AMERICAN WASTE SERVICES, INC.

[LOGO OF AMERICAN WASTE SERVICES, INC.]

1996 ANNUAL REPORT

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Financial Highlights

(in thousands, except for per share amounts and percentages)

For the year 1996 1995
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Net operating revenues.......................... $ 79,024 $ 83,700
Income (loss) from operations................... 4,476 (40,304)
Net income (loss)............................... 3,122 (29,241)
Net income (loss) per share..................... .10 (.98)
Net cash provided by operating activities....... $ 18,922 $ 15,155

At year-end 1996 1995
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Working capital................................. $ 6,283 $ 16,131
Total assets.................................... 117,463 115,736
Total debt...................................... 4,141 9,106
Shareholders' equity............................ 70,932 67,245
Percent of debt-to-total capital employed....... 6% 12%

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The Company

American Waste Services, Inc. provides integrated waste management and
environmental services, which include disposal, collection, technical and
transportation services to industrial, commercial, municipal and governmental
customers primarily in selected eastern and midwestern U.S. markets. The
Company operates nonhazardous solid waste landfills for the disposal of special
waste and municipal solid waste; transports hazardous and nonhazardous waste;
provides transportation and disposal brokerage and management services; provides
collection services; and provides environmental engineering, site assessment,
analytical laboratory and remediation services. The Company, as part of its
transportation business, is also a common carrier of general and bulk
commodities within the United States and several provinces of Canada.

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Contents

Financial Highlights............................ 1
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...................... 2
Consolidated Balance Sheets..................... 10
Consolidated Statements of Operations........... 11
Consolidated Statements of
Cash Flows..................................... 12
Consolidated Statements of
Shareholders' Equity........................... 13
Notes to Consolidated Financial
Statements..................................... 14
Independent Auditors' Report.................... 24
Digest of Financial Data........................ 25
Company Location Directory...................... 26
Directors and Officers.......................... 27
Shareholder Information......................... 28

American Waste Services, Inc. and Subsidiaries
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Management's Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
consolidated financial statements and accompanying notes.

Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, 'forward looking statements.' The
Company cautions readers that forward looking statements, including, without
limitation, those relating to the Company's future business prospects, revenues,
working capital, liquidity, capital needs, interest costs, and income, are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward looking statements, due to
risks and factors identified herein and from time to time in the Company's
reports filed with the Securities and Exchange Commission.

Liquidity and Capital Resources

The Company has been able to generate sufficient financial resources from both
internal and external sources to meet operating needs, repay indebtedness, fund
capital spending programs, fund business acquisitions and fund financial
assurance requirements. During 1996, 1995 and 1994, cash provided by operations
totaled $18.9 million, $15.2 million and $11.8 million, respectively.

Working capital decreased to $6.3 million at December 31, 1996 compared with
$16.1 million at December 31, 1995. The decrease in working capital was
primarily attributable to increased capital spending in 1996 compared to 1995
and the repayment of long-term indebtedness. The balance of accounts payable at
December 31, 1996 was $8.5 million compared to $6 million at December 31, 1995.
This increase is primarily due to unpaid retainage and invoices associated with
capital spending as of December 31, 1996. The balance of accounts receivable at
December 31, 1996 was relatively unchanged from the balance at December 31, 1995
despite a decrease in net operating revenues of $4.7 million for the year. The
decrease in net operating revenues occurred in the first quarter of 1996 and, as
such, did not have a material impact on the accounts receivable at December 31,
1996.

In December 1994, the Company entered into an $18 million unsecured revolving
credit facility with two banks. Such facility provided for revolving credit
loans during the first three years and/or term loans payable quarterly with a
final maturity date no later than seven years from the date of the agreement.
On December 31, 1996 the Company amended such agreement to extend the revolving
credit loans to December 31, 2000 and the final maturity date on term loans to
no later than seven years from the amendment date. On December 31, 2000 the
Company must convert any outstanding revolving credit loans into term loans
payable quarterly with a final maturity date no later than December 31, 2003.
The agreement also provides for the issuance of letters of credit up to an
aggregate amount of $13 million until December 31, 2000. The Company had $8
million and $-0- in outstanding letters of credit at December 31, 1996 and
December 31, 1995, respectively. The letters of credit were utilized to
capitalize a captive insurance company, incorporated and licensed under the laws
of the State of Vermont, which issued an insurance policy to provide the
required financial assurances for closure and post-closure monitoring costs to
the State of Ohio for the Company's American and Mahoning landfill facilities.

amount of borrowings outstanding under the revolving credit facility at December
31, 1996 and December 31, 1995 was $2.6 million and $7.1 million, respectively,
and the weighted average interest rate was 8.25% at December 31, 1996.

During 1996 the Company reduced its outstanding long-term debt by $4.9
million. Aggregate annual maturities of all of the Company's long-term debt
scheduled to be paid in the years 1997 through 2001 total $.3 million, $.2
million, $.1 million, $.1 million and $.9 million, respectively.

During 1996 capital spending totaled $18.8 million which was principally
related to continued landfill development and expansion, installation of a
landfill gas extraction system, and the acquisition of landfill and
transportation equipment. The Company's capital spending in 1997 is expected to
range from $7 million to $9 million, approximately $1.4 million of which is
committed pursuant to contracts. Capital expenditures in 1997 will relate
principally to landfill development, acquiring transportation equipment,
acquiring additional equipment to support disposal operations, acquiring
equipment associated with collection services, and engineering and construction
costs relating to regulatory compliance at the Company's landfills. Compliance
with current and future regulatory requirements may require the Company, as well
as others in the waste management industry, from time to time to make
significant capital and operating expenditures.

As a result of federal and state laws and regulations, the Company has future
financial obligations with regard to closure costs and post-closure monitoring
costs associated with the disposal sites it operates. Although the precise
amount of these future obligations cannot be determined, the Company has
developed procedures to estimate such total projected costs based on currently
available facts, existing technology and presently enacted laws and regulations.
As of December 31, 1996, the Company estimates that the total closure costs and
post-closure monitoring costs it will incur for all of its disposal facilities
is approximately $31.2 million. The Company currently estimates expenditures
for closure and post-closure monitoring costs during 1997 to be $1.3 million.
In accordance with Ohio's financial assurance regulations, the Company currently
estimates that it will be required to ultimately provide $32.5 million of
financial assurances to the State of Ohio relating to such costs; however, such
financial assurances are reduced by actual expenditures. At December 31, 1995
the Company had deposited approximately $5.1 million into trusts for the benefit
of the Ohio EPA to fund the financial assurance requirements for its landfills.
During 1996 the Company utilized insurance to satisfy the financial assurance
requirements for its American and Mahoning landfill facilities. As a result of
using such insurance, in June 1996 the Company received $2.5 million from its
trust fund deposits relating to the American landfill facility, and in July
1996, the Company received $.7 million from its trust fund deposits relating to
the Mahoning landfill facility. The Company continues to use a trust fund to
satisfy the financial assurance requirements for its East Liverpool landfill
facility. Therefore, in April 1996 the Company deposited approximately $.3
million into the trust fund to satisfy the current financial assurance
obligation for that facility. The Company will continue to review and update
the underlying assumptions used to estimate the total projected costs and
financial assurance requirements and, accordingly, such estimates will be
subject to periodic revision and adjustment at least annually.

Management believes that cash provided from operations, the availability of
working capital and the Company's unused portion of its revolving credit
facility as well as the Company's ability to incur additional indebtedness will
be for the foreseeable future sufficient to meet operating requirements, fund
debt repayments, fund present capital expenditure programs and provide for
financial assurance requirements of its disposal facilities.

Currently, the Company is not aggressively pursuing potential acquisition
candidates but will continue to consider acquisitions that make economic sense.
While the Company has not entered into any pending agreements for acquisitions,
it may do so at any time. Such potential acquisitions could be financed by
existing working capital, the use of the Company's existing credit facility,
secured or unsecured debt, issuance of common or preferred stock, or issuance of
a security with characteristics of both debt and equity, any of which could
impact liquidity in the future.

Results of Operations

The Company's primary business segment provides integrated waste management and
environmental services which include the operation of nonhazardous solid waste
landfills for the disposal of special waste and municipal solid waste;
transportation of hazardous and nonhazardous waste; transportation and disposal
brokerage and management services; collection services; and environmental
engineering, site assessment, analytical laboratory and remediation services.
The Company, as part of its transportation operations, also operates a second
business segment: a common carrier of general and bulk commodities throughout
the United States and several provinces of Canada.

Performance in 1996 compared with 1995

Overall performance. Net operating revenues were $79 million in 1996 compared
with $83.7 million in 1995. Net income totaled $3.1 million or $.10 per share
compared with a net loss of $29.2 million or $.98 per share in 1995. During
1995, in accordance with the Company's asset impairment policy, the Company
performed an analysis for impairment of certain long-lived assets. As a result,
in 1995 the Company incurred significant charges for the write-down of assets
and the write-down of costs in excess of fair market value of net assets of
acquired businesses and other intangibles. In 1995, the Company also incurred
significant charges for closure and post-closure monitoring costs associated
with the Company's American and East Liverpool landfill facilities.

Segment performance. Segment performance should be read in conjunction with
Note 12 to the Consolidated Financial Statements.

Net operating revenues of the Company's primary business segment, integrated
waste management and environmental services declined 7% to $63.4 million in 1996
from $67.9 million in 1995. The Company's technical environmental services
business reported a modest increase in net operating revenues compared with the
prior year primarily as a result of increased remediation business. The net
operating revenues of the disposal operations, including disposal brokerage,
decreased in 1996 compared to 1995 primarily as a result of lower net operating
revenues of the disposal brokerage business and the Company's decision to
significantly curtail operations at its East Liverpool landfill facility in July
1996. Net operating revenues of the transportation and transportation related
operations declined significantly in 1996 compared with 1995 primarily due to
the closing of two transportation terminals resulting in decreased revenues
associated with the transportation of hazardous waste and, to a lesser extent,
the transportation of industrial waste.

As previously mentioned, the Company incurred significant charges in 1995 for
the write-down of assets, the write-down of costs in excess of fair market value
of net assets of acquired businesses and other intangibles and for closure and
post-closure monitoring costs. As a result, operating costs of the integrated
waste management and environmental services segment were significantly lower in
1996 than in 1995. Operating costs of this segment were 85% of net operating
revenues in 1996. Excluding the effects of the aforementioned charges,
operating costs would have been 92% of net operating revenues in 1995.
Operating costs of the transportation and transportation related operations
decreased as a percentage of net operating revenues primarily as a result of
lower depreciation and amortization expense and the closing of transportation
terminals which had high operating costs as a percentage of net operating
revenues. The disposal operations had lower operating costs in 1996 compared
with 1995 primarily due to lower closure and post-closure monitoring expense and
reduced depreciation and amortization expense as a

result of obtaining an expansion permit in May 1996 for the Company's American
landfill facility and improved gross margins on the disposal brokerage business.
The technical environmental services business also had lower operating costs in
1996 compared with 1995 primarily as a result of decreased subcontractor costs
and decreased depreciation and amortization expense.

