-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OpdRkE1ScvOHkYteqmz+wT/Yq3m5rTGHfZ2Zp/Z8VhDCs5/tpmSOWRc+tRXrnxFQ lYivqSJsRVqS2MEup9wbRw== 0000914760-96-000118.txt : 19960603 0000914760-96-000118.hdr.sgml : 19960603 ACCESSION NUMBER: 0000914760-96-000118 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960411 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960531 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KTI INC CENTRAL INDEX KEY: 0000931581 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 222665282 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25490 FILM NUMBER: 96575673 BUSINESS ADDRESS: STREET 1: 7000 BLVD E CITY: GUTTENBERG STATE: NJ ZIP: 07093 BUSINESS PHONE: 2018547777 MAIL ADDRESS: STREET 1: 7000 BOULEVARD EAST CITY: GUTTENBERG STATE: NJ ZIP: 07093 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________ FORM 8-KA CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 11, 1996 KTI, INC. (Exact name of Registrant as specified in Charter) New Jersey 33-85234 22-2665282 (State or other juris- (Commission (IRS Employer diction of incorporation) File Number) Identification Number) 7000 Boulevard East, Guttenberg, New Jersey 07093 (Address of principal executive office) (Zip Code) (201)854-7777 (Registrant's telephone number including area code) Not Applicable (Former name and former address, as changed since last report) Item 2. Acquisition or Disposition of Assets On April 11, 1996, the Registrant purchased a 60% interest as a limited partner in American Ash Recycling of Tennessee, LTD., a Florida limited partnership. The general partner is American Ash Recycling Corp. of Tennessee, a Florida corporation. The partnership will carry on the business of the predecessor corporation. The Registrant has a priority on distribution of earnings up to a minimum amount. The purchase price consisted of $500,000 in cash and a promissory note for $1,600,000. The partnership owns an incinerator ash recycling plant in Nashville, Tennessee, which commenced operations in 1993. The plant recycles ash from a landfill owned by the Metropolitan Government of Nashville and Davidson County. The plant had total sales of approximately $2,500,000 in the calendar year ending December 31, 1995. The plant processes ash to recover both ferrous and non-ferrous metals, and after removing unburned material, converts the residue into a high grade aggregate which is sold for use in asphalt, concrete and roadbed applications. Item 7. Financial Statements and Exhibits (a) Financial Statements of the business acquired. The audited financial statements of American Ash Recycling Corp. of Tennessee (the predecessor corporation) for the year ended December 31, 1995 together with the independent auditors report thereon are included on pages F-1 through F-10 hereof. (b) Proforma Financial information The required proforma financial information was included on Form 8K dated May 3, 1996 as filed with the Securities and Exchange Commission on May 18, 1996. (c) Exhibits Exhibit Number 10 First Amendment to the Agreement of Limited Partnership of American Ash Recycling of Tennessee, LTD., dated as of February 15, 1996. (Filed as Exhibit 1 to registrant's Current Report on Form 8-K dated April 15, 1996.) 23 Consent of KPMG Peat Marwick LLP. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. KTI, Inc. (Registrant) Dated: May 29, 1996 By: /s/ Martin J. Sergi Name: Martin J. Sergi Title: President Index to Financial Statements The following financial statements of American Ash Recycling Corp. of Tennessee are included in item 7.: Report of Independent Auditors F-2 Balance sheets at December 31, 1995 and 1994 F-3 Statements of operations for the years ended December 31, 1995 and 1994 F-4 Statements of shareholder's equity for the years ended December 31, 1995 and 1994 F-5 Statements of cash flows for the years ended December 31, 1995 and 1994 F-6 Notes to financial statements F-7 Independent Auditors' Report The Board of Directors American Ash Recycling Corp. of Tennessee: We have audited the accompanying balance sheets of American Ash Recycling Corp. of Tennessee as of December 31, 1995 and 1994, and the related statements of operations, shareholder's equity, and cash flows for the years then ended. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Ash Recycling Corp. of Tennessee as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida March 12, 1996 AMERICAN ASH RECYCLING CORP. OF TENNESSEE Balance Sheets December 31, 1995 and 1994
Assets 1995 1994 Current assets: Cash and cash equivalents $ 69,981 35,755 Accounts receivable 120,829 166,147 Prepaid expenses and other current assets 49,567 58,228 Total current assets 240,377 260,130 Buildings and equipment, net (notes 3 and 4) 2,654,818 2,870,032 Total assets $ 2,895,195 3,130,162 Liabilities and Shareholder's Equity Current liabilities: Accounts payable $ 197,807 223,548 Accrued expenses 5,868 8,205 Current portion of long-term debt (note 4) 438,197 444,241 Total current liabilities 641,872 675,994 Deferred income taxes (note 5) 130,130 119,916 Long-term debt, excluding current portion (note 4) 819,932 624,616 Intercompany payables (note 2) 658,222 1,262,003 Total liabilites 2,250,156 2,682,529 Shareholder's equity: Common stock, $1 par value; 10,000 shares issued and outstanding 10,000 10,000 Retained earnings 635,039 437,633 Total shareholder's equity 645,039 447,633 $ 2,895,195 3,130,162 See accompanying notes to financial statements.
