Note 5. INVESTMENT IN WEST VALLEY MRF, LLC

Effective June 19, 1997, Kaiser Recycling Corporation (“KRC”) (now Kaiser Recycling, LLC) and West Valley Recycling & Transfer, Inc. (“WVRT”), a subsidiary of Burrtec Waste Industries, Inc. (“Burrtec”), which are equal members of West Valley MRF, LLC (“WVMRF”), (a California limited liability company) entered into a Members Operating Agreement (“MOA”) which is substantially the equivalent of a joint venture agreement for a limited liability company. The construction and start-up of the West Valley MRF was completed during December 1997.

Most of the financing for the construction of the West Valley MRF of approximately $22 million, was obtained through the issuance and sale of two California Pollution Control Financing Authority (the “Authority”) Variable Rate Demand Solid Waste Disposal Revenue bonds. The bonds are secured by an irrevocable letter of credit issued by Union Bank of California, N.A. (“Union Bank”).

The payment schedule as of February 29, 2012, for the California Pollution Control Authority bonds is summarized below.


	PAYMENT SCHEDULE
	1997		2000
YEAR	BONDS		BONDS			TOTAL
2012	$	620,000	$	—		$	620,000
2013 thru
2029		—		4,930,000	⁽¹⁾		4,930,000	⁽¹⁾
2030		—		270,000			270,000

Total	$	620,000	$	5,200,000		$	5,820,000

¹	Total payments for this period (2013 thru 2029) at $290,000 per year.

The Company also remains responsible for any pre-existing environmental conditions on the land on which the WVMRF is located, which is covered by insurance.

The Company is accounting for its investment in West Valley MRF, LLC under the equity method.

Due to the time required to close the books of the West Valley MRF, LLC and in keeping with past practice, there is a one month delay in reporting the results of West Valley MRF, LLC. The condensed summarized financial information of West Valley MRF, LLC is as follows:


	February 29, 2012		November 30, 2011
Balance Sheet Information:

Current Assets	$	8,782,000	$	8,430,000
Property and Equipment (net)		9,975,000		10,214,000

Total Assets	$	18,757,000	$	18,644,000

Current Liabilities	$	5,170,000	$	4,154,000
CPCFA Bonds Payable – Long Term Portion		5,200,000		5,200,000
Members’ Equity		8,387,000		9,290,000

Total Liabilities and Members’ Equity	$	18,757,000	$	18,644,000


	2012		2011
Income Statement Information:

For the Three Months Ended February 29
Net Revenues	$	3,098,000	$	3,415,000
Income from Operations	$	623,000	$	1,109,000
Net Income	$	597,000	$	1,079,000

The increase in current assets between November 30, 2011 and February 29, 2012 is due primarily to an increase in cash. The decrease in Members’ Equity for the West Valley MRF between November 30, 2011 and February 29, 2012, is primarily due to the fact that cash distributions exceeded net income during this period.

The Company recognized equity income from the West Valley MRF of $298,000 and $539,000 for the first three months of 2012 and 2011, respectively.

Our 50% ownership interest in the West Valley MRF, LLC was sold on April 2, 2012. For further information on this transaction, see “Note 9. SUBSEQUENT EVENTS.”