Acquisitions

6 Months Ended

Jun. 30, 2011

Acquisitions [Abstract]

ACQUISITIONS

NOTE 3 — ACQUISITIONS

Choice Acquisition

     On February 13, 2011, we entered into an Agreement and Plan of Merger (the “Choice Agreement”) with Swsh Merger Sub, Inc., a Florida corporation and wholly-owned subsidiary of the Company, Choice, and other parties, as set forth in the Choice Agreement. The Choice Agreement provided for the acquisition of Choice by the Company by way of merger.

     In connection with the merger with Choice, on February 23, 2011, we entered into an agency agreement, which the agents agreed to market, on a best efforts basis 12,262,500 subscription receipts (“Subscription Receipts”) at a price of $4.80 per Subscription Receipt for gross proceeds of up to $58,859,594. Each Subscription Receipt entitled the holder to acquire one share of our common stock, without payment of any additional consideration, upon completion of our acquisition of Choice.

     On March 1, 2011, we closed the acquisition of Choice and issued 8,281,920 shares of our common stock to the former shareholders of Choice and assumed $40,941,484 of debt, which $39,219,160 was paid down with proceeds from the private placement of the Subscription Receipts. In addition, certain shareholders of Choice received $5,700,000 in cash and warrants to purchase an additional 918,076 shares at an exercise price of $6.21, which expired on March 31, 2011 and were not exercised.

     On March 1, 2011, in connection with the closing of the acquisition of Choice, the 12,262,500 Subscription Receipts were exchanged for 12,262,500 shares of our common stock. We agreed to use commercially reasonable efforts to file a resale registration statement with the SEC relating to the shares of common stock underlying the Subscription Receipts. If the registration statement was not filed or declared effective within specified time periods, or if it ceased to be effective for a period of time exceeding certain grace periods, the initial subscribers of Subscription Receipts would be entitled to receive an additional 0.1 share of common stock for each share of common stock underlying Subscription Receipts held by any such initial subscriber at that time. The Company filed a resale registration statement with the SEC relating to the 8,291,920 shares issued to the former shareholders of Choice and the 12,262,500 shares issued in connection with the private placement. The registration statement was effective as of the date of this filing.

     Choice has been in business since 2004 and serves more than 150,000 residential and 7,500 commercial customers in the Southern and Central Florida regions through its 320 employees and over 150 collection vehicles by offering a complete range of solid waste and recycling collection, transportation, processing and disposal services. Choice operates six hauling operations and three transfer and material recovery facilities.

     The following table presents the purchase price consideration as of March 1, 2011:

Consideration:
Issuance of shares at stock price of $5.89	$	48,780,526
Debt		40,941,484
Cash paid		7,553,784
	$	97,275,794

     The preliminary allocation of the purchase price is based on the best information available to management. This allocation is provisional, as the Company is required to recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of March 1, 2011 that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The Company may adjust the preliminary purchase price allocation after obtaining additional information regarding asset valuation, liabilities assumed and revisions of previous estimates. The following table summarizes the preliminary allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities of Choice as of March 1, 2011 as follows:

Net tangible assets acquired:
Cash and cash equivalents	$	340,870
Receivables		6,095,801
Inventory		150,833
Property and equipment		29,618,377
Customer contracts		27,840,000
Non-compete agreements		2,880,000
Deferred income tax assets and other assets		2,234,452
Accounts payable and accrued expenses		(7,960,210	)
Capital lease obligations		(3,523,615	)
Deferred income tax liabilities		(12,001,506	)
Total tangible assets acquired		45,675,002
Goodwill		51,600,792
Total purchase price		97,275,794
Less: Debt assumed		(40,941,484	)
Less: Issuance of shares		(48,780,526	)
Cash paid (including prepayment penalty of $1,853,784)	$	7,553,784

     Other assets include approximately $721,000 of notes receivable from prior Choice shareholders. In addition, the Company’s Condensed Consolidated Financial Statements for the three months ended June 30, 2011 includes $15,629,158 of revenue and $108,019 of net loss before income taxes related to Choice and for the six months ended June 30, 2011 includes $21,874,676 of revenue and $233,015 of net loss before income taxes related to Choice.