AMERICAN ASH RECYCLING CORP. OF TENNESSEE Statement of Operations Years ended December 31, 1995 and 1994
1995 1994 Revenue $ 2,551,471 3,400,139 Cost of operations 1,499,258 1,979,339 Gross profit 1,052,213 1,420,800 General and administrative expenses 242,587 265,521 Depreciation and amortization 354,885 333,527 597,472 599,048 Operating income 454,741 821,752 Interest expense 115,171 130,486 Other expense, net 21,733 23,896 Income before taxes 317,837 667,370 Income tax expense (note 5) 120,431 253,369 Net income $ 197,406 414,001 See accompanying notes to financial statements.
AMERICAN ASH RECYCLING CORP. OF TENNESSEE Statements of Shareholder's Equity Years ended December 31, 1995 and 1994
Common Stock Retained Shares Amount Earnings Total Balance, December 31, 1993 10,000 $ 10,000 23,632 33,632 Net income - - 414,000 414,000 Balance, December 31, 1994 10,000 10,000 437,633 447,633 Net income - - 197,406 197,406 Balance, December 31, 1995 10,000 $ 10,000 635,039 645,039 See accompanying notes to financial statements.
AMERICAN ASH RECYCLING CORP. OF TENNESSEE Statements of Cash Flows Years ended December 31,1995 and 1994
1995 1994 Cash flows from operating activities: Net income 197,406 414,001 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 354,885 333,527 Deferred income taxes 10,214 102,716 Changes in assets and liabilities: Accounts receivable 45,318 (37,467) Prepaid expenses and other current assets 8,661 (42,227) Accounts payable (25,618) 33,291 Accrued expenses (2,460) (13,557) Net cash provided by operating operating activities 588,406 790,284 Cash flows from investing activities: Purchases of buildings and equipment (141,171) (174,547) Proceeds from sale of equipment and vehicles 1,500 - Net cash used in investing activities (139,671) (174,547) Cash flows from financing activities: Proceeds from issuance of long-term debt 499,785 190,912 Repayment of long-term debt (310,513) (524,689) Change in intercompany payables (603,781) (257,789) Net cash used in financing activities (414,509) (591,566) Net increase in cash and cash equivalents 34,226 24,171 Cash and cash equivalents at beginning of year 35,755 11,584 Cash and cash equivalents at end of year 69,981 35,755 See accompanying notes to financial statements.
AMERICAN ASH RECYCLING CORP. OF TENNESSEE Notes to Financial Statements December 31,1995 and 1994 (1) Company Ownership and Operations American Ash Recycling Corp. of Tennessee (the Company) is a wholly- owned subsidiary of American Ash Recycling Corp. (AAR) which is a wholly-owned subsidiary of Environmental Capital Holdings, Inc. (ECH). The Company, through the comprehensive technologies of ECH, recycles Municipal Waste Combustor (MWC) ash. Combining the technology for the recovery of both ferrous and non-ferrous metals from MWC ash and the proprietary air classification equipment (Windzifter and Stijzifter) licensed from its affiliate, Duos Engineering (USA), Inc., the Company is able to remove substantially all metals and unburned materials, thereby rendering the remaining ash suitable to be recycled for beneficial reuse as aggregate in asphalt and concrete, as base and sub- base in road construction and as landfill cover, thereby avoiding the need to landfill the ash. The Company entered into a MWC ash recycling contract with the Metropolitan Government of Nashville and Davidson County, Tennessee in January 1993. The terms of the contract are for a two year period commencing 120 days after execution of the contract with the Metropolitan Government having the option to extend the contract in one year increments for three additional increments. Simultaneously, the Company was granted the first permit for commercial (i.e., beneficial) reuse of aggregate derived from MSW incinerator ash for road construction applications by the State of Tennessee. The Company commenced construction of its Nashville ash recycling facility in May of 1993 and commenced commercial operations of the facility in September 1993. The facility was completed at a total capital cost of approximately $3.3 million dollars. As of December 31, 1995, the facility has successfully recycled over 220,000 tons of MWC ash since startup. On February 15, 1996, the Company entered into a Limited Partnership Agreement - American Ash Recycling of Tennessee, Ltd. - with KTI, Inc. for the purpose of acquiring and continuing to operate the Company's facility in Nashville, Tennessee. The Company expects to realize a gain in 1996 of approximately $720,000 on the sale of certain assets in this transaction, as well as an additional deferred gain of $480,000 which will be amortized over thirty months. The