UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1998
COMMISSION FILE NO. 0-19674
WASTE CONNECTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
94-3283464
(I.R.S. Employer Identification No.)
2260 Douglas Boulevard, Suite 280, Roseville, California 95661
(Address of principal executive offices)
Registrant's telephone number, including area code: (916) 772-2221
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ ] No [x]
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock:
As of August 12, 1998: 9,112,709 Shares of Common Stock
Page 1 of 24
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INDEX TO FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1997 and June 30, 1998
Condensed Consolidated Statements of Operations
for the three and six months ended
June 30, 1997 and 1998
Condensed Consolidated Statements of Cash Flows
for the six months ended
June 30, 1997 and 1998
Notes to Condensed Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 2 - Changes in securities
Item 3 - Defaults upon senior securities
Item 4 - Submission on matters to a vote of security holders.
Item 5 - Other information.
Item 6 - Exhibits and Reports on Form 8-K
Signatures
Page 2 of 24
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Waste Connections, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(Unaudited)
December 31, 1997 June 30, 1998
ASSETS
Current assets:
Cash $ 820 $ 3,243
Accounts receivable, less
allowance for doubtful
accounts of $96 at
June 30, 1998 and $19 at
December 31, 1997 3,940 6,430
Prepaid expenses and other current assets 358 650
_______ _______
Total current assets 5,118 10,323
Property and equipment, net 4,185 14,595
Goodwill, net 9,408 50,970
Other assets 169 3,560
_______ _______
$18,880 $79,448
Page 3 of 24
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Waste Connections, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(Unaudited)
December 31, 1997 June 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,609 $ 5,119
Deferred revenue 597 1,405
Accrued liabilities 825 2,129
Current portion of notes payable - 465
Current portion of accrued losses
on acquired contracts 251 323
_______ _______
Total current liabilities 4,282 9,441
Accrued losses on acquired contracts 702 1,076
Long-term debt and notes payable, net 6,762 23,152
Commitments and Contingencies
Deferred income taxes 162 379
Redeemable convertible preferred stock:
$.01 par Value; 2,500,000 shares authorized;
2,499,998 shares issued and outstanding
at December 31, 1997; no shares issued
and outstanding at June 30, 19987,523 -
Stockholders' equity (deficit):
Preferred stock $.01 par value;7,500,000 shares
authorized; none issued and outstanding
Common stock: $.01 par value; 50,000,000 shares
authorized; 2,300,000 shares issued and
outstanding at December 31, 1997, 8,523,397
shares issued and outstanding
at June 30, 1998 23 85
Additional paid-in capital 5,105 52,774
Stockholder notes receivable (82) (82)
Deferred stock compensation - (619)
Accumulated deficit (5,597) (6,758)
________ ________
Total stockholders' equity
(deficit) (551) 45,400
________ ________
$18,880 $79,448
See accompanying notes.
Page 4 of 24
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Waste Connections, Inc. and Predecessors
Condensed Consolidated Statements of Operations
Three and Six months ended June 30, 1998 and 1997
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
Revenues $6,090 $10,919 $11,784 $18,520
Operating Expenses:
Cost of operations 5,110 7,433 9,784 12,830
Selling, general and
administrative 590 1,098 1,305 1,868
Depreciation and
amortization 367 818 745 1,391
Stock compensation - 121 - 441
Income (loss)
_______ _______ ________ ________
from operations 23 1,449 (50) 2,022
Interest expense (152) (430) (304) (731)
Other income
(expense), net 4 - 4 -
______ _______ _______ _______
Income (loss) before income
tax provision (125) 1,019 (350) 1,291
Income tax provision - (480) - (717)
_______ _______ _______ ________
Income (loss) before
extraordinary item (125) 538 (350) 573
Extraordinary item-early
extinguishment of debt,
net of tax benefit
of $165 - (815) - (815)
________ ________ ________ ________
Net loss (125) (277) (350) (242)
Redeemable convertible
preferred stock
accretion - (345) - (917)
_______ ________ ________ ________
Net loss applicable
to common
stockholders $ (125) $ (622) $(350) $(1,159)
Page 5 of 24
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Waste Connections, Inc. and Predecessors
Condensed Consolidated Statements of Operations
Three and Six months ended June 30, 1998 and 1997
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
Basic earnings per common share:
Income (loss) before
extraordinary item $ 0.04 $(0.09)
Extraordinary item (0.16) (0.22)
________ _______
Net loss per common share $(0.12) $(0.31)
Diluted earnings per common share:
Income (loss) before
extraordinary item $ 0.03 $(0.09)
Extraordinary item (0.11) (0.22)
________ _______
Net loss per common share $(0.08) $(0.31)
Shares used in the per share calculations:
Basic 5,116,942 3,714,027
Diluted 7,329,352 3,714,027
See accompanying notes.
