SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 10, 1998
WASTE INDUSTRIES, INC.
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-22417 56-0954929
- ----------------------------- --------------------------
(Commission file Number) (IRS Employer ID Number)
3949 Browning Place, Raleigh, North Carolina 27609
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (919) 782-0095
-------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Agreement and Plan of Merger dated as of September 9, 1998
(the "Merger Agreement"), by and among Waste Industries, Inc., a North Carolina
corporation (the "Registrant"), TWS Merger Corporation, a Georgia corporation
and a wholly owned subsidiary of the Registrant ("Subsidiary"), Trans Waste
Services, Inc., a Georgia corporation ("Trans Waste"), the Thomas C. Cannon IRA
and MML Limited Partnership, a Georgia limited partnership, as the sole
shareholders of Trans Waste (the "Shareholders"), Thomas C. Cannon and James F.
Taylor, the Registrant acquired, in exchange for approximately $13.3 million in
cash plus 706,370 shares of the Registrant's Common Stock valued at
approximately $13.5 million, all of the outstanding stock of Trans Waste
effective on September 10, 1998. Trans Waste is engaged in solid waste
collection and the development, ownership and operation of four transfer
stations and a landfill in Albany, Georgia. The source of the funds for the
acquisition was the Registrant's $60.0 million revolving credit facility with
BB&T, $50.0 million of which is available for acquisitions and capital
expenditures.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1) The financial statements for the
acquired business (Trans Waste)
required by Item 7 of Form 8-K
promulgated by the Commission under
the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are
filed with this report. Trans Waste
Financial Statements as of September
30, 1997 and the year then ended and
Unaudited Interim Financial
Statements as of June 30, 1998 and
for the nine-month periods ended
June 30, 1998 and 1997 include the
following:
a) Report of Independent Auditors
b) Balance Sheets
c) Statements of Income and
Retained Earnings
d) Statements of Cash Flows
e) Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
The following pro forma financial
information required by Item 7 of
Form 8-K promulgated by the
Commission under the Exchange Act is
filed with this report:
<PAGE>
1) Introduction to the Unaudited
Pro Forma Financial Data
2) Unaudited Pro Forma Statement
of Operations Data for the
Nine-Months Ended September 30,
1998
3) Unaudited Pro Forma Statement
of Operations Data for the Year
Ended December 31, 1997 and
Accompanying Notes
(c) EXHIBITS.
2.2* Agreement and Plan of Merger
dated as of September 9,1998,
by and among the Registrant,
Subsidiary, Trans Waste, the
Shareholders, Thomas C. Cannon
and James F. Taylor.
----------------------
* Previously filed
<PAGE>
TRANS WASTE SERVICES, INC.
FINANCIAL STATEMENTS
Year Ended September 30, 1997 and
Nine Months Ended September 30, 1998 and 1997 (unaudited)
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets as of September 30, 1997 and as of June 30, 1998 (unaudited) 2
Statement of Income and Retained Earnings for the Year Ended September 30,
1997 and for the Nine Months Ended June 30, 1998 and
1997 (unaudited) 3
Statement of Cash Flows for the year ended September 30, 1997 and for
the Nine Months Ended June 30, 1998 and 1997 (unaudited) 4 - 5
Notes to Financial Statements 6 - 11
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Trans Waste Services, Inc.
Albany, Georgia
We have audited the accompanying balance sheet of Trans Waste Services, Inc.
("The Company") as of September 30, 1997, as defined in Note 1, consisting of
the waste collection, transportation and disposal operations acquired by Waste
Industries, Inc. ("Waste Industries"), and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 our audit provides a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the financial
position and related results of operations and cash flows of the Company, which
was acquired by Waste Industries, and may not necessary reflect the financial
position, results of operations and cash flows of the Company that might have
resulted had it operated as a stand-alone company.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Trans Waste
Services, Inc. as of September 30, 1997, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Alday, Tillman, Wright & Giles, P.C.
- -----------------------------------------
Alday, Tillman, Wright & Giles, P.C.