The integrated waste management and environmental services segment recorded
operating income of $9.4 million in 1996 compared with an operating loss of
$33.8 million in 1995. Excluding the effect of the aforementioned charges on
1995 operating income, the integrated waste management and environmental
services segment would have recorded operating income of $5.8 million in 1995.
The increase in operating income in 1996 is primarily the result of increased
operating income of the transportation and transportation related operations and
the technical environmental services business both of which incurred operating
losses in 1995.

The Company's second business segment, the transportation of general and bulk
commodities, recorded net operating revenues of $12.2 million in 1996 compared
with $12.6 million in 1995. This segment recorded operating income of $.6
million compared with an operating loss of $1.3 million in 1995. The increase
in operating income is primarily the result of decreased depreciation and
amortization expense in 1996 and the fact that 1995's operating results
included a $1.1 million charge relating to impaired assets.

Interest Expense. Interest expense declined significantly to $.2 million in
1996 compared to $1 million in 1995 primarily due to a reduction in the amount
of principal outstanding and lower weighted average interest rates. During 1996
and 1995 interest costs capitalized amounted to $.3 million and $1 million,
respectively.

General Corporate Expenses. General corporate expenses declined to $5.6 million
in 1996 compared to $6.2 million in 1995. In 1995 the Company incurred a $.8
million prepayment charge in connection with the prepayment of a senior secured
note prior to maturity.

Net Income (Loss). The Company recorded net income of $3.1 million in 1996
compared with a net loss of $29.2 million in 1995 primarily as a result of the
foregoing. The Company recorded a provision for income taxes of $1.8 million in
1996 compared to a benefit for income taxes of $9.8 million in 1995. The
Company's overall effective income tax rate, including the effect of state
income tax provisions, was 36% in 1996 and 23.6% in 1995. The 1995 overall
effective income tax rate was substantially lower than the statutory income tax
rates primarily because of the nondeductibility for tax purposes of the
amortization and write-down of costs in excess of fair market value of net
assets of acquired businesses.

Performance in 1995 compared with 1994

Overall Performance. Net operating revenues were $83.7 million in 1995 compared
with $88.8 million in 1994. The Company incurred a net loss of $29.2 million,
or $.98 per share in 1995 compared with $2 million of net income, or $.07 per
share in 1994. In 1995, in accordance with the Company's asset impairment
accounting policy, the Company performed an analysis for impairment of certain
long-lived assets. As described further in the following paragraphs and in Note
2 to the Consolidated Financial Statements, such analysis indicated that assets
were impaired at the Company's East Liverpool landfill facility, technical
environmental services businesses, and certain transportation operations.

In light of market conditions, regulatory requirements and other business
factors, in 1995 East Liverpool Landfill, Inc. ("ELLI") determined that the
significant capital investment necessary to develop this facility in the
foreseeable future was not economically justified.

As a result of the decision in the fourth quarter of 1995 not to further
develop the facility, the East Liverpool landfill has very limited airspace
available for waste disposal and, therefore, the Company decided to
significantly reduce the quantity of waste accepted for disposal at this
facility. As a result, in accordance with the Company's asset impairment
accounting policy and Financial Accounting Standards Board Statement No. 121,
during the fourth quarter of 1995 the Company adjusted the carrying value of the
East Liverpool landfill assets to reflect the fair value of such assets,
resulting in an $11.7 million write-down. Furthermore, because the East
Liverpool landfill facility has very limited airspace available for waste
disposal, the Company accrued additional closure and post-closure monitoring
costs amounting to $6.8 million. Based upon the limited airspace available for
waste disposal, the Company also adjusted its contingent obligation to the City
of East Liverpool ("City") to reflect the Company's estimate of contingent
percentage gross disposal receipt payments and the future costs to be incurred
by the Company to provide free waste disposal to the City in accordance with its
agreement with the City. This adjustment resulted in the recognition of a gain
on the extinguishment of a portion of the aforementioned contingent obligation
which was accounted for as an extraordinary credit, net of tax, of $2.5 million.

In 1990, the Company acquired its technical environmental services businesses
and certain transportation operations. The amounts paid by the Company to
purchase these operations were based upon historical financial results, market
conditions and/or expectations at the time they were acquired. Significant
changes have occurred in the environmental industry over the last several years
and the financial performance of these operations had significantly deteriorated
since their acquisition as a result of, among other things, market conditions
and increased competition. Therefore, during 1995, in accordance with the
Company's asset impairment accounting policy, the Company evaluated the costs in
excess of fair market value of net assets of the technical services companies
and the transportation operations to determine if the carrying values of such
assets were recoverable.

The costs in excess of fair market value of net assets of the technical
services companies were not identified with any long-lived assets or intangibles
at the time of acquisition. Therefore, the Company evaluated the recoverability
of such costs in accordance with the Company's asset impairment accounting
policy and Accounting Principles Board Opinion No. 17 "Intangible Assets." To
ascertain whether a permanent impairment existed, the Company estimated the
undiscounted sum of the expected future after-tax operating income of the
technical services companies excluding amortization of costs in excess of fair
market value of net assets to determine if such sum was less than the carrying
value of such costs in excess of fair market value of net assets, which had a
remaining useful life of 20 years. The evaluation performed by the Company
indicated the existence of an impairment and the Company determined the fair
value and measured the extent of the impairment by discounting the expected
future after-tax operating income excluding amortization of costs in excess of
fair market value of net assets at the Company's incremental borrowing rate of
8.875%. The Company recorded an adjustment of $10.1 million to the carrying
value of such assets.

The recoverability of the costs in excess of fair market value of net assets
of the transportation operations was evaluated in accordance with the Company's
asset impairment accounting policy and Financial Accounting Standards Board
Statement No. 121, because these costs could be identified with long-lived
assets and other intangible assets. To ascertain if a permanent impairment
existed, the Company estimated the undiscounted sum of the expected future cash
flows of the identified assets to determine if such sum was less than the
carrying value of such identified assets. The evaluation performed by the
Company indicated the existence of an impairment and the Company measured the
extent of the impairment by determining the fair

value of the long-lived assets based upon quoted market prices. As a result, the
Company recorded an adjustment to the carrying value of the costs in excess of
fair market value of net assets and other intangible assets of $2.2 million and
$.7 million, respectively.

In the third quarter of 1995, as a result of a resolution reached with the
Ohio EPA alleging violation of American Landfill, Inc.'s ("ALI") 1985 permit and
related regulations concerning its capacity, ALI incurred a charge of
approximately $9.2 million for closure and post-closure monitoring costs.

Segment performance. Segment performance should be read in conjunction with
Note 12 to the Consolidated Financial Statements.

Net operating revenues of the Company's primary business segment, integrated
waste management and environmental services declined 7% to $67.9 million in 1995
from $73.1 million in 1994. The Company's disposal operations reported
decreased net operating revenues in 1995 compared with 1994 as a result of a
decrease in disposal volumes and, to a lesser extent, a decrease in average
disposal prices. Net operating revenues of the disposal brokerage operations
improved due to an increase in the volume of business. Net operating revenues
of the transportation and transportation brokerage and management operations
were lower in 1995 than in 1994, reflecting a reduction in the level of
transportation services provided. The Company's technical environmental
services business reported a modest improvement in net operating revenues in
1995 compared with 1994 primarily as a result of increased subcontractor costs
charged to the customer with little or no markup, offset by a significant
decrease in revenues arising from time billings and, to a lesser extent,
laboratory services.

Operating costs for the integrated waste management and environmental services
segment were significantly higher in 1995 compared with 1994 primarily as a
result of the aforementioned charges relating to the impaired assets of the
Company's disposal, transportation and technical services businesses and the
adjustments recorded for closure and post-closure monitoring costs associated
with the Company's disposal operations. Excluding the effects of the
aforementioned charges, the operating costs of the integrated waste management
and environmental services segment were 92% of the segment's net operating
revenues in 1995 compared with 87% in 1994. Operating costs of the technical
environmental services businesses as well as the transportation and
transportation related operations increased in 1995 compared to 1994. The
increase in the technical environmental services business operating costs was
primarily as a result of increased subcontractor costs. The increase in
operating costs as a percentage of net operating revenues for the transportation
and transportation related operations was primarily a result of decreased net
operating revenues as well as the result of a liability recorded by one of the
transportation companies having been identified as a potentially responsible
party relating to a hazardous waste disposal facility as more fully described in
Note 9 to the Consolidated Financial Statements. Operating costs of the
disposal operations decreased primarily as a result of lower amortization costs
associated with the landfill operations. Operating costs of disposal brokerage
operations increased primarily due to the increased level of business of the
disposal brokerage operations.

The integrated waste management and environmental services segment incurred an
operating loss of $33.8 million in 1995 compared with operating income of $9.3
million in 1994 primarily as a result of the aforementioned charges and
decreased net operating revenues. Excluding the effects of the aforementioned
charges in 1995, the integrated waste management and environmental services
segment would have recorded operating income of $5.8 million. The decrease from
$9.3 million in 1994 to $5.8 million in 1995 was primarily the result of the
transportation and technical environmental services operations incurring
operating losses in 1995, partially offset by increased operating income of the
disposal and disposal brokerage operations.

The Company's second business segment, the transportation of general and bulk
commodities, recorded net operating revenues of $12.6 million in 1995 compared
with $12.9 million in 1994. This segment incurred an operating loss of $1.3
million in 1995 compared with operating income of $.5 million in 1994. The
decrease is primarily the result of increased operating costs in 1995 including
$1.1 million relating to the charges for impaired assets as described above.

Interest expense and amortization of debt discount. Interest expense and
amortization of debt discount declined slightly to $1 million in 1995 compared
with $1.1 million in 1994 primarily due to a reduction in the amount of
principal outstanding. During 1995 and 1994 interests costs capitalized
amounted to $1 million and $1.5 million, respectively.

General corporate expenses. General corporate expenses increased to $6.2
million in 1995 compared with $5.7 million in 1994 primarily as a result of a
$.8 million prepayment charge in connection with the prepayment of a senior
secured note prior to maturity as more fully described in Note 4 to the
Consolidated Financial Statements.

Net income (loss). A net loss of $29.2 million was incurred in 1995 as compared
with net income of $2 million in 1994 primarily as a result of the foregoing.
The Company recorded a benefit for income taxes of $9.8 million in 1995 compared
to an expense provision of $1.7 million in 1994. The Company's overall
effective income tax rate, including the effect of state income tax provisions,
was 23.6% in 1995 and 45.2% in 1994. The 1995 overall effective income tax rate
was substantially lower than the statutory income tax rates primarily because of
the nondeductibility for tax purposes of the amortization and write-down of
costs in excess of fair market value of net assets.