Page 6 of 24
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Waste Connections, Inc. and Predecessors
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998, and 1997
(in thousands)
(Unaudited)
Six Months Ended June 30,
1997 1998
Cash flows from operating activities:
Net loss $(350) $(243)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 745 1,358
Amortization of debt issuance costs, debt guarantee fees and
accretion of discount on long term debt - 134
Stock compensation - 441
Extraordinary item - early extinguishment of debt - -
Changes in operating assets and liabilities, net of effects from
acquisitions: - 981
Accounts receivable, net (440) (361)
Prepaids expenses and
other current assets 224 (656)
Accounts payable 52 119
Deferred revenue (44) 292
Accrued liabilities 334 (23)
Accrued losses on acquired contracts (91) (151)
_______ _______
Net cash provided by operating activities 430 1,891
Cash flows from investing activities:
Proceeds from sale of property and equipment - 89
Payments for acquisitions,
net of cash acquired - (30,281)
Capital expenditures for property and equipment (726)
(934)
Decrease in other assets 66 -
________ _________
Net cash used in investing activities (660) (31,126)
Page 7 of 24
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Waste Connections, Inc. and Predecessors
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998, and 1997
(in thousands)
(Unaudited)
Six Months Ended June 30,
1997 1998
Cash flows from financing activities:
Net intercompany balance 221 -
Proceeds from borrowings - 40,862
Principal payments on notes payable - (258)
Principal payments on long term debt (70) (32,327)
Proceeds from sale of common stock - 24,126
Payment of preferred stock dividend - (161)
Debt issuance costs - (584)
_______ ________
Net cash provided by financing activities 151 31,568
_______ ________
Net (decrease) increase in cash (79) 2,423
Cash at beginning of period 102 820
_______ _______
Cash at end of period $ 23 $ 3,243
See accompanying notes.
Page 8 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statements of operations and cash flows relate to
Waste Connections, Inc. and its subsidiaries (the "Company") for
the three and six-month periods ended June 30, 1998 and to its
predecessors combined for the three and six-month periods ended
June 30, 1997. The consolidated financial statements of the
Company include the accounts of WCI and its wholly owned
subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. Operating results for the three and
six month periods ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 1998.
The Company's consolidated balance sheet as of June 30, 1998, the
consolidated statements of operations for the three and six months
ended June 30, 1998 and 1997, and the consolidated statements of
cash flows for the six months ended June 30, 1998 and 1997 are
unaudited. In the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Company's
financial position, results of operations, and cash flows for the
periods presented. The consolidated financial statements presented
herein should be read in conjunction with the Company's audited
consolidated financial statements for the twelve months ended
December 31, 1997 and for the three months ended March 31, 1998
included as part of the Company's registration statement filed on
Form S-1 on May 21, 1998 (the `Registration Statement').
Page 9 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The entities the Company acquired in September 1997 from Browning
Ferris Industries (BFI) are collectively referred to herein as the
Company's "Predecessors Combined". BFI acquired the predecessor
operations at various times during 1995 and 1996, and prior to
being acquired by BFI, the Predecessors Combined operated as
separate stand-alone businesses.