August 26, 1998
(except for Note 10, as to
which the date is September 10, 1998)
<PAGE>
TRANS WASTE SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30, JUNE 30,
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including interest bearing deposits: 1997-$393,892 $ 461,207 $ 352,119
Accounts receivable 1,135,648 3,248,556
Investments 161,075 --
Prepaid expenses 49,791 26,626
Notes receivable 135,580 --
Due from related party 230,609 --
---------- ----------
TOTAL CURRENT ASSETS 2,173,910 3,627,301
PROPERTY AND EQUIPMENT, net of accumulated
depreciation :1997 - $796,621 1,083,092 1,316,806
OTHER ASSETS
Intangibles, net of accumulated amortization :1997 - $34,952 32,697 22,549
Deposits 175 --
---------- ----------
TOTAL OTHER ASSETS 32,872 22,549
TOTAL ASSETS $3,289,874 $4,966,656
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 200,177 $ 587,239
Accrued liabilities 123,803 250,062
Income taxes payable 398,310 355,054
Deferred income taxes 296,369 296,369
Notes payable 173,887 858,403
Current maturities of long-term debt 186,132 --
Current maturities of capital lease obligations 93,875 95,000
---------- ----------
TOTAL CURRENT LIABILITIES 1,472,553 2,442,127
LONG-TERM LIABILITIES
Long-term debt, less current maturities 179,259 --
Capital lease obligations, less current maturities 124,028 46,577
Deferred income taxes 49,152 56,222
---------- ----------
TOTAL LONG-TERM LIABILITIES 352,439 102,799
STOCKHOLDERS' EQUITY
Common stock - 10,000 shares authorized, issued and
outstanding, no par 291,997 291,997
Retained earnings 1,172,885 2,129,733
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,464,882 2,421,730
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,289,874 $4,966,656
========== ==========
</TABLE>
See accompanying notes and independent auditors' report.
-2-
<PAGE>
TRANS WASTE SERVICES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Unaudited
Year Ended Nine Months Ended
September 30, June 30,
1997 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $ 8,415,803 $ 9,458,340 $ 5,610,024
OPERATING COSTS AND EXPENSES
Cost of service operations 5,895,531 6,877,966 3,692,697
Selling, general and administrative 658,419 667,619 496,882
Depreciation and amortization 405,578 355,627 398,073
----------- ----------- -----------
TOTAL OPERATING COSTS AND EXPENSES 6,959,528 7,901,212 4,587,652
----------- ----------- -----------
INCOME FROM OPERATIONS 1,456,275 1,557,128 1,022,372
OTHER INCOME (EXPENSES)
Gain on sales of property and equipment 172,622 -- --
Other income 23,297 23,166 --
Interest expense (86,089) (36,042) (101,464)
----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSES) 109,830 (12,876) (101,464)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,566,105 1,544,252 920,908
INCOME TAXES 606,197 579,000 357,000
----------- ----------- -----------
NET INCOME 959,908 965,252 563,908
RETAINED EARNINGS AT BEGINNING OF PERIOD 212,977 1,172,885 212,977
OTHER CAPITAL TRANSACTIONS -- (8,404) --
----------- ----------- -----------
RETAINED EARNINGS AT END OF PERIOD $ 1,172,885 $ 2,129,733 $ 776,885
=========== =========== ===========
</TABLE>
See accompanying notes and independent auditors' report.
-3-
<PAGE>
TRANS WASTE SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
Year Ended Nine Months Ended
September 30, June 30,
1997 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 959,908 $ 965,252 $ 563,908
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation 392,049 345,479 398,073
Amortization 13,529 10,148 --
Deferred income tax provision 145,420 7,070 --
Gain on sales of property and equipment (172,622) (1,871) --
Unrealized gains on investments (7,338) -- --
(Increase) decrease in
Accounts receivable (684,761) (2,112,908) (520,074)
Prepaid expenses and other assets 5,179 23,340 (45,700)
Increase (decrease) in
Accounts payable 103,413 387,062 389,813
Accrued liabilities 94,727 126,259 297,961
Income taxes payable 392,503 (43,256) 351,193
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,242,007 (293,425) 1,435,174
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of net assets for new subsidiary (107,000) -- --
Repayment receipts from (advance to) affiliate (230,609) 230,609 (632,614)
Purchases of investments (153,737) -- (137,196)
Proceeds from sale of investments -- 161,075 --
Purchases of property and equipment (679,504) (579,864) (504,413)
Proceeds from sales of property and equipment 739,999 2,542 --
Advances on notes receivable (480,000) -- --
Repayment receipts on notes receivable 427,345 135,580 --
----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (483,506) (50,058) (1,274,223)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable (76,163) -- --
Proceeds from long-term debt 109,098 650,646 316,049
Payments on long-term debt (256,246) (331,521) (248,148)
Payments on capital lease obligations (189,424) (76,326) --
Other capital transaction -- (8,404) 13,946
----------- ----------- -----------
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES (412,735) 234,395 81,847
----------- ----------- -----------
</TABLE>
See accompanying notes and independent auditors' report.
-4-
<PAGE>
TRANS WASTE SERVICES, INC.
STATEMENT OF CASH FLOWS
Unaudited
Year Ended Nine Months Ended
September 30, June 30,
1997 1998 1997
--------- --------- ---------
NET INCREASE (DECREASE) $ 345,766 $(109,088) $ 242,798
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 115,441 461,207 115,441
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 461,207 $ 352,119 $ 358,239
========= ========= =========
SUPPLEMENT DISCLOSURE
Interest paid $ 86,089 $ 36,042 $ 101,464
========= ========= =========
Income taxes paid $ 68,274 $ 223,946 $ --
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS INCURRED ON PURCHASES
OF PROPERTY AND EQUIPMENT $ 200,317
=========
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS SATISFIED ON SALES OF
PROPERTY AND EQUIPMENT $ 687,099
=========
See accompanying notes and independent auditors' report.