Trends and uncertainties

In the ordinary course of conducting its business, the Company becomes involved
in lawsuits, administrative proceedings and governmental investigations,
including those relating to environmental matters. Some of these proceedings
may result in fines, penalties or judgments being assessed against the Company
which, from time to time, may have an impact on its business and financial
condition.

The Company is subject to extensive and evolving environmental laws and
regulations that have been enacted in response to technological advances and the
public's increased concern over environmental issues. As a result, the Company
believes that costs associated with the engineering, construction, ownership and
operation of landfills will increase in the future. Competitive factors may
require the Company to absorb all or a portion of these increased expenses.

The federal government as well as numerous states and local governmental
bodies are increasingly considering, proposing or enacting legislation to either
restrict or impede disposal and/or transportation of waste. A significant
portion of the Company's disposal and transportation revenues are derived from
the disposal or transportation of out-of-state waste. All of the Company's
landfills are located within the State of Ohio. Any regulation restricting or
impeding the transportation of waste, the acceptance of out-of-state waste for
disposal, or which levies significant taxes on the disposal of waste could have
a significant negative effect on the Company.

Competitive pressures within the environmental industry continue to impact the
financial performance of the Company's disposal, transportation and technical
environmental services operations. Increases in additional disposal capacity
within the industry and aggressive pricing strategies of certain competitors
could result in further declines in disposal rates and/or disposal volumes
thereby affecting the Company's financial performance. Additionally, a further
decline

in the rates which customers are willing to pay for its technical environmental
and transportation services could impact the future financial performance of the
Company's operations.

During the third quarter of 1996, the Company, through newly organized
subsidiaries, started commercial collection operations with the intent to begin
residential collection in the future. The Company initially intends to target
the local markets in which the Company's American and Mahoning landfills are
located.

The Company recently completed the construction of a landfill gas extraction
facility at its American landfill and began production in September 1996. In
November 1996 the Company entered into a contract for the sale of all of the
landfill gas, the principal component of which is methane. The production and
sale of the landfill gas is expected to entitle the Company to qualify for tax
credits from the production of fuel from a nonconventional source. These tax
credits, which under current legislation expire at the end of 2007, could
significantly reduce the Company's overall effective tax rate.

As a result of East Liverpool Landfill, Inc.'s ("ELLI") previously disclosed
decision not to further develop its facility, the East Liverpool landfill has
very limited airspace available for waste disposal, and effective July 1, 1996,
ELLI significantly reduced the quantity of waste accepted for disposal.

During the fourth quarter of 1996, the Company's remediation business began
experiencing operating losses. Such losses have significantly increased during
the first quarter of 1997 primarily as a result of inefficiencies and delays
occurring at a remediation project in Denver, Colorado. These operating losses
will adversely affect the Company's first quarter financial results.
Furthermore, as more fully described below, the Company is currently in a
dispute regarding this remediation project.

In March 1996, the Company entered into an agreement with a customer to
provide certain remediation related services at a site in Denver, Colorado. The
volume of contaminated materials actually requiring remediation has greatly
exceeded the amount originally estimated and the agreement provides for payment
to the Company for such additional volume. The customer has refused to make
further payments to the Company. On February 14, 1997, the Company filed a
demand for arbitration against the customer, claiming, among other things, that
the customer has materially breached the agreement. Furthermore, the Company
has requested financial assurances from the customer of its ability to pay
amounts that are now and will be due and owing to the Company under the
agreement. The agreement provides, among other things, that the Company shall
not cease work pending the arbitration award but shall proceed with all work,
including work that is the subject of the dispute submitted to arbitration. The
Company has requested an expedited hearing claiming that the Company will be
severely prejudiced if it is required to continue to work at the site without
adequate assurance that it will be paid. On March 21, 1997 the Company was
advised that another contractor had been selected to complete the project.
Failure to resolve the pending dispute in favor of the Company could have a
material adverse effect on the Company's future financial results.

Inflation impact

The Company has not entered into any long-term fixed price contracts which could
adversely impact financial performance in periods of inflation. In general,
management believes that rising costs resulting from price inflation could be
passed on to customers; however, the Company may need to absorb all or a portion
of these cost increases until current competitive conditions ease. During the
three years ended December 31, 1996, management believes inflationary pressures
did not significantly impact the Company's financial performance.

American Waste Services, Inc. and Subsidiaries
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Consolidated Balance Sheets

(in thousands, except for shares)

December 31,
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1996 1995
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Assets
Current Assets:
Cash and cash equivalents..................................................... $ 4,286 $ 5,186
Accounts receivable, less allowance for
doubtful accounts of $506 in 1996 and $778 in 1995........................... 14,510 14,481
Refundable income taxes....................................................... -- 5,519
Current deferred tax benefit (Note 5)......................................... 197 191
Prepaid expenses and other current assets..................................... 3,019 2,931
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Total current assets...................................................... 22,012 28,308
Property and equipment, net (Notes 2, 3 and 4).................................. 89,637 78,636
Deposits (Note 10).............................................................. 2,314 5,117
Costs in excess of fair market value of net assets of acquired businesses, net
(Notes 1 and 2)................................................................ 3,193 3,365
Other assets, net (Notes 1 and 2)............................................... 307 310
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Total assets.............................................................. $117,463 $115,736
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Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt (Notes 2 and 4)............................. $ 305 $ 358
Accounts payable.............................................................. 8,495 5,970
Accrued payroll and other compensation........................................ 1,076 920
Accrued income taxes.......................................................... 315 166
Other accrued taxes........................................................... 2,127 1,804
Other liabilities and accrued expenses (Notes 1 and 6)........................ 3,411 2,959
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Total current liabilities................................................. 15,729 12,177
Long-term debt (Notes 2 and 4).................................................. 3,836 8,748
Deferred income taxes (Note 5).................................................. 7,757 6,559
Accrued closure costs and post-closure monitoring costs (Notes 1, 2 and 10)..... 16,932 18,519
Other noncurrent liabilities (Note 2)........................................... 2,277 2,488
Contingencies and Commitments (Notes 9, 10 and 11):
Shareholders' Equity (Notes 6, 7 and 8):
Preferred Stock, no par value; authorized 2,000,000 shares;
no shares issued or outstanding.............................................. -- --
Class A Common Stock, no par value, one vote per share; authorized
70,000,000 shares; issued 25,015,615 shares at December 31, 1996
and 24,784,466 shares at December 31, 1995................................... 63,702 63,136
Class B Common Stock, no par value, ten votes per share; authorized
30,000,000 shares; issued 5,165,569 shares at December 31, 1996
and 5,170,844 shares at December 31, 1995.................................... 780 781
Retained earnings............................................................. 6,630 3,508
Treasury Stock, Class B Common Stock, at cost................................. (180) (180)
-------------------
Total shareholders' equity............................................... 70,932 67,245
-------------------
Total liabilities and shareholders' equity............................... $117,463 $115,736
-------------------

See accompanying notes to consolidated financial statements.

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Operations

(in thousands, except for per share amounts)

Year Ended December 31,
----------------------------------
1996 1995 1994
----------------------------------

Net operating revenues.......................................................... $ 79,024 $ 83,700 $ 88,779

Cost and expenses:
Cost of operations............................................................ 63,269 71,754 71,510
Closure and post-closure monitoring costs (Notes 2 and 10).................... 591 17,124 1,223
Write-down of costs in excess of fair market value of net assets
of acquired businesses and other intangibles (Note 2)........................ -- 13,020 --
Write-down of assets (Note 2)................................................. -- 11,685 --
Selling, general and administrative expense................................... 10,688 10,421 11,707
----------------------------------
Income (loss) from operations................................................... 4,476 (40,304) 4,339

Other income (expense):
Interest expense (Note 4)..................................................... (223) (974) (839)
Amortization of debt discount (Note 2)........................................ -- -- (289)
Interest income............................................................... 390 665 450
Other income (expense), net (Note 4).......................................... 236 (940) 59
----------------------------------
Income (loss) before income taxes and extraordinary credit...................... 4,879 (41,553) 3,720

Provision (benefit) for income taxes (Note 5):
Current....................................................................... 565 (4,742) 1,412
Deferred...................................................................... 1,192 (5,081) 268
----------------------------------
1,757 (9,823) 1,680
----------------------------------
Income (loss) before extraordinary credit....................................... 3,122 (31,730) 2,040

Extraordinary credit, net of tax (Note 2)....................................... -- 2,489 --
----------------------------------
Net income (loss)............................................................... $ 3,122 $(29,241) $ 2,040
----------------------------------
Net income (loss) per share before extraordinary credit......................... $.10 $(1.06) $.07

Extraordinary credit per share.................................................. -- .08 --
----------------------------------
Net income (loss) per share..................................................... $.10 $(.98) $.07
----------------------------------
Weighted average shares outstanding (Note 1).................................... 30,236 29,982 29,888
----------------------------------

See accompanying notes to consolidated financial statements.

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,
----------------------------------
1996 1995 1994
----------------------------------

Operating activities:
Net income (loss)............................................................. $ 3,122 $(29,241) $ 2,040
Reconciliation of net income to cash provided by operating activities:
Extraordinary credit........................................................ -- (2,489) --
Depreciation and amortization............................................... 6,975 8,561 10,906
Closure and post-closure monitoring costs................................... 591 17,124 1,223
Write-down of costs in excess of fair market value of net assets
of acquired businesses and other intangibles............................... -- 13,020 --
Write-down of assets........................................................ -- 11,685 --
Amortization of debt discount............................................... -- -- 289
Provision (benefit) for deferred income taxes............................... 1,192 (5,081) 268
Provision for losses on accounts receivable................................. (85) 610 1,007
(Gain) loss on sales of fixed assets........................................ (103) 302 57
Change in assets and liabilities excluding the
effects of business acquisitions:
(Increase) decrease in accounts receivable................................. 56 5,825 (5,022)
(Increase) decrease in refundable taxes.................................... 5,519 (5,363) (60)
(Increase) decrease in prepaid expenses and other current assets........... (88) (759) 1,190
(Increase) decrease in other assets........................................ (37) 5 (133)
Increase in accounts payable............................................... 2,525 855 555
Increase (decrease) in accrued payroll and other compensation.............. 156 (683) 2
Increase in accrued income taxes........................................... 149 2 128
Increase (decrease) in other accrued taxes................................. 323 576 (5)
Increase (decrease) in other liabilities and accrued expenses.............. 1,016 (417) (638)
Decrease in accrued closure costs and post-closure
monitoring costs........................................................ (2,178) -- --
Increase (decrease) in other noncurrent liabilities........................ (211) 623 --
----------------------------------
Net cash provided by operating activities............................... 18,922 15,155 11,807
----------------------------------
Investing activities:
Capital expenditures.......................................................... (18,754) (11,032) (6,224)
Business acquisitions, net of cash acquired................................... -- -- (87)
Proceeds from sales of fixed assets........................................... 1,094 86 276
(Increase) decrease in deposits, net.......................................... 2,803 920 (866)
----------------------------------
Net cash used in investing activities................................... (14,857) (10,026) (6,901)
----------------------------------
Financing activities:
Proceeds from sale of common stock............................................ -- 6 --
Proceeds from issuance of long-term debt...................................... 3,100 9,831 102
Repayments of long-term debt.................................................. (8,065) (17,127) (4,128)
----------------------------------
Net cash used in financing activities................................... (4,965) (7,290) (4,026)
----------------------------------
Increase (decrease) in cash and cash equivalents................................ (900) (2,161) 880
Cash and cash equivalents at beginning of year.................................. 5,186 7,347 6,467
----------------------------------
Cash and cash equivalents at end of year........................................ $ 4,286 $ 5,186 $ 7,347
----------------------------------

For supplemental disclosures of cash flow information and non-cash investing
and financing activities, see Notes 1, 2, 5 and 6.