Property and Equipment
Capitalized landfill costs include expenditures for land and
related airspace, permitting costs and preparation costs. Landfill
permitting and preparation costs represent only direct costs
related to these activities, including legal, engineering and
construction. Interest is capitalized on landfill permitting and
construction projects and other projects under development while
the assets are undergoing activities to ready them for their
intended use. The interest capitalization rate is based on the
Company's weighted average cost of indebtedness. No interest was
capitalized during the six months ended June 1998. Landfill
permitting, acquisition and preparation costs, excluding the
estimated residual value of land, are amortized as permitted
airspace of the landfill is consumed. Landfill preparation costs
include the costs of construction associated with excavation,
liners, site berms and the installation of leak detection and
leachate collection systems. In determining the amortization rate
for a landfill, preparation costs include the total estimated costs
to complete construction of the landfills permitted capacity.
Units-of-production amortization rates are determined annually for
the Company's operating landfill. The rates are based on estimates
provided by the Company's outside engineers and consider the
information provided by surveys which are performed at least
annually.
Page 10 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Closure and Post-Closure Costs
The Company does not accrue for closure and post-closure costs
related to the Farimead Landfill it operates in Madera County,
California. Madera County as required by state law, has
established a special fund to pay such liabilities. On June 5,
1998, the Company acquired the stock of Red Carpet Landfill, Inc.
in Oklahoma. Red Carpet is engaged in landfilling of municipal
solid waste and other acceptable waste streams in the county of
Major, Oklahoma. As a result of the acquisition, the Company is
required to accrue for closure and post-closure costs related to
the landfill. Accrued closure and post-closure costs include the
current and non-current portion of accruals associated with
obligations for closure and post-closure of the landfill. The
Company, based on input from its outside engineers, estimates its
future closure and post-closure monitoring and maintenance costs
for solid waste landfills based on its interpretation of the
technical standards of the U.S. Environmental Protection Agency's
Subtitle D regulations and the air emissions standards under the
Clean Air Act as they are being applied on a state-by-state basis.
Closure and post-closure monitoring and maintenance costs represent
the costs related to cash expenditures yet to be incurred when a
landfill facility ceases to accept waste and closes. Accruals for
closure and post-closure monitoring and maintenance requirements in
the U.S. consider final capping of the site, site inspection,
groundwater monitoring, leachate management, methane gas control
and recovery, and operation and maintenance costs to be incurred
during the period after the facility closes. Certain of these
environmental costs, principally capping and methane gas control
costs, are also incurred during the operating life of the site in
accordance with the landfill operation requirements of Subtitle D
and the air emissions standards. Reviews of the future requirements
for closure and post-closure monitoring and maintenance costs for
the Company's operating landfills are performed by the Company's
engineers at least annually and are the basis upon which the
Company's estimates of these future costs and the related accrual
rates are revised. The Company provides accruals for these
estimated costs as the remaining permitted airspace of such
facilities is consumed. The states in which the Company operates
its landfills require a specified portion of these accrued closure
and post-closure obligations to be funded at any point in time.
Page 11 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Long Term Debt
On May 28, 1998, the Company entered into a new revolving credit
facility with a syndicate of banks for which BankBoston N.A. acts
as agent (the "Credit Facility"). The maximum amount available
under the Credit Facility is $60 million (including stand-by
letters of credit) and the borrowings bear interest at various
fixed and/or variable rates at the Company's option (approximately
7.44% as of June 30, 1998). The Credit Facility replaced an
existing revolving credit facility. The Credit Facility allows for
the Company to issue up to $5 million in stand-by letters-of-
credit. The Credit Facility requires quarterly payments of
interest and it matures in May 2001. Borrowings under the Credit
Facility are secured by virtually all of the Company's assets. The
Credit Facility requires the Company to pay an annual commitment
fee equal to 0.375% of the unused portion of the Credit Facility.