-5-
<PAGE>
TRANS WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary Of Significant Accounting Policies
Nature of Business and Operations. Trans Waste Services, Inc. (the "Company") is
a multi-faceted environmental service company with the expertise and risk
controls to serve all phases of waste collection, transportation and disposal.
Basis of Presentation. The financial statements include the accounts of the
Trans Waste Services, Inc., a Georgia company. However, the financial statements
do not include the accounts of Barber Petroleum and Equipment Company
("Barber"), a wholly-owned subsidiary, Pyramid Environmental Group, Inc.
("Pyramid"), a wholly-owned subsidiary, and Central Georgia Waste Services, Inc.
("Central Georgia"), a 50% investee.
Common stock of the Company was sold to Waste Industries, Inc. ("Waste
Industries") under a stock purchase agreement dated September 9, 1998. Barber,
Pyramid and Central Georgia were spun-off to the former stockholders of the
Company immediately prior to the merger of the Company into Waste Industries.
Accounts Receivable. Accounts receivable have been adjusted to reflect
collectible balances. An allowance for doubtful accounts has not been set up,
since the amount is not considered to be material.
Investments. All of the Company's investments are classified as trading
securities and carried at fair value. Unrealized holding gains of $7,338 have
been included in earnings for the year ended September 30, 1997.
Property, Plant and Equipment. Property and equipment is recorded at cost. The
cost of property and equipment is depreciated over the useful lives of the
related assets. Depreciation is computed on the double declining balance and
straight-line methods for financial reporting and income tax purposes.
The useful lives of property, plant and equipment for the purposes of computing
depreciation are:
YEARS
-----
Buildings and improvements 39
Machinery and equipment 3 - 7
Maintenance and repairs are charged to operations when incurred. When property
or equipment is retired or disposed of, its cost and the related accumulated
depreciation are eliminated from the respective accounts, and gains or losses
arising from the disposition are included in income for that period.
Intangibles. The Company's intangible asset relates to organization costs
arising from the incorporation of the Company. This intangible is carried at
amortized cost over 5 years.
Advertising Costs. The Company's policy is to expense nondirect-response
advertising costs as they are incurred. Included as charges to net income for
the year ended September 30, 1997 is $15,084 in advertising costs.
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts in the financial statements and accompanying
notes. Actual results could differ from those estimates.
-6-
<PAGE>
TRANS WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary Of Significant Accounting Policies, Continued
Statement of Cash Flows. For the purpose of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and money market funds.
Revenue Recognition. The Company has entered into long-term contracts with the
Solid Waste Management Authority of Crisp County, Georgia (the Authority).
During the year ended September 30, 1997, the Authority began netting landfill
fees and equipment usage charges against remittances to the Company for fees due
according to the contract terms. The Company's practice of recording revenues
under these agreements is to gross up the revenue recognized and record landfill
fees and equipment usage expense. Landfill fees and equipment usage expense
included in the Company's statement of income under this policy are $1,186,620
and $ 377,774, respectively, for the year ended September 30, 1997.
Unaudited Interim Information. The balance sheet as of June 30, 1998 and the
statements of income and retained earnings and of cash flows for the nine-months
ended June 30, 1998 and 1997 are unaudited. In the opinion of management, these
statements contain all adjustments necessary to present fairly the financial
position of the Company as of June 30, 1998 and the results of its operations
and its cash flows for the nine months ended June 30, 1998 and 1997. All such
adjustments are of a normal recurring nature.
Note 2 - Property And Equipment
Property and equipment consisted of the following at September 30, 1997:
Machinery and equipment $ 1,810,465
Construction in progress 69,248
------------
Less accumulated depreciation 1,879,713
(796,621)
------------
TOTAL
$ 1,083,092
============
Depreciation expense on property and equipment for the year ended September 30,
1997 was $392,049.
Note 3 - Notes Receivable
Included in notes receivable at September 30, 1997 are unsecured, noninterest
bearing advances of $135,580. The advances are payable upon demand.
Note 4 - Notes Payable
Notes payable consisted of the following balance to Security Bank and Trust
Company at September 30, 1997:
Due November, 1997, prime plus 0.5%, secured by equipment. $ 173,887
===========
-7-
<PAGE>
TRANS WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 5 - Long-Term Debt
Long-term debt consisted of the following balances at September 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Trans Power, Inc., interest rates ranging from 6.80% to 9.25%, due in total
monthly installments of $9,448 and $11,699, respectively, through
October, 1999, secured by equipment $ 143,403
Security Bank and Trust Company, 8.80%, due in monthly installments of $6,170
with balloon payment due August, 1999, secured by equipment. 130,019
Associates Commercial Corporation, interest rates ranging from 8.25% to 8.50%,
due in total monthly installments of $9,073 and $842, respectively, through
March 2001, secured by equipment 80,063
Other 11,906
-----------
365,391
Less current portion 186,132
-----------
$ 179,259
===========
</TABLE>
Principal payments due on long-term debt for each of the five years subsequent
to September 30, 1997 are as follows:
1998 $186,132
1999 151,190
2000 27,234
2001 835
--------
$365,391
--------
All interest expense incurred during the year ended September 30, 1997 was
charged to operations.