See accompanying notes to consolidated financial statements.

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity
(in thousands)

For The Three Years Ended December 31, 1996
------------------------------------------------------------------
Class B
Shares Common Stock Treasury Stock
---------------- ---------------- Retained ---------------
Class A Class B Class A Class B Earnings Shares Cost
------------------------------------------------------------------

Balance at January 1, 1994. 23,551 6,173 $62,346 $ 967 $ 30,709 39 $180
Stock contributed to
401(k) plan
(Note 6)................ 228 -- 598 -- -- -- --
Conversion of shares by
shareholders
(Note 8)................ 691 (691) 129 (129) -- -- --
Net income............... -- -- -- -- 2,040 -- --
------------------------------------------------------------------
Balance at December 31,
1994...................... 24,470 5,482 63,073 838 32,749 39 180
Exercise of stock options
(Note 7)............... 3 -- 6 -- -- -- --
Conversion of shares by
shareholders
(Note 8)................ 311 (311) 57 (57) -- -- --
Net loss................. -- -- -- -- (29,241) -- --
------------------------------------------------------------------
Balance at December 31,
1995...................... 24,784 5,171 63,136 781 3,508 39 180
Stock Contributed to
401(k) plan
(Note 6)............... 226 -- 565 -- -- -- --
Conversion of shares by
shareholders
(Note 8)............... 5 (5) 1 (1) -- -- --
Net income............... -- -- -- -- 3,122 -- --
------------------------------------------------------------------
Balance at December 31,
1996...................... 25,015 5,166 $63,702 $ 780 $ 6,630 39 $180
------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

The significant accounting policies of American Waste Services, Inc. and its
subsidiaries (collectively the "Company" or "AWS"), which are summarized below,
are consistent with generally accepted accounting principles and reflect
practices appropriate to the businesses in which they operate. 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 those estimates. Certain prior year amounts have been reclassified
to be consistent with the 1996 presentations.

Principles of consolidation

The consolidated financial statements include the accounts of American Waste
Services, Inc. and all wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents

Cash and cash equivalents include money market instruments and other highly
liquid investments that are stated at cost which approximates market value.
Such investments, which mature in three months or less from date of purchase,
are considered to be cash equivalents for purposes of the consolidated
statements of cash flows. The balance of such short-term investments was
$2,016,000 and $3,627,000 at December 31, 1996 and 1995, respectively.

Financial instruments

The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximated fair value at
December 31, 1996 and 1995 because of the relatively short maturity of these
instruments.

Property and equipment

Disposal sites include the cost of acquisitions in addition to engineering,
permitting and certain preparation costs related to disposal sites in operation.
These costs are amortized as disposal capacity is used which is based on
engineering estimates of remaining available airspace. Engineering, legal and
other costs associated with the expansion of capacity of existing sites are
deferred until receipt of all necessary operating permits. Such costs are
capitalized and amortized after receipt of the necessary operating permits.
Disposal site improvements are capitalized and amortized using the straight-line
method over the estimated useful life of the asset which varies from 5 to 20
years. All other property and equipment is stated at cost and depreciated using
the straight-line method over the estimated useful life of the asset which
varies from 5 to 50 years in the case of buildings and improvements and from 3
to 15 years in the case of all other property and equipment.

Major additions and improvements are charged to the property and equipment
accounts while replacements, maintenance and repairs which do not improve or
extend the life of the respective asset are expensed currently. The cost of
assets retired or otherwise disposed of and the related accumulated depreciation
is eliminated from the accounts in the year of disposal. Gains or losses
resulting from disposals of property and equipment are credited or charged to
operations currently. Interest costs are capitalized on significant projects of
landfill development or expansion and other construction (see Note 4).

Closure costs and post-closure monitoring costs

Disposal site closure costs and post-closure monitoring costs are estimated
based on currently available facts, existing technology and presently enacted
laws and regulations. Such costs are accrued over the estimated life of the
related disposal site as disposal capacity is utilized based on engineering
estimates of remaining available airspace. Upon the effective date of the
federal "Subtitle (D) Regulations," October 9, 1993, the Company began accruing
estimated closure costs and post-closure monitoring costs. Closure costs and
post-closure monitoring costs charged to operations were $591,000 in 1996,
$17,124,000 in 1995, and $1,223,000 in 1994. The balance of accrued closure and
post-closure monitoring costs at December 31, 1996 was $18,199,000 of which
$1,267,000 is included in "Other current liabilities" and $16,932,000 is
included in "Accrued closure costs and post-closure monitoring costs." At
December 31, 1995 the balance was $18,519,000, all of which was included in
"Accrued closure costs and post-closure

monitoring costs." As a result of an agreement between American Landfill, Inc.
and the Ohio Environmental Protection Agency ("Ohio EPA") and an asset
impairment at the East Liverpool landfill facility, the Company incurred
significant adjustments for closure and post-closure monitoring costs in 1995
(see Notes 2 and 10).

Costs in excess of fair market value of net assets of acquired businesses

The costs in excess of fair market value of net assets of acquired businesses is
amortized on a straight-line basis over 25 years. Amortization of these costs
was $172,000 in 1996 and $798,000 in 1995 and 1994. Accumulated amortization at
December 31, 1996 and 1995 was $4,453,000 and $4,281,000, respectively. During
the fourth quarter of 1995 in accordance with the Company's asset impairment
accounting policy, a portion of the costs in excess of fair market value of net
assets of acquired businesses was written off (see Note 2).

Other intangible assets

Included in the balance of "Other assets, net" are other intangible assets of
$163,000 and $177,000 at December 31, 1996 and 1995, respectively. Other
intangible assets consist primarily of a coal mining permit for the Company's
American landfill facility. The permit is amortized as the coal is mined
during construction of the landfill facility and is based upon engineering
estimates of remaining coal reserves. In 1995 other intangible assets consisted
primarily of the cost of intrastate operating authorities related to
transportation operations which were being amortized on a straight-line basis
principally over periods not exceeding 25 years. In the fourth quarter of 1995
the intrastate operating authorities relating to the transportation operations
were written off (see Note 2). Amortization of other intangible assets in 1996,
1995 and 1994 was $41,000, $65,000 and $84,000, respectively.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and 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 and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. 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.

Revenue recognition

The Company recognizes revenue for waste disposal services when the waste is
accepted at the landfill sites and revenue related to transportation services is
recognized on the date of delivery. Revenue for collection and technical
services, excluding laboratory services, is recognized as services are
performed, while revenue for laboratory services is recognized when the service
is completed. On contracts where the percentage-of-completion method is used,
revenue is recognized for a portion of the total contract revenue, in the
proportion that costs incurred bear to management's estimate of total contract
costs to be incurred, commencing when progress reaches a point where experience
is sufficient to estimate final results with reasonable accuracy. Earnings and
costs on contracts are subject to revision throughout the terms of the contract,
and any required revisions are made in the periods in which revisions become
known. Provision is made for the full amount of anticipated losses in the
period in which they are determinable.

Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenues recognized on contracts for which billings will be presented
in accordance with contract provisions. Such revenues are generally expected to
be billed and collected within one year.

Net income (loss) per share

Class A Common Stock and Class B Common Stock are considered as one class of
stock for the calculation of net income (loss) per share. All per share data
has been computed using the weighted average number of common and common
equivalent shares outstanding each year which amounted to 30,236,000, 29,982,000
and 29,888,000 in 1996, 1995 and 1994, respectively. Common equivalent shares,
which represent shares issuable upon the exercise of outstanding stock options,
were 129,000, 67,000 and -0- in 1996, 1995 and 1994, respectively.

Asset impairments

In the fourth quarter of 1995, the Company adopted Financial Accounting
Standards Board Statement No. 121 entitled "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" which was not
significantly different from the Company's previous asset impairment accounting

policy. The Company periodically reviews the carrying value of certain of its
assets in relation to historical results, current business conditions and trends
to identify potential situations in which the carrying value of assets may not
be recoverable. If such reviews indicate that the carrying value of such assets
may not be recoverable, the Company would estimate the undiscounted sum of the
expected future cash flows of such assets to determine if such sum is less than
the carrying value of such assets to ascertain if a permanent impairment exists.
If a permanent impairment exists, the Company would determine the fair value by
using quoted market prices, if available, for such assets, or if quoted market
prices are not available, the Company would discount the expected future cash
flows of such assets.

Impact of new accounting requirements

On October 23, 1995, the Financial Accounting Standards Board issued FAS No.
123, "Accounting for Stock-Based Compensation," which is effective for financial
statements for fiscal years beginning after December 15, 1995. Statement No.
123 provides a fair value method of accounting for stock-based compensation
arrangements rather than the intrinsic value based method contained in APB
Opinion No. 25. The Statement does not require an entity to adopt the new fair
value based method for purposes of preparing its basic financial statements.
Entities that retain the APB Opinion No. 25 method of accounting are required to
display in the footnotes pro forma net income and earnings per share information
as if the fair value based method had been adopted. The Company did not adopt
the fair value method provided in Statement No. 123.

The Company performed an analysis under the fair value method of accounting
for stock-based compensation arrangements and has determined that the stock-
based compensation would be immaterial to the consolidated financial statements
of the Company. Therefore, no pro forma information is presented.

Note 2. Impairment of Long-lived Assets

In 1995, in accordance with the Company's asset impairment accounting policy,
the Company performed an analysis for impairment of certain long-lived assets.
As described further in the following paragraphs, such evaluation indicated
asset impairments at the Company's East Liverpool landfill facility, technical
environmental services businesses, and transportation operations.

