Consolidated Envirowaste Sets up Allowance
VANCOUVER, BRITISH COLUMBIA--The Company wishes to announce that
it will set up an allowance of approximately C$1,500,000 against
its consolidated and subsidiary accounts receivable and gross
revenue to reflect the uncertainty of collecting an account
receivable from a Florida-based customer that is operating under
United States Chapter 11 bankruptcy protection. The customer was
originally granted Chapter 11 bankruptcy protection on May 14,
1997 in order to restructure its business. The Company's Florida
subsidiary, Consolidated Resource Recovery ("CRR"), provided wood
waste to this customer for use as fuel in the generation of
electrical power. The contract between CRR and its customer
predated the Company's acquisition of CRR.
Sales to this customer accounted for approximately 18% of CRR's
revenue or approximately 13% of the Company's consolidated
revenues. The effect of the allowance will be to reduce the
Company's fiscal 1997 consolidated income by C$1,500,000 and the
Company's net income after tax by $930,000. This will result in a
reduction in the Company's earnings per share of $0.10. Although
this event has negatively affected the Company's working capital
and consolidated revenue, it does not affect the Company's ability
to meet its obligations nor will it affect our ability to execute
our acquisition growth strategy.
Chapter 11 bankruptcy protection is intended to provide the
protected party with the benefit of a period of time wherein it
can reorganize its business activities and negotiate a payment
structure with its various classes of creditors that will allow it
to discharge its negotiated obligations in the normal course of
their post-Chapter 11 business.
In recent years the electrical utility industry in the United
States has been deregulated. This has resulted in a reduction in
the rate structure between the suppliers and producers of
electrical power.
CRR's customer is in the business of generating electricity for
sale to Florida Power & Light Company ("FPL") under a long term
contractual arrangement. In the period following the granting of
bankruptcy protection to its customer, CRR has continued to
monitor the progress of the customer's Chapter 11 business
activities and has provided wood waste services to the customer on
the basis that the customer provide a weekly deposit to CRR in
advance of the work that would be performed by CRR. As a result,
the Company and CRR were of the opinion that the customer would
successfully reorganize its business affairs and that CRR would
receive its outstanding account receivable.
CRR's customer and FPL have been unable, to date, to renegotiate
the terms of their long term supply contract and have recently
become involved in litigation to resolve the issue. On September
11, 1997, CRR's customer sent notice to CRR that FPL had refused
to make payments under its contract and that they were evaluating
whether or not to suspend power plant operations. Notice of this
action has materially changed the opinion of the Company's and
CRR's management. At this time, the Company is unable to
determine the timing or probability of recovering any or all of
the funds owed to CRR. The Company has elected to use a
conservative approach and establish the allowance which represents
the full amount of the customer's account receivable.
CONSOLIDATED ENVIROWASTE INDUSTRIES INC.
Douglas R. Halward, President
Bill, where is the disclosure? Why wasn't this reported in third quarter statements? First they come out with good news 2weeks ago then hit you with this bombshell. Same old same old. Lost half a million last year on a stupid ad campaign then lost 1.5 million this year. This year is awash might as well pack up and head for the exits. I stopped recommending this stock to people a year ago. I know the prez is aware of this conference. Bill maybe we'll be lucky and Doug will quit and go coach some Junior "B" team in the Yukon. |