The Credit Facility places certain business, financial and
operating restrictions on the Company relating to, among other
things the incurrance of additional indebtedness, investments,
acquisitions, asset sales, mergers, dividends, distributions and
repurchases and redemption of capital stock. The Credit Facility
also requires that specified financial ratios and balances be
maintained.
Madera Pollution Control Bond
On June 16, 1998, the Company completed a $1.8 million tax-exempt
bond financing for its Madera subsidiary. These funds will be used
for specified capital expenditures and improvements, including
installation of a landfill gas recovery system. The bonds issued
mature on May 1, 2016 and bear interest at variable rates based on
market conditions for California tax exempt bonds. The bonds are
backed by a letter of credit issued by BankBoston under the Credit
Facility for $1.8 million. Funds from the bond offering are held
by a trustee until the capital expenditures are completed. The
unused funds are classified as restricted cash and included in
other assets on the accompanying consolidated balance sheet. The
capital expenditures funded by the bonds are expected to be
substantially completed by December 31, 1998.
Page 12 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. ACQUISITIONS
During the quarter ended June 30, 1998, the Company acquired eleven
solid waste collection businesses that were accounted for using the
purchase method of accounting. The aggregate consideration for
these acquisitions was approximately $30.5 million consisting of
$25.5 million in cash and seller notes and $5 million in stock.
The purchase prices have been allocated to the tangible assets
acquired based on fair values at the dates of acquisition with the
residual amounts allocated to identified intangibles, primarily
goodwill.
The following proforma information shows the results of the
Company's operations as though both of its significant acquisitions
(Madera Disposal Systems, Inc. and Arrow Sanitary Service, Inc.)
had occurred as of January 1, 1997 (in thousands, except share and
per share data):
Six Months Ended
June 30, 1997 June 30, 1998
Revenue $18,141 $ 21,639
Net income before extraordinary item 5 302
Net income (loss) 5 (513)
Proforma basic earnings (loss)
per share of common stock $ (.13)
Basic common shares outstanding 4,679,000
The proforma results have been prepared for comparative purposes
only and are not necessarily indicative of the actual results of
operations had the acquisitions taken place as of January 1, 1997
or the results of future operations of the Company. Furthermore,
the proforma results do not give effect to all cost savings or
incremental costs that may occur as a result of the integration and
consolidation of the acquisitions.
Page 13 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Earnings Per Share Calculation
The following table sets forth the numerator and denominator used
in the computation of earnings per common share:
Three months ended Six months ended
June 30, June 30,
1998 1998
Numerator:
Net income before extraordinary item $538,000 $ 573,000
Redeemable convertible preferred stock
accretion (345,000) (917,000)
_________ __________
Income (loss) applicable to common
stockholders before
extraordinary item 193,000 (344,000)
Extraordinary item (815,000) (815,000)
_________ __________
Net loss applicable
to common stockholders $(622,000) $(1,159,000)
Denominator:
Denominator for basic earnings per
common share-weighted average 5,116,942 3,714,027
Dilutive effect of redeemable stock,
stock options and warrants 2,212,410 -
__________ _________
Denominator for diluted earnings
per common share-adjusted
weighted average shares
and assumed conversions 7,329,352 3,714,027
Page 14 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the six months ended June 30, 1998, outstanding options to
purchase 937,300 shares of common stock (with an exercise price
from $2.80 to $16.75) and outstanding warrants to purchase
1,420,611 shares of common stock (with exercise prices ranging from
$.01 to $17.63 could potentially dilute basic earnings per share in
the future and have not been included in the computation of diluted
net loss per share because to do so would have been anitdilutive
for the periods presented. On a proforma basis, assuming that the
preferred shares had converted as of March 31, 1998 the basic and
diluted shares outstanding would have been 6,450,274 and 8,662,684
respectively.