On February 2, 1990, East Liverpool Landfill, Inc. ("ELLI"), a wholly owned
subsidiary of the Company, entered into an agreement with the City of East
Liverpool, Ohio, ("City") to manage and operate the City's landfill facility.
ELLI also entered into an agreement with the City to purchase its landfill
facility for $1,043,000 in cash, to provide $1,000,000 in cash to the City for
improvements, provide up to 700 tons of free waste disposal per month, and to
make minimum disposal fee payments of $600,000 per year to the City for a period
of 20 years if ELLI was successful in being granted a new permit by the Ohio
Environmental Protection Agency. On March 1, 1993, the Ohio Environmental
Protection Agency granted a permit to upgrade the facility in accordance with
Ohio's "best available technology" standards and the acquisition of the East
Liverpool landfill facility was then consummated on March 3, 1993. This
acquisition was accounted for using the purchase method of accounting. The
present value of the minimum annual disposal fee payments, determined using a
discount rate of 8%, totaled $5,891,000 and had been recorded as a long-term
debt as of the date of acquisition. The purchase price of the facility, which
included the liability for minimum annual disposal fee payments and other
liabilities of $162,000, totaled $8,250,000 and was allocated to property and
equipment.

On June 29, 1994, the City filed an action against ELLI in the Court of Common
Pleas, Columbiana County, Ohio, relating to the agreement regarding the sale and
purchase of the East Liverpool landfill entered into by the City and ELLI on
February 2, 1990 (the "Agreement").

On August 29, 1994, ELLI entered into an Agreed Judgment Entry of
Consolidation, Settlement and Dismissal (the "Entry") with the City and others.
The Entry modified certain terms of the Agreement. The Entry obligated the
Company to provide up to 700 tons of free waste disposal at either its American
landfill facility or Mahoning landfill facility should the East Liverpool
facility stop accepting waste, and eliminated the requirement for ELLI to make a
minimum annual payment of $600,000 per year to the City. The Entry further
provided that ELLI will continue to pay the City 17% of gross disposal receipts
until March 1, 1998 and 18% of gross disposal receipts for the remaining 15-year
term of the Agreement. The Company was unable to estimate the amount of
contingent percentage gross disposal receipt payments that would be made to the
City during the term of the Agreement. Accordingly, the Company reclassified
the remaining liability recorded at the date of acquisition from long-term debt
to other noncurrent liabilities.

In light of market conditions, regulatory requirements and other business
factors, in 1995 ELLI determined that the significant capital investment
necessary to

develop this facility in the foreseeable future was not economically justified.

As a result of the decision in the fourth quarter of 1995 not to further
develop the facility, the East Liverpool landfill has very limited airspace
available for waste disposal. Therefore, the Company decided to significantly
reduce the quantity of waste accepted for disposal at this facility. As a
result, in accordance with the Company's asset impairment accounting policy and
Financial Accounting Standards Board Statement No. 121, the Company determined
that the assets of the East Liverpool landfill were impaired. Accordingly, in
the fourth quarter of 1995, the Company adjusted the carrying value of the East
Liverpool landfill to reflect the fair value of such assets resulting in an
$11,685,000 write-down. Such amount is included in the Consolidated Statements
of Operations for 1995 under the caption "Write-down of assets." Furthermore,
because the East Liverpool landfill facility has very limited airspace available
for waste disposal, in the fourth quarter of 1995, the Company accrued
additional closure and post-closure monitoring costs amounting to $6,821,000.
This charge is included under the caption "Closure and Post-closure Monitoring
Costs" on the Consolidated Statements of Operations for 1995. Based upon the
limited airspace available for waste disposal, the Company also adjusted its
contingent obligation to the City of East Liverpool, as described above, to
reflect the Company's estimate of contingent percentage gross disposal receipt
payments and the future costs to be incurred by the Company to provide free
waste disposal to the City in accordance with its agreement with the City. This
adjustment resulted in the recognition of a gain on the extinguishment of a
portion of the aforementioned contingent obligation which was accounted for as
an extraordinary credit, net of tax, of $2,489,000 in 1995. Such contingent
noncurrent liability at December 31, 1996 and December 31, 1995 amounted to
$1,336,000 and $1,548,000, respectively. Future percentage gross disposal
receipt payments and the free waste disposal provided to the City will reduce
the carrying amount of such contingent noncurrent liability.

In 1990, the Company acquired its technical environmental services businesses
and certain transportation operations. The amounts paid by the Company to
purchase these operations were based upon historical financial results, market
conditions and/or expectations at the time they were acquired. Significant
changes have occurred in the environmental industry over the last number of
years and the financial performance of these operations had significantly
deteriorated since their acquisition as a result of, among other things, market
conditions and increased competition. During 1995, in accordance with the
Company's asset impairment accounting policy, the Company evaluated the costs in
excess of fair market value of net assets of the technical services companies
and the transportation operations to determine if the carrying values of such
assets were recoverable.

The costs in excess of fair market value of net assets of the technical
services companies were not identified with any long-lived assets or intangibles
at the time of acquisition. Therefore, the Company evaluated the recoverability
of such costs in accordance with the Company's asset impairment accounting
policy and Accounting Principles Board Opinion No. 17 "Intangible Assets." To
ascertain whether a permanent impairment existed, the Company estimated the
undiscounted sum of the expected future after-tax operating income of the
technical services companies excluding amortization of costs in excess of fair
market value of net assets to determine if such sum was less than the carrying
value of such costs in excess of fair market value of net assets, which had a
remaining useful life of 20 years. The evaluation performed by the Company
indicated the existence of an impairment and the Company determined the fair
value and measured the extent of the impairment by discounting the expected
future after-tax operating income excluding amortization of costs in excess of
fair market value of net assets at the Company's incremental borrowing rate of
8.875%. As a result, in the fourth quarter of 1995 the Company recorded an
adjustment of $10,106,000 to the carrying value of the costs in excess of fair
market value of net assets. The adjustment is included in the Consolidated
Statements of Operations for 1995 under the caption "Write-down of costs in
excess of fair market value of net assets of acquired businesses and other
intangibles."

Company recorded an adjustment to the carrying value of the costs in excess
of fair market value of net assets and other intangible assets of $2,194,000 and
$720,000, respectively. The adjustments are included in the Consolidated
Statements of Operations for 1995 under the caption "Write-down of costs in
excess of fair market value of net assets of acquired businesses and other
intangibles."

Note 3. Property and Equipment

Property and equipment at December 31, 1996 and 1995 consist of the following
(in thousands)(see Note 2:

1996 1995
------------------

Land and land improvements.................................................. $ 8,452 $ 8,448
Disposal sites and improvements............................................. 66,781 52,256
Buildings and improvements.................................................. 15,143 14,588
Machinery and equipment..................................................... 15,385 14,227
Transportation equipment
and vehicles.............................................................. 13,051 12,781
Office furniture and equipment.............................................. 5,014 4,639
Construction in progress.................................................... 11,570 12,588
------------------
135,396 119,527
Less accumulated depreciation
and amortization.......................................................... 45,759 40,891
------------------
Property and equipment, net................................................. $ 89,637 $ 78,636
------------------

Note 4. Debt
Long-term debt at December 31, 1996 and 1995 is as follows (in thousands):

1996 1995
------------------

Unsecured revolving credit facility and term
loan agreement, with interest at prime
at December 31, 1996 and 3/8% above
prime at December 31, 1995................................................ $ 2,600 $ 7,115
Equipment loans secured by certain
transportation equipment, payable
monthly through August 1998, with
interest at 8.8%.......................................................... 324 650
Variable rate loan collateralized by mortgage
on golf course property, payable monthly
through March 2008, with interest rate
ceiling of 8% until March 1998 and
9.5% thereafter........................................................... 1,217 1,323
Capital leases and other notes payable...................................... -- 18
------------------
Total long-term debt........................................................ 4,141 9,106
Less current portion........................................................ 305 358
------------------
$ 3,836 $ 8,748
------------------

Aggregate annual maturities of the long-term debt total $305,000, $230,000,
$106,000, $106,000, and $903,000 for the years 1997 through 2001, respectively.

Borrowings under the amended agreement bear interest at prime or, at the
Company's option, at a fixed rate above the Eurodollar rate. The agreement
provides for an annual fee of 3/8% on the unused portion of the facility and
requires the Company to maintain certain financial ratios. The amount of
borrowings outstanding under the revolving credit facility at December 31, 1996
and December 31, 1995 was $2,600,000 and $7,115,000, respectively, and the
weighted average interest rate was 8.25% at December 31, 1996. In December 1995
the Company used the unsecured revolving credit facility to prepay a senior
secured note prior to its stated maturity. In doing so, the Company incurred a
prepayment charge of approximately $750,000. Such amount is included in the
Consolidated Statements of Operations for 1995 under the caption "Other income
(expense), net." The Company also had $8 million and $-0- in outstanding
letters of credit at December 31, 1996 and December 31, 1995, respectively. The
letters of credit were utilized to capitalize a captive insurance company,
incorporated and licensed under the laws of the State of Vermont, which issued
an insurance policy to provide the required financial assurances for closure and
post-closure monitoring costs to the State of Ohio for the Company's American
and Mahoning landfill facilities.

During August 1995, a subsidiary of the Company borrowed $1,350,000 from a
bank to refinance a previous loan and to finance the construction of a banquet
facility. Proceeds from the new loan were used to repay the remaining unpaid
principal balance of the previous loan which was approximately $850,000. The
new loan is repayable in equal monthly installments over an initial term of
12.75 years and provides for interest at a variable rate of 3/4% over the bank's
prime rate with an interest rate ceiling of 8% per annum until March 22, 1998.
Thereafter, the maximum interest rate will be 9.5% per annum. The golf course
property together with the pro shop, restaurant facility and banquet facility
serve as collateral securing repayment of this indebtedness.

Interest costs related to significant projects of landfill development or
expansion and other construction are capitalized. Interest costs capitalized
totaled $313,000, $1,029,000 and $1,524,000 in 1996, 1995 and

1994, respectively. Total interest costs and amortization of debt discount
incurred by the Company totaled $536,000, $2,003,000 and $2,652,000 in 1996,
1995 and 1994, respectively. Interest payments in 1996, 1995 and 1994 were
$459,000, $2,056,000 and $2,383,000, respectively.

Note 5. Income Taxes

Income (loss) before income taxes for each of the three years ended December
31, 1996 was subject to taxation under United States jurisdictions only.

