<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO
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> 2
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> 3
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
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
============= =============
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, 1998 7,523 --
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
============= =============
</TABLE>
See accompanying notes.
2
<PAGE> 4
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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- -----------------------------------
JUNE 30, JUNE 30,
----------------------------------- -----------------------------------
1997 1998 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
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 1,358
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)
============= ============= ============= =============
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
</TABLE>
See accompanying notes.
3
<PAGE> 5
WASTE CONNECTIONS, INC. AND PREDECESSORS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998, AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
1997 1998
------------- -------------
<S> <C> <C>
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 -- 981
acquisitions:
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)
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
============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 6
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').
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.
5
<PAGE> 7
WASTE CONNECTIONS, INC. AND PREDECESSORS
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.
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 incurrence 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.
6
<PAGE> 8
WASTE CONNECTIONS, INC. AND PREDECESSORS
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):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
<S> <C> <C>
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
</TABLE>
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.
4. Earnings Per Share Calculation
The following table sets forth the numerator and denominator used in the
computation of earnings per common share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1998
------------------ ------------------
<S> <C> <C>
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
================== ==================
</TABLE>
7
<PAGE> 9
WASTE CONNECTIONS, INC. AND PREDECESSORS
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 antidilutive 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.
5. 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.
8
<PAGE> 10
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.
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.
9
<PAGE> 11
WASTE CONNECTIONS, INC. AND PREDECESSORS
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).
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%
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.
10
<PAGE> 12
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.
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.
11
<PAGE> 13
WASTE CONNECTIONS, INC. AND PREDECESSORS
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:
<TABLE>
<S> <C>
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
-----------
Use of Proceeds of Initial Public Offering
Net offering proceeds $23,986,480
===========
</TABLE>
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
12
<PAGE> 14
WASTE CONNECTIONS, INC. AND PREDECESSORS
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
(b) Reports on Form 8-K:
On July 1, 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.
- --------------
* Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on form S-4. Registration No. 333-59199
13
<PAGE> 15
WASTE CONNECTIONS, INC. AND PREDECESSORS
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.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to its report on Form 10-Q to be
signed on its behalf by the undersigned thereto duly authorized.
WASTE CONNECTIONS, INC.
/s/ RON J. MITTELSTAEDT
BY:___________________________ Date: August 31, 1998
Ron J. Mittelstaedt, President and Chief Executive Officer
/s/ STEVEN F. BOUCK
BY:___________________________ Date: August 31, 1998
Steven F. Bouck, Vice President and Chief Financial Officer
14
<PAGE> 16
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
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<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
0
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-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