Note 6 - Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to depreciable assets and reporting for tax purposes on the
cash basis of accounting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
-8-
<PAGE>
TRANS WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Income Taxes, Continued
The components of income tax expense for the year ended September 30, 1997 were
as follows:
<TABLE>
<CAPTION>
<S> <C>
Current $ 460,777
Deferred 145,420
-------------------
$ 606,197
-------------------
</TABLE>
A reconciliation of the expected income tax expense, based on the statutory rate
of 40 percent (34 percent federal plus 6 percent state) for fiscal 1997 to the
actual income tax expense for the year ended September 30, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Expected income tax expense $ 626,142
Increase (decrease) in income tax expense resulting from
State income tax deduction (34,774)
Nondeductible expenses 14,085
Other 744
Total income tax expense -----------
$ 606,197
==========
</TABLE>
The Company's total deferred tax liability at September 30, 1997, was $345,521.
This amount has been presented in the Company's financial statements as follows:
<TABLE>
<CAPTION>
<S> <C>
Current deferred tax liability $ (296,369)
Noncurrent deferred tax liability (49,152)
-----------
Net deferred tax liability $ (345,521)
===========
</TABLE>
Note 7 - Capital Leases
The Company leases equipment from Paccar Financial Corporation that is accounted
for as capital leases. The leases are for 5 years each and provide that the
lessee maintain payment of insurance, taxes, maintenance and other expenses
pertinent to the equipment.
-9-
<PAGE>
TRANS WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 7 - Capital Leases, Continued
A schedule of the future minimum lease rentals, including purchase options on
these leases totaling $51,636, is as follows at September 30, 1997:
1998 $ 115,558
1999 119,018
-----------
234,576
Less amount representing interest 16,673
-----------
$ 217,903
==========
The leases payable have been presented in the balance sheet at September 30,
1997 as follows:
Current $ 93,875
Noncurrent 124,028
-----------
$ 217,903
==========
Included in equipment in Note 2 at September 30, 1997, is $516,357 representing
the cost capitalized for the leases and accumulated depreciation of $352,844.
Depreciation of the equipment being leased was $196,124 for the year ended
September 30, 1997.
Note 8 - Related Party Transactions
Included in accounts receivable at September 30, 1997, is a $129,110 receivable
from Barber. Sales to Barber amounted to $93,601 for the year ended September
30, 1997. The Company also has made an advance to Barber in the amount of
$230,609 which is shown as due from related party on the Company's balance sheet
at September 30, 1997. This advance is non interest-bearing and payable on
demand. Included in accounts payable at September 30, 1997 is a $6,305 payable
to Barber.
Included in accounts payable at September 30, 1997 is a payable to Central
Georgia in the amount of $2,530. Also included in accounts payable at September
30, 1997 is $121,957 payable to a related party through common ownership.
Management fees paid to a related party through common ownership were $60,000
for the year ended September 30, 1997. Interest expense incurred on debt to
related parties (Note 5) was $17,676 for the year ended September 30, 1997.
Note 9 - Concentrations
At times, the Company maintains deposits in federally insured financial
institutions in excess of federally insured limits. Management monitors the
soundness of these financial institutions and feels the Company's risk is
negligible.
-10-
<PAGE>
TRANS WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 9 - Concentrations, Continued
The Company's sales are predominantly to customers throughout the State of
Georgia. Accounts receivable arising from sales to customers are not
collateralized, and as a result management continually monitors the financial
condition of these companies and municipalities to reduce the risk of loss.
As mentioned in Note 1, the Company conducts a large portion of its business
with the Solid Waste Management Authority of Crisp County, Georgia (the
Authority). Sales to the Authority of $5,343,228 for the year ended September
30, 1997 represented 46% of the Company's total sales for that period. Included
in accounts receivable at September 30, 1997 is $691,302 from the Authority, or
39% of the Company's total accounts receivable at that date.
The Company used primarily one landfill to dispose of waste that the Company had
collected through its waste transfer stations. Included in costs of sales for
the year ended September 30, 1997 is $1,364,349 of fees paid to these
landfills. Accounts payable and accrued liabilities at September 30, 1997, for
this landfill have been netted against the receivable from the Authority
mentioned earlier in this note.
Note 10 - Subsequent Event
Effective on September 10, 1998, Waste Industries acquired, in exchange for
approximately $13.3 million in cash plus 706,730 shares of Waste Industries'
common stock valued at approximately $13.5 million, all of the outstanding stock
of the Company. The Company's operations consisted of solid waste collection,
transportation and disposal, including the operation of four transfer stations
and a landfill in Albany, Georgia.