Total income tax expense (benefit) for the year ended December 31, 1995 was
allocated as follows:

Income (loss) from continuing operations............................................ $(9,823)
Extraordinary item.................................................................. 1,339
-------
$(8,484)
-------

The provisions (benefits) for income taxes charged to operations consist of the
following (in thousands):

1996 1995 1994
--------------------------

Current:
Federal............................................................................. 438 $(4,814) $1,185
State............................................................................... 127 72 227
--------------------------
565 (4,742) 1,412
--------------------------
Deferred:
Federal............................................................................. 1,208 (4,699) 334
State............................................................................... (16) (382) (66)
--------------------------
1,192 (5,081) 268
--------------------------
1,757 $(9,823) $1,680
--------------------------

The tax effects of temporary differences that give rise to significant
portions of the deferred tax (assets) liabilities at December 31, 1996 and 1995
are as follows (in thousands):

1996 1995
-----------------

Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts........ $ (131) $ (243)
Reserves not deductible until paid....... (564) (444)
Net operating loss carry-forwards........ (101) (1,016)
Alternative minimum tax credit
carry-forwards......................... (181) (372)
Other.................................... (21) (72)
-----------------
Gross deferred tax assets................ (998) (2,147)
Less valuation allowance................. 75 75
-----------------
Net deferred tax assets.................. $ (923) $(2,072)
-----------------
Deferred tax liabilities:
Property and equipment................... $8,466 $ 8,298
Other.................................... 17 142
-----------------
Gross deferred tax liabilities........... 8,483 8,440
-----------------
Net deferred tax liability............... $7,560 $ 6,368
-----------------

The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory federal income
tax rate to income (loss) before income taxes as a result of the following
differences (in thousands):

1996 1995 1994
---------------------------

Income (loss) before income taxes
and extraordinary credit.......... $4,879 $(41,553) $3,720
Federal statutory tax rate.......... 35% 35% 35%
---------------------------
1,708 (14,544) 1,302
State income taxes, net of federal
income tax benefits............... 72 (250) 105
Nondeductible amortization
and depreciation.................. 60 4,584 279
Change in the valuation
allowance for deferred tax
assets allocated to income
tax expense....................... -- 75 --
Nonconventional fuel production
tax credits....................... (83) -- --
Other, net.......................... -- 312 (6)
---------------------------
$1,757 $ (9,823) $1,680
---------------------------

The Company received income tax refunds, net of payments, of $5,102,000 in
1996. The Company made income tax payments of $599,000 and $1,427,000 in 1995
and 1994, respectively.

Note 6. Retirement Benefits

The Company sponsors a defined contribution profit sharing plan that is a
qualified tax deferred benefit plan under Section 401(k) of the Internal Revenue
Code (the "Plan"). Substantially all employees are eligible to participate in
the Plan. The Plan provides for Company contributions equal to 4% of each
participant's annual compensation. In addition, discretionary contributions may
be made by the Company from time to time in an amount determined by the
Company's Board of Directors. Mandatory contributions are fully vested
immediately while discretionary contributions vest on a graduated basis and
become 100% vested after six years of service. Plan participants may also
contribute a portion of their annual compensation to the Plan, subject to
maximums imposed by the Internal Revenue Code and related regulations. Costs
charged to operations for Company contributions were $564,000, $566,000, and
$574,000 for the years 1996, 1995 and 1994, respectively. The Company may make
all or a portion of its contributions in the form of Class A Common Stock and
2,500,000 shares have been reserved for this purpose. The liability for Company
contributions for 1996 and 1995 was satisfied by the contribution of 282,808
shares and 225,874 shares, respectively, of Class A Common Stock. The
contribution of shares for 1996 was made in February 1997 and the contribution
of shares for 1995 was made in February 1996. Such shares were issued from the
authorized but unissued Class A Common Stock of the Company. Cash was
contributed by the Company to satisfy its liability to the Plan for 1994.

Note 7. Stock Option Plans

The 1990 Long-Term Incentive Plan adopted as of August 1, 1990, as amended (the
"1990 Plan"), provides for the granting of options which are either intended to
qualify as "incentive stock options" under the Internal Revenue Code ("IS's") or
are "non-qualified stock options" ("NQS's"). The Company has reserved 3,000,000
shares of Class A Common Stock for issuance to employees and non-employee
directors. The Option Plan Committee of the Company's Board of Directors
determines grants to be made with the exception of grants of NQS's to non-
employee directors of the Company which are determined by the Board of
Directors. NQS's may be granted with an exercise price which is not less than
85% of the fair market value of the Class A Common Stock on the date of grant.
IS's may be granted with an exercise price which is not less than 100% of fair
market value of the Class A Common Stock on the date of grant, except IS's
granted to an employee who owns 10% or more of the total combined voting power
of all classes of stock of the Company must be at least 110% of the fair market
value at the date of grant. Prior to adopting the 1990 Plan, the company
established the 1990 Stock Option Plan (the "Old Plan") as of January 16, 1990
for the purpose of granting options for Class B Common Stock to salaried
employees of the Company who were neither officers nor directors. Options
granted under the Old Plan had a five-year term from the date of grant. All
such options expired on January 16, 1995. No additional options will be granted
under the Old Plan. The following summarizes the stock option activity for the
three years ended December 31, 1996:

Number Per Share
1990 Plan (Class A Common Stock) of options option price
------------------------------

Outstanding at January 1, 1994.... 1,362,813 $2.00-$12.88
Cancelled......................... 205,528 $2.00-$10.00
------------------------------
Outstanding at December 31, 1994.. 1,157,285 $2.00-$12.88
Granted........................... 15,000 $2.00
Exercised......................... 3,000 $2.00
Cancelled......................... 76,090 $2.00-$10.00
------------------------------
Outstanding at December 31, 1995.. 1,093,195 $2.00-$12.88
Granted........................... 545,000 $2.38
Cancelled......................... 388,450 $2.00-$10.00
------------------------------
Outstanding at December 31, 1996.. 1,249,745 $2.00-$12.88
Exercisable at December 31, 1996. 537,945 $2.00-$12.88
-----------
Available for grant at
December 31, 1996............... 1,750,255
-----------
Old Plan (Class B Common Stock)
Outstanding at January 1, 1994.... 226,004 $3.51
Cancelled......................... 43,248 $3.51
Outstanding at December 31, 1994.. 182,756 $3.51
------------------------------
Cancelled......................... 182,756 $3.51
Outstanding at December 31, 1995
and 1996........................ --
-----------

Note 8. Shareholders' Equity

Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes on all matters submitted to a vote
of the shareholders. Except for the election of the Company's Board of
Directors, the Class A Common Stock and the Class B Common Stock vote together
as a single class on all matters presented for a vote of the shareholders.
However, with regard to the election of directors, the holders of the Class A
Common Stock, voting as a separate class, will elect the minimum number of
directors as shall constitute at least 25% of the total Board of Directors and
the holders of the Class B Common Stock, voting as a separate class, will elect
the remaining directors for as long as the outstanding Class B Common Stock has
more than 50% of the total outstanding voting power of the common stock.
Thereafter, the holders of the Class A and Class B Common Stock will vote
together as a single class for the election of directors. The holders of a
majority of all outstanding shares of Class A Common Stock or Class B Common
Stock, voting as separate classes, must also approve amendments to the Articles
of Incorporation that adversely affect the shares of their class. Shares of
Class A Common Stock and Class B Common Stock do not have cumulative voting
rights.

Each share of Class B Common Stock is convertible into one share of Class A
Common Stock at any time at the option of the shareholder. Shares of Class B
Common Stock are also automatically converted into shares of Class A Common
Stock on the transfer of such shares to any person other than the Company,
another holder of Class B Common Stock or certain specified permitted
transferees, as defined in the Company's Articles of Incorporation.

The Company's Board of Directors has the authority to issue up to 2,000,000
shares of no par value preferred stock without any further vote or action by the
shareholders. The preferred stock may be issued from time to time in one or
more series and each series will have such voting powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions as established by the Board of
Directors at the time of issuance. No preferred stock has been issued.

Note 9. Legal Matters

On or about October 3, 1991, one shareholder owning 100 shares of stock brought
suit against the Company and others on behalf of himself and a purported class
of other shareholders in the United States District Court for the Southern
District of New York. The suit alleges that

the Company, the signatories to the registration statements filed with the
Securities and Exchange Commission during October 1990, and the Company's
underwriters violated federal securities laws in connection with the Company's
public offering of six million shares of Class A Common Stock in October 1990.
Among other things, the suit alleges misrepresentations and failure to disclose
allegedly material information concerning the nature of the Company's market;
the size of the Company's market; the Company's failure to disclose that its
landfills were located within a 50-mile radius of each other in Ohio, thus
making the Company especially vulnerable to local conditions and competition;
the Company's failure to set forth the present and imminent competition; and the
Company's growth. The Plaintiff seeks damages in an unspecified amount alleged
to have arisen in part from the decline in the price of the Company's stock
following the public offering, and rescission. The Court has not yet determined
whether the suit will proceed as a class action.

A timely Answer was filed on behalf of all defendants and a Motion to Transfer
Venue to the Northern District of Ohio was granted on June 10, 1992. A Motion
for an Undertaking for Costs Pursuant to Section 11(e) of The Securities Act of
1933 was filed in the Northern District of Ohio but denied by the Court. A
Motion to Dismiss the Complaint for failure to state a claim was filed February
1, 1994 on behalf of all defendants but was denied by the Court on August 29,
1994. As a result of the language contained in the Order, on September 29, 1994
a Motion to Limit the Scope of Plaintiffs' Requested Discovery was filed. That
motion was granted, and all proceedings have been stayed pending a decision on
all defendants' Motion for Summary Judgment filed on May 30, 1995. The Company
intends to vigorously defend the claims.

In September 1995, certain subsidiaries of the Company were informed that they
had been identified as potentially responsible parties by the Indiana Department
of Environmental Management ("IDEM") relating to a Fulton County, Indiana,
hazardous waste disposal facility which is subject to remedial action under
Indiana environmental laws. Such identification is based upon the subsidiaries
having been involved in the transportation of hazardous substances to the
facility. These transportation activities occurred prior to the acquisition of
such subsidiaries by the Company. IDEM is seeking to recover and/or allocate
past costs of approximately $1.0 million as well as future costs associated with
further site investigation and remediation activities, which costs could be
substantial. Although a large number of waste generators and other waste
transportation and disposal companies have also been identified as responsible
or potentially responsible parties, because the law assigns joint and several
liability among the responsible parties, any one of them, including the
Company's subsidiaries, could be assessed the entire cost of the remediation.
Currently, no remedy has been selected. As such, the extent of any liability of
any of the Company's subsidiaries is currently unknown.

When the Company concludes that it is probable that a liability has been
incurred, a provision is made in the Company's financial statements for the
Company's best estimate of the liability based on management's judgment and
experience, information available from regulatory agencies, and the number,
financial resources and relative degree of responsibility of other potentially
responsible parties who are jointly and severally liable for remediation of the
site as well as the typical allocation of costs among such parties. If a range
of possible outcomes is estimated and no amount within the range appears to be a
better estimate than any other, then the Company provides for the minimum amount
within the range, in accordance with generally accepted accounting principles.
As such, the Company accrued a liability of approximately $941,000 in the fourth
quarter of 1995 relating to this matter. Such amount is included in the
Consolidated Statements of Operations for 1995 under the caption "Cost of
operations."

