including noncash investing and financing activities for the periods ended
December 31 (in thousands):
[Download Table]
1994 1993 1992
---- ---- ----
Changes in current assets and
liabilities, net of effects of
discontinued operations:
Accounts receivable $ (1,363) $ 236 $ 3,104
Inventories (202) 43 (62)
Deposits and prepaid expenses (675) (86) 530
Accounts payable 1,287 539 (408)
Billings in excess of costs and
estimated earnings on
uncompleted contracts, net 489 (28) (1,822)
Accrued expenses and
other liabilities 1,042 (1,578) 832
Other -- 274 --
-------- -------- --------
$ 578 $ (600) $ 2,174
======== ======== ========
During 1994, the Company acquired certain equipment through issuance of a
$75,000 instalment note payable.
12. Defined Contribution Retirement Plan
The Company maintains a 401 (k) plan for all eligible full-time employees.
Employees can make tax deferred contributions to the plan which the Company
matches, at a rate of 25%, up to a total of 6% of the employees' earnings.
The Company also makes a discretionary contribution equivalent to l/z% of
employee earnings for all active employees at year-end. The Company's
contributions vest ratably over a five-year period. The Company's matching
contributions were $58,000 and discretionary contributions were $34,000 for
1994. Company contributions were $68,000 and $78,000 for 1993 and 1992,
respectively.
13. Major Customers and Industry Segment Information
The Company views itself as operating within a single industry segment --
waste materials management engaged in recycling and related businesses.
Sales to the Company's largest customers, as a percentage of consolidated
revenues, are as follows (* Less than 10% of consolidated revenues):
[Download Table]
1994 1993 1992
---- ---- ----
Commercial Construction Customer A * * 13%
Commercial Construction Customer B * 13% *
Aluminum Recycler * 13% 11%
Glass Recycler 10% 10% *
14. Plastics Division (Discontinued Operations)
During 1992, the Company decided to close its Roosevelt, New York facility
and discontinue its post industrial plastic compounding and extrusion
operations. Additionally, the Company entered into a sale of its
Polyethylene Terephthalate Polymer Resin ("PET") business which it operated
in its Trenton, New Jersey facility. These facilities had combined to form
the Company's Plastics Division. As a result of this decision, a reserve of
$1,778,000 was established against which $841,000 was charged through
December 31, 1992. The remaining amount was paid in 1993.
15. Subsequent Event - Sale of Class Processing Assets
In February 1995, the Company sold certain equipment used in its glass
processing activities for $1,750,000. This transaction resulted in a gain of
approximately $690,000 which will be recorded in the first quarter of 1995.
In connection with the sale, the Company entered into an Operating and
Management Agreement with the buyer pursuant to which the Company will
continue operating the assets on behalf of the buyer in exchange for certain
fixed and variable fees. The agreement has an initial term of one year,
subject to early termination and renewal provisions. Revenues from the glass
processing activities for 1994 and 1993 were approximately $4.6 million and
$3.7 million, respectively.
16. Subsequent Event - Tender Offer to Purchase the Company's Shares (Unaudited)
On March 23, 1995, a tender offer was made by a subsidiary of Waste
Management, Inc. (the "Purchaser") for the purchase of all of the Company's
outstanding shares at a price of $11.50 per share to be paid in cash. The
offer was made pursuant to an Agreement and Plan of Merger, dated March 17,
1995, under which the Purchaser is expected to be merged with and into the
Company. The accompanying financial statements do not reflect any
adjustments that would be required in the event the proposed merger is
consummated.
Resource Recycling Technologies, Inc
Financial Statement Schedules
(Amounts in thousands)
--------------------------------------------------------------------------------
[Enlarge/Download Table]
SCHEDULE 11 - VALUATION AND QUALIFYlNG ACCOUNTS AND RESERVES
Column A Column B Column C Column D Column E
---------------------- ---------- ------------------------------- ------------- --------
Balance at Charged to Charged to Balance
Beginning Costs and Other at end of
Description of Period Expenses Accounts Deductions (a) Period
----------------------- ---------- ---------- ---------- -------------- ---------
Allowance for Doubtful
Account-deducted from
Accounts Receivable
1994 $ 96 $ 51 $ - $ 51 $ 96
1993 119 96 - 119 96
1992 114 34 - 29 119
(a) UN collectible accounts written off net of recoveries of $7, $2 and $93 in 1994, 1993 and 1992
respectively
Reserve for Loss
on Investment -
deducted from
Investments
1994 395 - - - 395
1993 395 - - - 395
1992 262 133 - - 395
Reserve for Loss
on the disposal
of Plastics
Division
1994 - - - - -
1993 937 - - 937 -
1992 - 1,778 - 841 937
Dates Referenced Herein and Documents Incorporated by Reference
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