Subsequent Events
On July 31, 1998, WCI Acquisition Corporation, a Nebraska
corporation wholly owned by Waste Connections, Inc., merged into
Shrader Refuse and Recycling Service Company, a Nebraska
corporation ("Shrader"), and Shrader acquired certain real estate
located in Lincoln and Papillion, Nebraska and used in Shrader's
business. Shrader is engaged in the collection, transportation and
handling of solid waste and recyclables in eastern Nebraska. The
consideration was $7.1 million in cash and seller notes and $9.4
million in common stock.
On July 31, 1998, Waste Connections, Inc. purchased the stock of
J&J Sanitation, Inc. in O'Neill, Nebraska. On August 3, 1998 the
Company acquired certain assets of Miller Containers, Inc. in
Draper, Utah. On August 10, 1998 the Company purchased certain
assets of ABC Waste, Inc. in Salt Lake City, Utah.
Page 15 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited financial statements and notes thereto included elsewhere
herein.
FORWARD LOOKING STATEMENTS
Certain statements included in this Quarterly Report on Form 10-Q,
including, without limitation, information appearing under Part I,
Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," are forward-looking
statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934) that involve risks and uncertainties. Factors set forth under
the caption "Risk Factors" in the Company's Registration Statement
could affect the Company's actual results and could cause the
Company's actual results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, the
Company in this Quarterly Report on Form 10-Q.
OVERVIEW
Waste Connections, Inc. is a regional, integrated solid waste
services company that provides solid waste collection, transfer,
disposal and recycling services in secondary markets of the Western
U.S. As of June 30, 1998, the Company served more than 150,000
commercial, industrial and residential customers in Washington,
Oregon, California, Idaho, Wyoming, Utah, Oklahoma and South
Dakota. The Company currently owns fourteen collection operations
and operates or owns eight transfer stations, two Subtitle D
landfills and one recycling facility.
The Company generally intends to pursue an acquisition-based growth
strategy and, as of June 30, 1998 had acquired 17 companies since
its inception in September 1997. All of these acquisitions were
accounted for under the purchase method of accounting. Accordingly,
the results of operations of these acquired businesses have been
included in the Company's financial statements only from the
respective dates of acquisition. The Company anticipates that a
substantial part of its future growth will come from acquiring
additional solid waste collection, transfer and disposal businesses
and, therefore, it is expected that additional acquisitions could
continue to affect period-to-period comparisons of the Company's
operating results.
Page 16 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
RESULTS OF OPERATIONS
During the periods in which the Predecessors Combined operated as
wholly owned subsidiaries of BFI, they maintained intercompany
accounts with BFI for recording intercompany charges for costs and
expenses, intercompany purchases of equipment and additions under
capital leases and intercompany transfers of cash, among other
transactions. It is not feasible to ascertain the amount of related
interest expense that would have been recorded in the historical
financial statements had the Predecessors Combined been operated as
stand-alone entities. Charges for interest expense were allocated
to the Predecessors Combined by BFI as disclosed in the statement
of operations data. The interest expense allocations from BFI are
based on formulas that do not necessarily correspond to the
balances in the related intercompany accounts. Moreover, the
financial position and results of operations of the Predecessors
Combined during this period may not necessarily be indicative of
the financial position or results of operations that would have
been realized had the Predecessors Combined been operated as
stand-alone entities. For the periods in which the Predecessors
Combined operated as wholly owned subsidiaries of BFI, the
statements of operations include amounts allocated by BFI to the
predecessors for selling, general and administrative expenses based
on certain allocation methodologies. As a result, the Company
believes its historical results of operations for the periods
presented are not directly comparable. The Company's acquisitions
of the Predecessors Combined from BFI in September 1997 were
accounted for using the purchase method of accounting, and the
purchase price was allocated to the fair value of the assets
acquired and liabilities assumed. Consequently, the amounts of
depreciation and amortization included in the statements of
operations for the periods presented reflect the changes in basis
of the underlying assets that were made as a result of the changes
in ownership that occurred during the periods presented. As a
result of the above, year to year comparisons are not meaningful
and therefore discussions of SG&A, depreciation and amortization
and interest expense have not been included.