The Company's estimates are revised, as deemed necessary, as additional
information becomes known. While the measurement of environmental liabilities
is inherently difficult and the possibility remains that technological,
regulatory or enforcement developments, the results of environmental studies or
other factors could materially alter the Company's expectations at any time, the
Company does not anticipate that the amount of any such revisions will have a
material adverse effect on operations or consolidated financial position.

On March 21, 1996, Earth Sciences Consultants, Inc. ("Earth Sciences"), a
subsidiary of the Company, entered into a Professional Services Agreement (the
"PSA") with the S. W. Shattuck Chemical Company, Inc. ("Shattuck") wherein Earth
Sciences agreed to act as the remediation contractor for the Denver radium site,
operable unit VIII, which is owned by Shattuck and located in Denver, Colorado
(the "Project").

Earth Sciences' work on the Project is currently suspended as a result of a
Stop Work Order issued by the United States Environmental Protection Agency ("US
EPA") on January 22, 1997, due to the discovery of unanticipated, petroleum
contamination on the Project site. On February 14, 1997, Earth Sciences filed a

demand for arbitration against Shattuck with the Denver Regional Office of the
American Arbitration Association relating to the PSA. The demand for
arbitration claims, among other things: (i) that Shattuck is in default and has
materially breached its payment obligations to Earth Sciences by failing to pay
outstanding invoices; (ii) that Shattuck has summarily and wrongfully denied
requested change orders; and (iii) that Shattuck has anticipatorily breached
the PSA.

On March 11, 1997, Shattuck filed an Answering Statement and Counterclaims.
Shattuck has denied Earth Sciences' claims and has asserted several
counterclaims including allegations that Earth Sciences has failed to perform in
accordance with the PSA and that Earth Sciences has no right to stop its work on
the project regardless of Shattuck's actions by reason of the language of the
PSA. American Waste Services, Inc. ("AWS") was named as a third party respondent
to the arbitration proceeding because under the PSA, AWS guaranteed the
performance of Earth Sciences' obligations, including the payment of any and all
liabilities of Earth Sciences.

On March 21, 1997 Earth Sciences received a letter from Shattuck advising
Earth Sciences that the stop work order issued by the US EPA on January 22, 1997
had been lifted on March 20, 1997 and that Shattuck will be engaging another
contractor to complete the project.

A hearing date has not yet been set. Failure to resolve the pending dispute
in an expedited manner and in favor of the Company could have a material adverse
effect on the Company's future financial results.

In the ordinary course of conducting its business, the Company also becomes
involved in lawsuits, administrative proceedings and governmental
investigations, including those relating to environmental matters. Some of
these proceedings may result in fines, penalties or judgments being assessed
against the Company which, from time to time, may have an impact on its business
and financial condition. The Company does not believe that such pending
proceedings, individually, or in the aggregate, would have a material adverse
effect on its business or its financial conditions.

Note 10. Closure Costs and Post-Closure Monitoring Costs

The United States Environmental Protection Agency's "Subtitle (D) Regulations"
provide minimum design, construction and operating standards for virtually all
landfills in the United States. Furthermore, regulations promulgated by the
Ohio Environmental Protection Agency ("Ohio EPA") require every Ohio landfill to
utilize the "best available technology" with respect to cell preparation and
lining, leachate collection and treatment, and groundwater monitoring as well as
to provide financial assurances adequate to cover closure costs and post-closure
monitoring costs for a period of up to 30 years after the landfill is closed.
As a result of the above-described requirements, the Company has future
financial obligations with regard to closure costs and post-closure monitoring
costs associated with the disposal sites it operates. Although the precise
amount of these future obligations cannot be determined, the Company has
developed procedures to estimate these total projected costs based on currently
available facts, existing technology and presently enacted laws and regulations.
As of December 31, 1996, the Company estimated that the total closure costs and
post-closure monitoring costs it will incur for all of its disposal facilities
is approximately $31.2 million; however, in accordance with Ohio's financial
assurance regulations, the Company currently estimates that it will be required
to ultimately provide approximately $32.5 million of financial assurances to the
State of Ohio. At December 31, 1995 the Company had deposited approximately
$5.1 million into trusts for the benefit of the Ohio EPA to fund the financial
assurance requirements for its landfills. Such funds were included in the 1995
Consolidated Balance Sheets under the caption "Deposits." During 1996 the
Company utilized insurance to satisfy the financial assurance requirements for
its American and Mahoning landfill facilities. As a result of using such
insurance, in June 1996, the Company received $2.5 million from its trust fund
deposits relating to the American landfill facility, and in July 1996, the
company received $.7 million from its trust fund deposits relating to the
Mahoning landfill facility. The Company continues to use a trust fund to
satisfy the financial assurance requirements for its East Liverpool facility.
In April 1996 the Company deposited approximately $.3 million into the trust to
fund a portion of the current financial assurance obligation for that facility.
Such fund, which is recorded by the Company at cost which approximates market
value, is included in the Consolidated Balance Sheets under the caption
"Deposits" and amounted to $2.3 million at December 31, 1996. The funds in the
trust are invested primarily in short-term securities, commercial paper or
certificates of deposit with investment earnings accruing to the benefits of the
Company. The Company will continue to review and update the underlying
assumptions used to estimate the total projected costs and financial assurance
requirements and, accordingly, such estimates will be subject to periodic
revision and adjustment at least annually. In the third quarter of 1995, as a
result of a resolution reached with the Ohio EPA alleging violations of American
Landfill, Inc.'s ("ALI") 1985 permit and related regulations concerning its
capacity , ALI incurred a charge of

approximately $9,165,000 to reflect the accrual of closure and post-closure
monitoring costs based upon the remaining capacity of the landfill. This charge
is reflected under the caption "Closure and post-closure monitoring costs" on
the Consolidated Statements of Operations for 1995. During 1995 the Company made
a decision not to further develop the East Liverpool landfill facility and, as a
result, the facility has very limited airspace available for waste disposal. As
such, in the fourth quarter of 1995 the Company accrued additional closure and
post-closure monitoring costs amounting to $6,821,000. This charge is also
included under the caption "Closure and post-closure monitoring costs" on the
Consolidated Statements of Operations for 1995.

Note 11. Lease Commitments

The Company leases certain office facilities, vehicles, machinery and equipment.
Future commitments under long-term, noncancellable operating leases at December
31, 1996 are as follows (in thousands):

Year ending December 31,
- --------------------------

1997...................... $ 872
1998...................... 647
1999...................... 540
2000...................... 515
2001...................... 515
After 2001................ -0-
------
$3,089
------

Rental expense included in the consolidated statements of operations amounted
to $1,450,000 in 1996, $1,581,000 in 1995, and $1,124,000 in 1994.

Note 12. Business Segment Information

The Company's primary business segment provides integrated waste management and
environmental services, which include the operation of nonhazardous solid waste
landfills for the disposal of special waste and municipal solid waste;
transportation of hazardous and nonhazardous waste; transportation and disposal
brokerage and management services; collection services; and environmental
engineering, site assessments, analytical laboratory and remediation services.
The Company, as part of its transportation operations, also operates a second
business segment; a common carrier of general and bulk commodities within the
United States and several provinces of Canada. Other businesses include the
operation of a public golf course. The Company does not have significant
operations located outside the United States and, accordingly, geographical
segment information is not presented.

Segment operating income reflects the results of operations of each business
segment before income taxes, interest income and expense, and items of a general
nature not readily allocable to a separate segment (see Note 2).

Identifiable assets are the total assets used in the operation of each
business segment. Corporate assets are principally cash and cash equivalents
and certain real estate assets. Business segment information is as follows (in
thousands):

1996 1995 1994
------------------------------

Net operating revenues:
Integrated waste management
and environmental services........ $ 63,382 $ 67,919 $ 73,103
Transportation of general and
bulk commodities.................. 12,181 12,562 12,922
Other businesses.................... 3,461 3,219 2,754
------------------------------
$ 79,024 $ 83,700 $ 88,779
------------------------------
Operating income (loss):
Integrated waste management
and environmental services........ $ 9,397 $(33,806) $ 9,281
Transportation of general and
bulk commodities.................. 618 (1,326) 545
Other businesses.................... 326 113 239
------------------------------
Segment operating income (loss)...... 10,341 (35,019) 10,065
Interest expense and
amortization of debt discount....... (223) (974) (1,128)
Interest income...................... 390 665 450
General corporate expenses........... (5,629) (6,225) (5,667)
------------------------------
Income (loss) before income taxes
and extraordinary credit............ $ 4,879 $(41,553) $ 3,720
------------------------------
Depreciation and amortization:
Integrated waste management
and environmental services........ $ 5,955 $ 7,459 $ 9,855
Transportation of general and
bulk commodities.................. 529 605 582
Other businesses.................... 247 227 187
Corporate........................... 244 270 282
------------------------------
$ 6,975 $ 8,561 $ 10,906
------------------------------
Capital expenditures:
Integrated waste management
and environmental services........ $ 17,238 $ 9,621 $ 5,789
Transportation of general and
bulk commodities.................. 864 306 249
Other businesses.................... 90 1,049 169
Corporate........................... 562 56 17
------------------------------
$ 18,754 $ 11,032 $ 6,224
------------------------------
Identifiable assets at December 31:
Integrated waste management
and environmental services........ $ 93,313 $ 93,002 $115,486
Transportation of general and
bulk commodities.................. 7,947 5,965 8,099
Other businesses.................... 6,503 6,487 5,567
Corporate........................... 9,700 10,282 12,657
------------------------------
$117,463 $115,736 $141,809
------------------------------

Note 13. Quarterly Financial Data (Unaudited)

Selected quarterly financial data for each quarter in 1996 and 1995 is as
follows (in thousands except for per share amounts):

Year ended December 31, 1996
------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------------------------------------------------

Net operating revenues........................ $16,696 $19,046 $22,317 $ 20,965 $ 79,024
Income from operations........................ 159 1,581 1,895 841 4,476
Net income.................................... 171 1,069 1,278 604 3,122
Net income per share.......................... $ .01 $ .04 $ .04 $ .02 $ .10
------------------------------------------------

Year ended December 31, 1995
------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------------------------------------------------
Net operating revenues........................ $22,899 $19,597 $21,078 $ 20,126 $ 83,700
Income (loss) from operations................. 427 145 (8,358) (32,518) (40,304)
Income (loss) before extraordinary credit..... 207 (2) (5,588) (26,347) (31,730)
Extraordinary credit, net of tax.............. -- -- -- 2,489 2,489
Net income (loss)............................. 207 (2) (5,588) (23,858) (29,241)
Income (loss) per share before extraordinary
credit....................................... $ .01 $ .00 $ (.19) $ (.88) $ (1.06)
Net income (loss) per share................... $ .01 $ .00 $ (.19) $ (.80) $ (.98)
------------------------------------------------

- --------------------------------------------------------------------------------
Independent Auditors' Report

The Shareholders and Board of Directors of American Waste Services, Inc.