-11-
<PAGE>
WASTE INDUSTRIES, INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations data of
Waste Industries, Inc. (the "Registrant") have been derived by the
application of pro forma adjustments to the historical financial statements of
the Registrant for the periods indicated. The adjustments are described in the
accompanying notes. The unaudited pro forma consolidated statement of operations
data give effect to the following as if they had occurred at the beginning of
the periods presented:
o The September 10, 1998 purchase of all of the outstanding stock of Trans
Waste Services, Inc. ("Trans Waste") in exchange for approximately $13.3 in
cash plus 706,730 shares of the Registrant's common stock valued at
approximately $13.5 million. Trans Waste is a Georgia corporation engaged
in solid waste collection and the development, ownership and operation of
four transfer stations and a landfill in Albany, Georgia. This acquisition
has been accounted for as a purchase.
o Certain other 1998 and 1997 acquisitions (the "Other Acquisitions"),
consisting of the following:
<TABLE>
<CAPTION>
<S> <C>
Date
Company Acquired Principal Business Location
------- -------- ------------------ --------
Greater Atlanta Sanitation, Inc. August 28, 1998 Commercial, Industrial and Alpharetta, GA
Residential Collection
Cumberland Waste Disposal, LLC May 1, 1998 Commercial, Industrial and Crossville, TN
Residential Collection and
Recycling
Action Waste Systems, Inc. March 31, 1998 Commercial, Industrial and Lithia Springs, GA
Residential Collection and
Recycling
Waste Disposal Services, March 16, 1998 Commercial, Industrial and Tunnel Hill, GA
Inc. Residential Collection and
Recycling
L&M Garbage Service March 2, 1998 Commercial, Industrial and Durham, NC
Residential Collection and
Recycling
Garner Area Disposal, Inc. October 31, 1997 Residential Collection Garner, NC
American Waste Systems, Inc. October 31, 1997 Industrial and Residential Lilburn, GA
Collection
Royal DispozAll, Inc. October 17, 1997 Commercial and Industrial Easley, SC
Collection
BFI Rocky Mount and Kinston August 30, 1997 Commercial, Industrial and Rocky Mount and
Residential Collection and Kinston, NC
Recycling
Waste Management Chattanooga May 15, 1997 Commercial, Industrial and Chattanooga, TN
Residential Collection
BFI Charleston April 30, 1997 Commercial, Industrial and Charleston, SC
Residential Collection and
Recycling
BFI Raleigh-Durham March 21, 1997 Residential Collection Raleigh, NC
</TABLE>
<PAGE>
o The Registrant's June 1997 initial public offering ("IPO") in which it
issued 1,927,700 shares of common stock at a price of $13.50 per share
resulting in net proceeds after deduction of underwriting discounts and
commissions and other offering expenses to the Registrant of approximately
$23.2 million. The proceeds from the offering were used to repay revolving
bank debt.
The Registrant's historical statements of operations were restated to reflect
the following:
o On March 31, 1998, the Registrant exchanged 320,555 shares of its common
stock for all of the issued and outstanding shares of common stock of (i)
ECO Services, Inc. ("ECO"), a commercial, industrial and residential
collection operation located in Olive Branch, MS and (ii) Air Cargo
Services, Inc. ("ACS"), a commercial, industrial and residential collection
and recycling operation and solid waste transporter located in Raleigh, NC.
Certain of the Registrant's executive officers, who are also Registrant
shareholders, owned substantially all of the common stock of ECO and ACS.
Accordingly, all assets and liabilities transferred have been accounted for
at historical cost in a manner similar to that of pooling-of-interests
accounting pursuant to the provisions of AIN #39 of APB Opinion No. 16. The
Registrant's financial statements have been restated to include the
accounts and operations for all periods presented.
o On August 28, 1998, the Registrant exchanged 388,311 shares of its common
stock for all of the issued and outstanding stock of Railroad Avenue
Disposal, Inc., a Class I rubbish pit and gravel operation located in Olive
Branch, MS. On June 30, 1998, the Registrant exchanged 330,000 shares of
its common stock for all of the issued and outstanding shares of common
stock of Reliable Trash Services, Inc., a commercial, industrial and
residential collection and recycling operation located in Norfolk, VA. On
June 16, 1998, the Registrant exchanged 21,344 shares of its common stock
for all of the issued and outstanding shares of common stock of Dumpsters,
Inc., an industrial collection operation located in Memphis, TN. These
business combinations have been accounted for as poolings-of-interests. The
financial statements have been restated to include the accounts and
operations for all periods presented.
The unaudited pro forma consolidated statement of operations data do not give
effect to any transactions other than the purchase of Trans Waste, the Other
Acquisitions, the IPO and those discussed in the accompanying notes. The
unaudited pro forma consolidated statement of operations data are provided for
informational purposes only and do not purport to represent the results of
operations or financial position of the Registrant had the transactions in fact
occurred on such dates, nor do they purport to be indicative of the financial
position or results of operations as of any futures date or for any future
period.