Revenues. Total revenues increased $4.8 million, or 79.3%, to $10.9
million for the three months ended June 30, 1998 from $6.1 million
for the three months ended June 30, 1997. Revenues for the six
months ended June 30, 1998 increased $6.7 million, or 57.2%, to
$18.5 million from $11.8 million for the six months ended June 30,
1997. The increase was primarily attributable to the inclusion of
the acquisitions closed since the beginning of 1998 ($4.5 million)
and growth in the base business ($304,000).
Page 17 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
Cost of Operations. Total cost of operations increased $2.3
million, or 45.5%, to $7.4 million for the three months ended June
30, 1998 from $5.1 million for the three months ended June 30,
1997. Cost of operations for the six months ended June 30, 1998
increased $3.0 million, or 31.1%, to $12.8 million in 1998 from
$9.8 million for the six months ended June 30, 1997. The increase
was primarily attributable to acquisitions closed since the
beginning of 1998 and a decline in expenses in the core business as
a result of cost reduction measures.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had working capital of $882,000,
including cash and cash equivalents of $3.2 million. The Company's
strategy in managing its working capital is generally to apply the
cash generated from its operations that remains available after
satisfying its working capital and capital expenditure requirements
to reduce its indebtedness under its bank revolving credit facility
and to minimize its cash balances.
The Company has a $60 million revolving credit facility with a
syndicate of banks for which BankBoston, N.A. acts as agent, which
is secured by virtually all assets of the Company, including the
Company's interest in the equity securities of its subsidiaries.
The credit facility matures in 2001 and bears interest at a rate
per annum equal to, at the Company's discretion, either: (i) the
BankBoston Base Rate; or (ii) the Eurodollar Rate plus applicable
margin. The credit facility requires the Company to maintain
certain financial ratios and satisfy other predetermined
requirements, such as minimum net worth, net income and limits on
capital expenditures. It also requires the lenders' approval of
acquisitions in certain circumstances. As of June 30, 1998, an
aggregate of approximately $20.6 million was outstanding under the
Company's credit facility, and the interest rate on outstanding
borrowings under the credit facility was approximately 7.44%
Page 18 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
For the six months ended June 30, 1998, net cash provided by
operations was approximately $1.9 million and was primarily
provided by operating results for the period exclusive of non-cash
charges.
For the six months ended June 30, 1998, net cash used by investing
activities was $31.1 million. Of this, $30.3 million was used to
fund the cash portion of acquisitions. The remaining cash uses were
investments in MIS systems, trucks and containers.
For the six months ended June 30, 1998, net cash provided by
financing activities was $31.6 million, which was provided by net
borrowings under the Company's various debt arrangements and $23.5
million in proceeds from the sale of common stock in an initial
public offering.
Capital expenditures for 1998 are currently expected to be
approximately $5.6 million. On June 16, 1998, Madera completed a
$1.8 million bond financing for certain capital expenditures that
were contingent on the financing. These expenditures are expected
to be substantially completed in 1998. On June 11, 1998, the
Company won an additional contract to provide services to the city
of Vancouver, which will require approximately $1.2 million of
additional capital expenditures. These expenditures, coupled with
the capital expenditures required for the acquisitions completed
since the Company's initial public offering, have increased the
estimated capital expenditures for 1998 to approximately $5.6
million. The Company intends to fund its remaining planned 1998
capital expenditures principally through internally generated
funds, and borrowings under its existing credit facility. The
Company intends to fund its future acquisitions and capital
requirements through additional borrowings under its credit
facility and funds raised from sale of the Company's common stock.
Page 19 of 24
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WASTE CONNECTIONS, INC. AND PREDECESSORS
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is no current proceeding or litigation involving the Company
that the Company believes will have a material adverse impact on
the Company's business, financial condition, results of operations
or cash flows.