Company will be the managing general partner with a forty percent equity interest and KTI will contribute all equity required for the project in exchange for a sixty percent limited partnership interest. (2) Summary of Significant Accounting Policies (a) Income Recognition Ash recycling fees are charged on a "per ton" basis and recognized based upon actual scale receipts. (b) Buildings and Equipment Buildings and equipment are stated at cost and are depreciated over the estimated life of the related contract or estimated useful life of the asset, whichever is less. Currently, the depreciable lives average ten years for buildings and five to seven years for heavy equipment and vehicles. (c) Intercompany Payables The intercompany payables relate primarily to the amounts due for income taxes and operating expenses paid for by the parent company, AAR. (d) Income Taxes Along with its parent AAR, the Company's results of operations are included in the U.S. federal and Florida income tax return of ECH. The tax provisions and deferred taxes recorded by the Company have been determined as if the Company was a standalone business filing separate returns. The current tax liability has been recorded as an intercompany payable. The Company follows the asset and liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under Statement 109, deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (e) Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. (f) Fair Value of Financial Instruments The fair value of the Company's long-term debt approximates the carrying value based on the rates currently offered to the Company for debt of similar average terms and maturities. (3) Buildings and Equipment At December 31, 1995 and 1994, buildings and equipment consisted of the following: 1995 1994 Buildings and other improvements $ 1,543,865 1,495,879 Heavy equipment and vehicles 1,978,037 1,895,561 3,521,902 3,391,440 Accumulated depreciation and amortization (867,084) (521,408) $ 2,654,818 2,870,032 (4) Long-Term Debt Long-term debt at December 31, 1995 and 1994, consisted of the following: 1995 1994 Installment notes payable with interest at 9.62% to 9.94%, due in August, 1998, collateralized by equipment. $1,190,380 1,059,378 Installment notes payable with interest at 11% to 13.63%, due at varying dates through 2000, collateralized by vehicles. 67,749 9,479 1,258,129 1,068,857 Less current portion (438,197) (444,241) $ 819,932 624,616 Future maturities of long-term debt at December 31, 1995, are as follows: 1996 $ 438,197 1997 474,340 1998 340,009 1999 3,412 2000 2,171 $ 1,258,129 (5) Income Taxes Income tax expense amounted to $120,431 (an effective rate of 37.9%) and $253,369 (an effective rate of 37.9%) for the years ended December 31, 1995 and 1994. The actual tax expense for 1995 and 1994 differs from the "expected" tax expense (computed at the federal rate of 34%) as follows: 1995 1994 Computed "expected" tax expense $ 108,065 226,095 State tax, net of federal benefit 11,617 24,300 Other, net 749 2,974 $ 120,431 253,369 Components of income tax expense for the year ended December 31, 1995 and 1994 is as follows: 1995 1994 Current income tax expense: Federal $ 94,108 128,633 State 16,109 22,020 110,217 150,653 Deferred income tax expense: Federal 8,721 87,918 State 1,493 14,798 10,214 102,716 Net income tax expense $ 120,431 253,369 There are no deferred tax assets at December 31, 1995 and 1994. The effects of temporary differences that give rise to significant portions of the deferred tax liabilities are a result of differences in depreciation of buildings and equipment. (6) Related Party Transactions The Company pays a monthly management fee to ECH of 5% and 10% of net revenues for the years ended December 31, 1995 and 1994, respectively. Management fees amounted to $101,078 and $265,321 in 1995 and 1994, respectively. Beginning in 1995, the Company pays a royalty fee of 7% of net revenues to ECH for use of technology developed by and licensed from Duos Engineering (USA), Inc. Royalty fees amounted to $141,509 for 1995. EX-23 2 Exhibit 23. Accountant's Consent The Board of Directors American Ash Recycling Corp. Of Tennessee: We consent to the inclusion of our report dated March 12, 1996, with respect to the balance sheets of American Ash Recycling Corp. of Tennessee as of December 31, 1995 and 1994, and the related statements of operations, shareholder s equity, and cash flows for the years then ended, which report appears in the Form 8-KA of KTI, Inc. Dated May 28, 1996. KPMG Peat Marwick LLP /s/ KPMG Peat Marwick LLP Jacksonville, Florida May 29, 1996 -----END PRIVACY-ENHANCED MESSAGE-----