The purchase of Trans Waste and the Other Acquisitions have been accounted for
using the purchase method of accounting. The total cost of these acquisitions
have been allocated to the tangible and intangible assets acquired and
liabilities assumed based upon their respective fair values. Such allocations
have been based on preliminary estimates that may be revised at a later date.
Accordingly, the pro forma adjustments are based upon available information and
upon certain assumptions that management believes are reasonable. The actual
allocation of the purchase cost and the resulting effect on income from
operations may differ significantly from the pro forma amounts included herein.
The unaudited pro forma consolidated statement of operations data and
accompanying notes should be read in conjunction with the financial statements
of the Registrant for the year ended December 31, 1997 and related notes thereto
included in the Registrant's Form S-4 Registration Statement (No. 333-63587).
<PAGE>
<TABLE>
<CAPTION>
WASTE INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
NINE MONTHS ENDED SEPTEMBER 30, 1998
Historical
-------------------------------
Nine-months Nine-months
September 30, June 30,
1998 1998 Pro Forma Other
Historical Trans Waste Adjustments Subtotal Acquisitions
-------------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Service revenues $ 124,982,002 $ 9,458,340 $ - $ 134,440,342 $ 5,529,000
Equipment sales 1,334,465 - - 1,334,465 -
-------------- ------------- ------------ -------------- ------------
Total revenues 126,316,467 9,458,340 - 135,774,807 5,529,000
-------------- ------------- ------------ -------------- ------------
OPERATING COSTS AND EXPENSES:
Cost of service operations 77,326,428 6,877,966 - 84,204,394 2,860,000
Cost of equipment sales 923,892 - - 923,892 -
-------------- ------------- ------------ -------------- ------------
Total cost of operations 78,250,320 6,877,966 - 85,128,286 2,860,000
Selling, general and administrative 20,839,109 667,619 - 21,506,728 791,000
Depreciation and amortization 11,860,341 355,627 424,054 (a) 12,640,022 483,000
Merger costs 400,410 - - 400,410 -
Start-up costs 101,175 - - 101,175 -
-------------- ------------- ------------ -------------- ------------
Total operating costs and
expenses 111,451,355 7,901,212 424,054 119,776,621 4,134,000
-------------- ------------- ------------ -------------- ------------
OPERATING INCOME 14,865,112 1,557,128 (424,054) 15,998,186 1,395,000
OTHER EXPENSE (INCOME):
Interest expense 3,191,344 36,042 645,807 (b) 3,873,193 -
Other (480,888) (23,166) - (504,054) -
-------------- ------------- ------------ -------------- ------------
Total other expense (income),
net 2,710,456 12,876 645,807 3,369,139 -
-------------- ------------- ------------ -------------- ------------
INCOME BEFORE INCOME TAXES 12,154,656 1,544,252 (1,069,861) 12,629,047 1,395,000
INCOME TAX EXPENSE -
Current and deferred 4,246,000 579,000 (401,000) (c) 4,424,000 523,000
============== ============= ============ ============== ============
NET INCOME - HISTORICAL BASIS $ 7,908,656 $ 965,252 $ (668,861) $ 8,205,047 $ 872,000
============== ============= ============ ============== ============
EARNINGS PER SHARE - HISTORICAL
BASIS:
Basic $ 0.62
==============
Diluted $ 0.60
==============
PRO FORMA INCOME TAXES $ 4,486,000 (d)
==============
PRO FORMA NET INCOME $ 7,668,656 (d)
==============
PRO FORMA EARNINGS PER SHARE:
Basic $ 0.60 (d)
==============
Diluted $ 0.59 (d)
==============
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 12,706,715
==============
Diluted 13,095,573
==============
<CAPTION>
Pro Forma
Adjustments Subtotal Pro Forma
------------ ------------ ---------------
<S> <C> <C> <C>
REVENUES:
Service revenues $ - $ 5,529,000 $ 139,969,342
Equipment sales - - 1,334,465
------------ ------------ ---------------
Total revenues - 5,529,000 141,303,807
------------ ------------ ---------------
OPERATING COSTS AND EXPENSES:
Cost of service operations - 2,860,000 87,064,394
Cost of equipment sales - - 923,892
------------ ------------ ---------------
Total cost of operations - 2,860,000 87,988,286
Selling, general and administrative - 791,000 22,297,728
Depreciation and amortization 218,821 (a) 701,821 13,341,843
Merger costs - - 400,410
Start-up costs - - 101,175
------------ ------------ ---------------
Total operating costs and
expenses 218,821 4,352,821 124,129,442
------------ ------------ ---------------
OPERATING INCOME (218,821) 1,176,179 17,174,365
OTHER EXPENSE (INCOME):
Interest expense 474,660 (b) 474,660 4,347,853
Other - - (504,054)
------------ ------------ ---------------
Total other expense (income),
net 474,660 474,660 3,843,799
------------ ------------ ---------------
INCOME BEFORE INCOME TAXES (693,481) 701,519 13,330,566
INCOME TAX EXPENSE -
Current and deferred (260,000) (c) 263,000 4,687,000
============ ============ ===============
NET INCOME - HISTORICAL BASIS $ (433,481) $ 438,519 $ 8,643,566
============ ============ ===============
EARNINGS PER SHARE - HISTORICAL
BASIS:
Basic $ 0.65
===============
Diluted $ 0.63
===============
PRO FORMA INCOME TAXES $ 4,927,000 (d)
===============
PRO FORMA NET INCOME $ 8,403,566 (d)
===============
PRO FORMA EARNINGS PER SHARE:
Basic $ 0.63 (d)
===============
Diluted $ 0.61 (d)
===============
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 13,380,905 (e)
===============
Diluted 13,769,763 (e)
===============
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data.