ITEM 2. CHANGES IN SECURITIES
Changes in Rights and Classes of Stock
As a result of the initial public offering all of the Company's
redeemable convertible preferred stock and redeemable common stock
were converted to common stock on a one for one basis.
Sales of Unregistered Securities
1. On May 5, 1998, the Company issued 13,636 shares of Common
Stock to the Shareholders of T&T Disposal at a price of $11.00 per
share in connection with the acquisition of the stock of that
company. Such shares were issued pursuant to Regulation D under
the securities act.
2. On May 8, 1998, the Company issued 27,273 shares of Common
Stock to the shareholders of Sunshine Sanitation and Sowers
Sanitation at a price of $11.00 in connection with the acquisition
of the stock of those companies. Such shares were issued pursuant
to Regulation D under the securities act.
3. On June 1, 1998, the Company issues 76,923 shares of Common
Stock to Contractors Waste Removal at a price of $13.00 in
connection with the acquisition of the solid waste business of that
company. Such shares were issued pursuant to Regulation D under
the securities act.
Page 20 of 24
<PAGE>
WASTE CONNECTIONS, INC. AND PREDECESSORS
4. On June 16, 1998, the Company issued 213,750 shares of Common
Stock to the shareholders of Arrow Sanitary Service at a price of
$14.24 per share in connection with the acquisition of the stock of
that company. Such shares were issued pursuant to Regulation D
under the securities act.
Use of Proceeds of Initial Public Offering
On May 22, 1998 the Company commenced the initial public offering
of its common stock pursuant to a Registration Statement on Form
S-1 (Commission file number 333-48029, declared effective May 21,
1998). The offering closed on May 28, 1998, resulting in the sale
of all of the 2,000,000 shares offered (all of which were sold by
the Company) at an offering price of $12.00 per share (constituting
aggregate gross proceeds of $24,000,000) for
the account of the Company, and on June 9, 1998 the underwriters
exercised in full their overallotment option to purchase an
additional 300,000 shares at $12.00 per share (constituting
additional aggregate gross proceeds of $3,600,000), all of which
were offered by the Company. The managing underwriters of the
offering were BT Alex Brown, Incorporated and CBIC Oppenheimer
Corp. The following expenses were incurred for the Company's
account in connection with the offering:
Gross Proceeds: $27,600,000
Less: Underwriting discounts 1,932,000
Legal 377,733
Accounting 799,376
Printing and other expenses 504,411
-----------
Total expenses 3,613,520
___________
Net offering proceeds $23,986,480
Between the effective date of the aforementioned registration
statement and June 30, 1998, the net offering proceeds to the
Company were used primarily to repay debt related to acquisitions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
Page 21 of 24
<PAGE>
WASTE CONNECTIONS, INC. AND PREDECESSORS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1* Revolving Credit Agreement, dated as of May 29, 1998,
between the Company and various banks represented by BankBoston,
N.A.
10.2* Loan Agreement dated as of June 1, 1998, between Madera
Disposal Systems, Inc. and the California Pollution Control
Financing Authority
27 Financial Data Schedule
__________________________________________________________________
*Incorporated by reference to the exhibits filed with the
Registrant's Registration Statement on form
S-4.Registration No. 333-59199
Page 22 of 24
<PAGE>
WASTE CONNECTIONS, INC. AND PREDECESSORS
(b) Reports on Form 8-K:
On July 1, 1998, the Company filed a Form 8-K describing its
acquisition on June 17, 1998, of the stock of Arrow Sanitary
Service, Inc., an Oregon corporation doing business as "Oregon
Paper Fiber" ("OPF"). OPF is engaged in the collection,
transportation and handling of solid waste and recyclables in Clark
County, Washington and Multnomah and Clackamas Counties, Oregon.