We have audited the accompanying consolidated balance sheets of American Waste
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Waste
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Cleveland, Ohio
February 18, 1997, except as to Note 9, which is as of March 21, 1997.

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Digest of Financial Data

(All amounts are in thousands, except per share data,
percentages and number of employees)
------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------

Selected statement of operations information
Net operating revenues............................................. $ 79,024 $ 83,700 $ 88,779 $ 87,323 $ 92,587
Income (loss) from operations...................................... 4,476 (40,304) 4,339 7,962 11,663
Interest expense and
amortization of debt discount..................................... 223 974 1,128 1,646 2,179
Income (loss) before income taxes and
extraordinary credit.............................................. 4,879 (41,553) 3,720 6,776 9,933
Extraordinary credit, net of tax................................... -- 2,489 -- -- --
Net income (loss).................................................. 3,122 (29,241) 2,040 4,011 6,164
Income (loss) per share before
extraordinary credit.............................................. .10 (1.06) .07 .14 .21
Extraordinary credit, per share.................................... -- .08 -- -- --
Net income (loss) per share........................................ .10 (.98) .07 .14 .21
Dividends per Class A share........................................ -- -- -- -- --
Dividends per Class B share........................................ -- -- -- -- --
Weighted average shares used to
calculate net income (loss) per share............................. 30,236 29,982 29,888 29,710 29,712
Selected cash flow information
Cash flows provided by
operating activities.............................................. 18,922 15,155 11,807 14,899 14,700
Cash used for capital expenditures................................. 18,754 11,032 6,224 10,174 10,676
Cash used for business acquisitions................................ -- -- 87 2,359 4,481
Selected year-end balance sheet information
Cash and cash equivalents.......................................... 4,286 5,186 7,347 6,467 6,348
Current assets..................................................... 22,012 28,308 30,833 26,857 25,170
Current liabilities................................................ 15,729 12,177 16,045 15,942 13,374
Working capital.................................................... 6,283 16,131 14,788 10,915 11,796
Properties less accumulated
depreciation and amortization..................................... 89,637 78,636 87,375 91,362 76,547
Total assets....................................................... 117,463 115,736 141,809 141,703 124,298
Current portion of long-term debt.................................. 305 358 4,559 4,568 3,259
Long-term debt..................................................... 3,836 8,748 11,843 21,770 18,136
Deferred income taxes.............................................. 7,757 6,559 10,352 9,977 2,957
Shareholders' equity............................................... 70,932 67,245 96,480 93,842 89,831
Other information
Working capital ratio.............................................. 1.4:1 2.3:1 1.9:1 1.7:1 1.9:1
Percent of debt-to-total capital employed.......................... 6% 12% 15% 22% 19%
Quoted market price-Class A shares:
High.............................................................. 4 3/4 5 5/8 3 1/8 3 3/8 7 3/8
Low............................................................... 2 1 1/8 1 1/2 1 3/4 2 1/2
Year-end.......................................................... 2 3/8 2 1 5/8 3 1/8 3 3/8
Number of employees at year-end.................................... 503 477 527 502 498

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Company Location Directory

Corporate Office

American Waste Services, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Disposal Facilities

American Landfill, Inc.
7916 Chapel Street, S.E.
Waynesburg, Ohio 44688

Mahoning Landfill, Inc.
3510 Garfield Road
New Springfield, Ohio 44443

East Liverpool Landfill, Inc.
Y & O Road
East Liverpool, Ohio 43920

Disposal Services

American Waste Management
Services, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Collection Services

American Waste, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

American Waste of Mahoning
Valley, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

American Waste of Northeast
Ohio, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Transportation Offices

DartAmericA, Inc.
Dart Trucking Company, Inc.
Dart Services, Inc.
TRB National Systems, Inc.
61 Railroad Street
Canfield, Ohio 44406
(330) 533-9841

Envirco Transportation
Management, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8850

Transportation Terminals

Dart Trucking Company, Inc.
200 Old Webster Road
Oxford, Massachusetts 01540

Dart Trucking Company, Inc.
61 Railroad Street
Canfield, Ohio 44406

Dart Trucking Company, Inc.
3332 St. Lawrence Drive
Toledo, Ohio 43605

Dart Trucking Company, Inc.
1807A Route 7
Kenova, West Virginia 25530

Technical Services

Earth Sciences Consultants, Inc.
Corporate Headquarters
One Triangle Drive
Export, Pennsylvania 15632
(412) 733-3000

Earth Sciences Consultants, Inc.
Philadelphia Regional Office
490 Norristown Road, Suite 250
Office Court at Walton Point
Blue Bell, Pennsylvania 19422
(610) 828-2525

Earth Sciences Consultants, Inc.
Ohio Operations
190 N. Union Street, Suite 301
Akron, Ohio 44304
(330) 535-6966

Earth Sciences Consultants, Inc.
Rocky Mountain Operations
565 East 70th Avenue
Unit 1W
Denver, Colorado 80229
(303) 287-9500

Antech Ltd.
One Triangle Drive
Export, Pennsylvania 15632
(412) 733-1161

AWS Remediation, Inc.
One Triangle Drive
Export, Pennsylvania 15632
(412) 733-1009

AWS Remediation, Inc.
Rocky Mountain Operations
565 East 70th Avenue
Unit 1W
Denver, Colorado 80229
(303) 287-9500

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Directors and Officers

Directors

Ronald E. Klingle
/1/(Chairman) /2/(Chairman)
Chairman of the Board and
Chief Executive Officer

Darrell D. Wilson /1,2/
President and Chief
Operating Officer

Charles Boryenace/1,2/
Executive Vice President,
Strategic Planning

Mark B. Cawthorne
Executive Vice President,
Transportation Services

Timothy C. Coxson/1/
Executive Vice President,
Finance, Treasurer and
Chief Financial Officer

George P. Ellis
Executive Vice President,
Technical Services

Stephen G. Kilper
Executive Vice President,
Disposal Services

Kenneth J. McMahon
Executive Vice President,
Sales

Sanford B. Ferguson /3,4/
Partner, Kirkpatrick & Lockhart
(law firm)

James A. Johnson /3,4/
Managing General Partner,
The Apex Fund
(venture capital fund)

F. Oliver Nicklin, Jr.
/3/(Chairman)/ 4/(Chairman)
President, First Analysis
Securities Corporation
(venture capital and investment
banking operations)

John R. Miller
Founder, President and
Chief Executive Officer,
TBN Holdings Inc.
(firm engaged in resource
recovery and recycling)

Officers

Ronald E. Klingle
Chairman of the Board and
Chief Executive Officer

Darrell D. Wilson
President and Chief
Operating Officer

Michael D. Barwick
Executive Vice President,
Collection Services

Charles Boryenace
Executive Vice President,
Strategic Planning

Mark B. Cawthorne
Executive Vice President,
Transportation Services

Timothy C. Coxson
Executive Vice President,
Finance, Treasurer and
Chief Financial Officer

Jeffrey M. Grinstein
Executive Vice President,
General Counsel and Secretary

Stephen G. Kilper
Executive Vice President,
Disposal Services

Kenneth J. McMahon
Executive Vice President, Sales

Frances R. Klingle
Chief Administrative Officer
and Controller

Patrick M. Alcorn
Vice President,
Transportation Sales

James E. Smith
Vice President,
Disposal Sales

Robert D. Hazen
Vice President,
National Accounts

David S. Hess
Vice President,
Technical Sales

Kenneth R. Nichols
Vice President,
Taxes
/1/ Executive Committee
/2/ Compensation Committee
/3/ Audit Committee
/4/ Option Plan Committee

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Shareholder Information

Annual meeting of shareholders

The annual meeting of shareholders will be held at the Grand Pavilion, One
American Way, Warren, Ohio, on Tuesday, April 29, 1997, at 10:00 a.m.

Common stock information

The Company's Class A Common Stock is listed on the New York Stock Exchange
(symbol: AW). Quarterly stock information for 1996 and 1995 as reported by The
Wall Street Journal is as follows:

1996:
Quarter Ended High Low Close
- ---------------------------------------------------------------------------------

March 31 $3 1/4 $ 2 $ 2 7/8
June 30 4 3/4 2 3/8 3 1/4
September 30 3 1/4 2 1/4 2 1/2
December 31 2 1/2 2 2 3/8

1995:
Quarter Ended High Low Close
- ---------------------------------------------------------------------------------
March 31 $1 7/8 $ 1 1/8 $ 1 1/8
June 30 1 3/4 1 1/4 1 3/4
September 30 5 5/8 1 3/8 3
December 31 3 5/8 2 2

No dividends were paid during 1996 or 1995.

There are 1,105 Class A and 20 Class B Common Stock shareholders of record as of
the close of business March 3, 1997. The number of holders is based upon the
actual holders registered on the records of the Company's transfer agent and
registrar and does not include holders of shares in "street names" or persons,
partnerships, associations, corporations or other entities identified in
security position listings maintained by depository trust companies.

Dividend policy

The Company presently intends to retain earnings for use in the operation and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.

Annual report on Form 10-K

Copies of the Company's annual report on Form 10-K can be obtained free of
charge by writing to American Waste Services, Inc., One American Way, Warren,
Ohio 44484-5555, Attention: Shareholder Relations.

Transfer agent and registrar

The transfer agent and registrar for the Company is American Stock Transfer and
Trust Company. All correspondence concerning stock transfers should be directed
to them at 40 Wall Street, New York, New York 10005.

Investor inquiries

Security analysts, institutional investors, shareholders, news media
representatives and others seeking financial information or general information
about the Company are invited to direct their inquiries to Timothy C. Coxson,
Executive Vice President, Finance, Treasurer, and Chief Financial Officer,
telephone (330) 856-8800.

Policy statement on equal

employment opportunity and

affirmative action

The Company is firmly committed to a policy of equal employment opportunity and
affirmative action. Toward this end, the Company will continue to recruit,
hire, train and promote persons in all job titles, without regard to race,
color, religion, sex, national origin, age, handicap, ancestry or Vietnam-era or
disabled veteran status. We will base all decisions on merit so as to further
the principle of equal employment opportunity. This policy extends to
promotions and to all actions regarding employment including compensation,
benefits, transfers, layoffs, return from layoffs, Company-sponsored training
and social programs.