<PAGE>
WASTE INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Historical
-------------------------------
Year Ended Year Ended
December 31, September
30,
1997 1997 Pro Forma Other
Historical Trans Waste Adjustments Subtotal Acquisitions
--------------- ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Service revenues $ 127,580,690 $ 8,415,803 $ - $135,996,493 $24,738,000
Equipment sales 1,601,279 - - 1,601,279 -
--------------- ------------ ------------ -------------- -------------
Total revenues 129,181,969 8,415,803 - 137,597,772 24,738,000
--------------- ------------ ------------ -------------- -------------
OPERATING COSTS AND EXPENSES:
Cost of service operations 78,315,559 5,895,531 - 84,211,090 14,816,000
Cost of equipment sales
1,171,002 - - 1,171,002 -
--------------- ------------ ------------ -------------- -------------
Total cost of operations 79,486,561 5,895,531 - 85,382,092 14,816,000
Selling, general and administrative 24,564,335 658,419 - 25,222,754 2,574,000
Depreciation and amortization 11,796,807 405,578 610,638 (a) 12,813,023 1,711,000
--------------- ------------ ------------ -------------- -------------
Total operating costs and
expenses 115,847,703 6,959,528 610,638 123,417,869 19,101,000
--------------- ------------ ------------ -------------- -------------
OPERATING INCOME 13,334,266 1,456,275 (610,638) 14,179,903 5,637,000
OTHER EXPENSE (INCOME):
Interest expense 3,021,496 86,089 929,962 (b) 4,037,547 -
Other (634,017) (195,919) - (829,936) -
--------------- ------------ ------------ -------------- -------------
Total other expense (income), net 2,387,479 (109,830) 929,962 3,207,611 -
--------------- ------------ ------------ -------------- -------------
INCOME BEFORE INCOME TAXES 10,946,787 1,566,105 (1,540,600) 10,972,292 5,637,000
INCOME TAX EXPENSE:
Current and deferred 2,711,250 606,197 (601,000) (c) 2,716,447 2,114,000
Effect of change in tax status 4,300,000 (d) - - 4,300,000 -
--------------- ------------ ------------ -------------- -------------
NET INCOME - HISTORICAL BASIS $ 3,935,537 $ 959,908 $ (939,600) $ 3,955,845 $ 3,523,000
=============== ============ ============ ============== =============
EARNINGS PER SHARE - HISTORICAL BASIS:
Basic $ 0.34
===============
Diluted $ 0.33
===============
PRO FORMA INCOME TAXES $ 4,266,000 (d)
===============
PRO FORMA NET INCOME $ 6,680,787 (d)
===============
PRO FORMA EARNINGS PER SHARE:
Basic $ 0.57 (d)
===============
Diluted $ 0.55 (d)
===============
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 11,708,832
===============
Diluted 12,067,844
===============
<CAPTION>
Pro Forma
Adjustments Subtotal Pro Forma
------------- ------------- ---------------
<S> <C> <C> <C>
REVENUES:
Service revenues $ - $ 24,738,000 $ 160,734,493
Equipment sales - - 1,601,279
------------- ------------- ---------------
Total revenues - 24,738,000 162,335,772
------------- ------------- ---------------
OPERATING COSTS AND EXPENSES:
Cost of service operations - 14,816,000 99,027,090
Cost of equipment sales
- - 1,171,002
------------- ------------- ---------------
Total cost of operations - 14,816,000 100,198,092
Selling, general and administrative - 2,574,000 27,796,754
Depreciation and amortization 1,072,546 (a) 2,783,546 15,596,569
------------- ------------- ---------------
Total operating costs and
expenses 1,072,546 20,173,546 143,591,415
------------- ------------- ---------------
OPERATING INCOME (1,072,546) 4,564,454 18,744,357
OTHER EXPENSE (INCOME):
Interest expense 1,656,298 (b) 1,656,298 5,693,845
Other - - (829,936)
------------- ------------- ---------------
Total other expense (income), net 1,656,298 1,656,298 4,863,909
------------- ------------- ---------------
INCOME BEFORE INCOME TAXES (2,728,844) 2,908,156 13,880,448
INCOME TAX EXPENSE:
Current and deferred (1,064,000)(c) 1,050,000 3,766,447
Effect of change in tax status - - 4,300,000 (d)
------------- ------------- ---------------
NET INCOME - HISTORICAL BASIS $(1,664,844) $ 1,858,156 $ 5,814,001
============= ============= ===============
EARNINGS PER SHARE - HISTORICAL BASIS:
Basic $ 0.43
===============
Diluted $ 0.42
===============
PRO FORMA INCOME TAXES $ 5,400,000 (d)
===============
PRO FORMA NET INCOME $ 8,480,448 (d)
===============
PRO FORMA EARNINGS PER SHARE:
Basic $ 0.63 (d)
===============
Diluted $ 0.62 (d)
===============
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 13,380,905 (e)
===============
Diluted 13,739,917 (e)
===============
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data.