Certain financial statements of OPF and certain proforma financial
data were not then available and therefore were not included. The
Company filed an amended Form 8-KA on July 16, 1998, to include the
financial statements and proforma financial information. This 8-K
Report also disclosed that on June 25, 1998, WCI acquired the stock
of Curry Transfer and Recycling ("Curry") and Oregon Waste
Technology ("OWT") and certain real estate located in Curry County,
Oregon and used in those businesses. Curry and OWT are Oregon
Corporations engaged primarily in the collection and transportation
of solid waste and recyclables in Brookings, Goldbeach and Port
Orford, Oregon and the unincorporated areas of Curry and Lane
Counties, Oregon.
On June 22, 1998, the Company filed a Form 8-K describing its
acquisition of the stock of B&B Sanitation, Inc., Red Carpet
Landfill, Inc. and Darlin Equipment, Inc. (collectively, the
"Oklahoma Companies") on June 5, 1998. The three acquired
companies are Oklahoma corporations engaged, respectively, in solid
waste and recyclables collection and transportation, landfill
operations, and equipment leasing in Oklahoma.
On June 15, 1998, the Company filed a Form 8-K describing
acquisition by Waste Connections of Utah, Inc. ("WCI-Utah"), a
Delaware corporation wholly owned by the Company, of substantially
all of the business assets of Contractor's Waste Removal, L.C.
("CWR") from CWR on June 1, 1998. CWR is a Utah limited liability
company that was engaged in solid waste collection and
transportation in Orem, Utah. The assets acquired include trucks,
containers, equipment, contracts, governmental permits,
intellectual property and goodwill.
Page 23 of 24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
WASTE CONNECTIONS, INC.
BY: /s/ Ron J. Mittelstaedt Date: August 18, 1998
Ron J. Mittelstaedt, President and Chief Executive Officer
BY: /s/ Steven F. Bouck Date: August 18, 1998
Steven F. Bouck, Vice President and Chief Financial Officer
Page 24 of 24
WASTE CONNECTIONS, INC. AND PREDECESSORS
FORM 10-Q
INDEX TO EXHIBITS
10.1 Revolving Credit Agreement, dated as of May 29, 1998,
between the Company and various banks represented by
BankBoston, N.A. (incorporated by reference to the
exhibits filed with the Registrant's Registration
Statement on form S-4.Registration No. 333-59199)
10.2 Loan Agreement dated as of June 1, 1998,
between Madera Disposal Systems, Inc. and
the California Pollution Control Financing Authority
(incorporated by reference to the exhibits filed
with the Registrant's Registration Statement
on form S-4.Registration No. 333-59199)
27 Financial Data Schedule
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
This exhibit contains summary financial information extracted from
the June 30, 1998 Condensed Consolidated Balance Sheet and
Condensed Consolidated Statement of Operations for the six-month
period ended June 30, 1998, and is qualified in its entirety by
reference to such financial statements and the footnotes thereto.
ARTICLE 5
NAME Waste Connections, Inc.
MULTIPLIER 1,000
PERIOD-TYPE 6-MOS
FISCAL-YEAR-END DEC-31-1998
PERIOD-START DEC-31-1998
PERIOD-END JUN-30-1998
CASH 3,243
SECURITIES 0
RECEIVABLES 6,430
ALLOWANCES (96)
INVENTORY 0
CURRENT-ASSETS 10,323
PP&E 15,997
DEPRECIATION 1,402
TOTAL-ASSETS 79,448
CURRENT-LIABILITIES 9,441
BONDS 23,152
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 85
OTHER-SE 45,315
TOTAL-LIABILITY-AND-EQUITY 79,448
SALES 0
TOTAL-REVENUES 18,520
CGS 0
TOTAL-COSTS 12,830
OTHER-EXPENSES 3,700
LOSS-PROVISION 74
INTEREST-EXPENSE 731
INCOME-PRETAX 1,291
INCOME-TAX 717
INCOME-CONTINUING 573
DISCONTINUED 0
EXTRAORDINARY (815)
CHANGES 0
NET-INCOME (242)
EPS-BASIC (.31)
EPS-DILUTED (.31)
C:\DMS\5119\028\0300282.01