     Other Acquisitions

     During the three months ended June 30, 2011, the Company acquired three of its franchisees and fifteen independent businesses. During the six months ended June 30, 2011, the Company acquired seven of its franchisees and twenty-four independent businesses, excluding Choice. The Company’s Condensed Consolidated Financial Statements include the results of operations of these acquisitions since their respective acquisition dates, which include $16,371,792 of revenue and $1,082,706 of net loss before income taxes for the three months ended June 30, 2011 and $21,683,094 of revenue and $773,153 of net loss before income taxes for the six months ended June 30, 2011.

     The following table summarizes the current estimated aggregate fair values of the assets acquired and liabilities assumed at the date of acquisition for these acquisitions made during the three and six months ended June 30, 2011, excluding Choice:

	Three Months Ended			Six Months Ended
	June 30, 2011			June 30, 2011
Number of businesses acquired		18			31
Net tangible assets acquired
Accounts receivable and other assets	$	5,518,953		$	6,172,803
Inventory		4,268,047			4,725,137
Property and equipment		13,211,839			14,073,659
Accounts payable and accrued expenses		(6,612,002	)		(7,138,972	)
Total		16,386,837			17,832,627
Identifiable intangible assets:
Customer relationships		30,146,200			35,592,600
Non-compete agreements		3,609,300			4,941,200
Total		33,755,500			40,533,800
Goodwill		50,040,953			58,314,053
Aggregate purchase price		100,183,290			116,680,480
Less: Stock issued		42,183,050			44,126,550
Less: Contingent consideration		1,827,734			3,017,734
Less: Cash held back		500,000			500,000
Less: Notes issued or assumed		—			8,598,700
Cash paid on acquisitions	$	55,672,506		$	60,437,496

     Contingent consideration includes (1) earn outs, which are based on the achievement of contractually negotiated levels of performance by certain of our acquired businesses and are payable at defined intervals through March 31, 2014 and (2) the performance of the Company’s stock price over a limited period from the date of the acquisition, typically less than 30 days.

     See Note 16 for additional acquisitions subsequent to June 30, 2011.

Supplemental pro forma information

     The following supplemental pro forma information presents the financial results as if all the acquisitions, including Choice, made during the six months ended June 30, 2011 had occurred as of January 1, 2011 for the three and six months ended June 30, 2011 and on January 1, 2010 for the three and six months ended June 30, 2010. The supplemental pro forma information does not include those acquisitions made during the year ended December 31, 2010.

     Pro forma adjustments for the three months ended June 30, 2011 and 2010 primarily include adjustments to reflect additional depreciation and amortization of $425,569 and $2,308,850, respectively, related to the identifiable intangible assets recorded as part of the acquisition.

     Pro forma adjustments for the six months ended June 30, 2011 and 2010 primarily include adjustments to reflect additional depreciation and amortization of $2,212,292 and $4,617,700, respectively, related to the identifiable intangible assets recorded as part of the acquisition.

     In addition, an adjustment was made for acquisition and merger expenses of $2,775,258 and $4,091,236 for the three and six months ended June 30, 2011 and 2010, respectively.

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Pro forma revenue	$	58,069,287		$	46,368,282		$	115,108,695		$	92,606,701
Pro forma net loss	$	(3,170,758	)	$	(1,538,560	)	$	(7,633,654	)	$	(2,077,152	)

     The above supplemental pro forma information has been prepared from the unaudited results of the acquired businesses for comparative purposes and does not purport to be indicative of what would have occurred had these acquisitions been completed on January 1, 2011 or January 1, 2010. Pro forma information does not include certain going-forward cost savings and synergies, which may be realized by the combined operations. Accordingly, they may not be indicative of any future results of the Company.