<PAGE>
Notes to Unaudited Pro Forma Statement of Operations Data
(a) Reflects amortization of goodwill and other intangible assets as
follows:
Nine Months Ended Year Ended
September 30, 1998 December 31, 1997
------------------ -----------------
Other Other
Trans Waste Acquisitions Trans Waste Acquisitions
----------- ------------ ----------- ------------
$ 424,054 $218,821 $610,638 $1,072,546
The purchase of Trans Waste and the Other Acquisitions have been
accounted for under the purchase method accounting. Under the purchase
method of accounting, the total purchase price has been allocated to
the tangible and intangible assets acquired and liabilities assumed by
the Registrant based on their respective fair values as of the
acquisition date based upon valuations and other studies not yet
available. For purposes of the pro forma information, the excess of the
purchase price over the historical net assets of Trans Waste and the
Other Acquisitions ($22.4 million and $37.1 million, respectively) has
been considered to be goodwill and other intangible assets, pending the
completion of appraisals and other purchase price allocation
adjustments. The pro forma remaining excess purchase costs to be
allocated has been amortized over a weighted-average period of
approximately 40 years and 25 years for Trans Waste and the Other
Acquisitions, respectively.
(b) Reflects additional interest expense incurred by the Registrant in
connection with the purchase of Trans Waste and the Other Acquisitions,
and reductions in interest expense for the proceeds from the IPO used
to repay revolving bank debt as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1998 December 31, 1997
--------------------------- ----------------------------
Principal Interest Principal Interest
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Trans Waste $13,323,000 $645,807 $13,323,000 $ 929,962
========== ===========
Other Acquisitions 14,046,000 $474,660 50,396,000 $2,423,122
IPO - - 23,200,000 (766,824)
========== ===========
$474,660 $1,656,298
========== ===========
</TABLE>
Interest was computed using weighted-average interest rates of 6.98%
and 7.30% for the nine months ended September 30, 1998 and for the year
ended December 31, 1997, respectively.
(c) Adjusts income tax benefit for assumed tax effect of pro forma
adjustments using an estimated rate 37% for the nine-months ended
September 30, 1998 and 39% for the year ended December 31, 1997.
(d) The Registrant's S Corporation status was terminated on May 8, 1997
and, accordingly, the Registrant became fully subject to federal and
state income taxes on May 9, 1997. In accordance with SFAS No. 109, the
unaudited pro forma statement of operations financial data give effect
to the recognition of deferred tax expense of $4.3 million as result of
the termination of the Registrant's S Corporation election on May 8,
1997. Additionally,
<PAGE>
certain companies acquired in poolings-of-interests transactions were
previously taxed as S Corporations. The recognition of the cumulative
deferred tax provision associated with the conversions of these
companies from S Corporations to C Corporations was immaterial to the
Registrant's consolidated financial statements. Pro forma net income
and earnings per share amounts have been computed as if the Company was
subject to federal and all applicable state corporate income taxes for
the nine months ended September 30, 1998 and for the year ended
December 31, 1997.
(e) For the nine months ended September 30, 1998 pro forma weighted-average
number of shares has been increased for shares issued in the 1998
acquisitions of Trans Waste (706,730 shares) and Greater Atlanta
Sanitation, Inc. (22,474 shares) as if these shares had been
outstanding at the beginning of the period. For the year ended December
31, 1997, pro forma weighted-average number of shares has been
increased for shares issued in the (i) 1998 acquisitions of Trans Waste
(706,730 shares) and Greater Atlanta Sanitation, Inc. (22,474 shares);
(ii) 1997 acquisitions of Royal DispozAll, Inc. (49,800 shares) and
Garner Area Disposal, Inc. (13,834 shares); and (iii) the IPO
(1,927,700 shares) as if these shares had been outstanding at the
beginning of the period.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WASTE INDUSTRIES, INC.
Date: November 24, 1998 /s/ Robert H. Hall
-------------------
Robert H. Hall,
Vice President and Chief Financial Officer
