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 SEPTEMBER 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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock:
As of November 12, 1998: 9,314,964 Shares of Common
Stock
INDEX TO FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets - December 31, 1997 and
September 30, 1998
Condensed Consolidated Statements of Operations for the three
and nine months ended
September 30, 1997 and 1998
Condensed Consolidated Statements of Cash Flows for the nine
months ended
September 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
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
September
30, 1998
ASSETS
Current assets:
Cash
$820
$1,090
Accounts receivable, less
allowance for doubtful
accounts of $19 at December
31, 1997 and
$390 at September 30, 1998
3,940
9,046
Prepaid expenses and other
current assets
358
773
Total current assets
5,118
10,909
Property and equipment, net
4,185
18,438
Goodwill, net
9,408
81,294
Other assets
169
3,854
$18,880
$114,495
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable
$2,609
$6,123
Deferred revenue
597
1,501
Accrued liabilities
825
3,165
Current portion of notes payable
- -
1,256
Other current liabilities
251
346
Total current
liabilities
4,282
12,391
Long-term debt and notes payable, net
6,762
40,404
Other long term liabilities
702
1,499
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 September 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, 9,204,632
shares issued and outstanding at
September 30, 1998
23
92
Additional paid-in capital
5,105
65,944
Stockholder notes receivable
(82)
- -
Deferred stock compensation
- -
(499)
Accumulated deficit
(5,597)
(5,715)
Total stockholders' equity
(deficit)
(551)
59,822
$18,880
$114,495
See accompanying notes.
Waste Connections, Inc. and Predecessors
Condensed Consolidated Statements of Operations
Three and Nine months ended September 30, 1998 and 1997
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
1997
1998
1997
1998
Revenues
$6,330
$16,828
$18,114
$35,336
Operating Expenses:
Cost of operations
4,969
11,192
14,753
24,007
Selling, general and
administrative
1,704
1,649
3,009
3,518
Depreciation and
amortization
338
1,335
1,083
2,693
Stock compensation
- -
121
- -
561
Income (loss) from
operations
(681)
2,531
(731)
4,557
Interest expense
(152)
(696)
(456)
(1,427)
Other income, net
10
- -
14
- -
Income (loss) before income
tax provision
(823)
1,835
(1,173)
3,130
Income tax provision
- -
(793)
- -
(1,513)
Income (loss) before
extraordinary item
(823)
1,042
(1,173)
1,617
Extraordinary item-early
extinguishment of debt,
net of tax benefit of
$165
- -
-
- -
(815)
Net income (loss)
(823)
1,042
(1,173)
802
Redeemable convertible
preferred stock accretion
- -
- -
- -
(917)
Net income (loss) applicable
to common
stockholders
$(823)
$1,042
$(1,173)
$(115)
Basic earnings per common
share:
Income before extraordinary
item
$0.12
$ 0.13
Extraordinary item
- -
(0.15)
Net income (loss) per common
share
$0.12
$(0.02)
Diluted earnings per common
share:
Income before extraordinary
item
$0.10
$0.09
Extraordinary item
- -
(0.11)
Net income (loss) per common
share
$0.10
$(0.02)
Shares used in the per share
calculations:
Basic
8,898,21
6
5,476,53
2
Diluted
10,806,1
58
7,438,65
8
See accompanying notes.
Waste Connections, Inc. and Predecessors
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997
(in thousands)
(Unaudited)
Nine Months Ended
September 30
1997
1998
Cash flows from operating activities:
Net income (loss)
$(1,173)
$802
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
gain on sale of assets
(4)
Depreciation and amortization
1,083
2,693
Amortization of debt issuance costs, debt
guarantee fees and
accretion of discount on long term debt
- -
176
Stock compensation
- -
561
Extraordinary item - early extinguishment of
debt
- -
981
Changes in operating assets and liabilities,
net of effects from acquisitions:
- -
Accounts receivable, net
(604)
(989)
Prepaid expenses and other current
assets
(74)
(249)
Accounts payable
(221)
493
Deferred revenue
(137)
326
Accrued liabilities
(450)
(178)
Other liabilities
-
(241)
Net cash provided by (used in) operating
activities
(1,580)
4,375
Cash flows from investing activities:
Proceeds from sale of property and
equipment
188
58
Payments for acquisitions, net of cash
acquired
- -
(44,185)
Capital expenditures for property and
equipment
(735)
(2,068)
Proceeds from stockholder notes
receivable
82
Decrease in other assets
22
- -
Net cash used in investing activities
(525)
(46,113)
Cash flows from financing activities:
Net intercompany balance
2,142
- -
Proceeds from borrowings
- -
57,703
Principal payments on notes payable
- -
(407)
Principal payments on long term debt
(38)
(38,653)
Proceeds from sale of common stock
- -
24,126
Payment of preferred stock dividend
- -
(161)
Debt issuance costs
- -
(600)
Net cash provided by financing activities
2,104
42,008
Net (decrease) increase in cash
(1)
270
Cash at beginning of period
102
820
Cash at end of period
$101
$1,090
See accompanying notes.
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 nine-month periods ended September 30, 1998 and
to its predecessors combined for the three and nine-month periods
ended September 30, 1997. The consolidated financial statements
of the Company include the accounts of Waste Connections, Inc.
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 nine month periods ended
September 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 September 30,
1998, the consolidated statements of operations for the three and
nine months ended September 30, 1998 and 1997, and the
consolidated statements of cash flows for the nine months ended
September 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 and unaudited
consolidated financial statements as part of the Company's
registration statement filed on Form S-4 on November 9, 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 nine months ended September 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 landfill's
permitted capacity. Units-of-production amortization rates are
determined annually for the Company's operating landfills. 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.
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 Fairmead 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 Major County,
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 6.8% as of September 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 Financing
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 for $1.8 million
issued by BankBoston N.A. under the Credit Facility. 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.
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. ACQUISITIONS
For the nine months ended September 30, 1998, the Company acquired
29 solid waste collection businesses that were accounted
for using the purchase method of accounting. The aggregate
consideration for these acquisitions was approximately $ 70.7
million consisting of $ 45.5 million in cash and seller notes and
$25.2 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 pro forma information shows the results of the
Company's operations as though its significant acquisitions
(Madera Disposal Systems, Inc., Arrow Sanitary Service, Inc. and
Shrader Refuse and Recycling Service Company) and a majority of
its individually insignificant acquisitions had occurred as of
January 1, 1997 (in thousands, except share and per share data):
Nine Months Ended
September
30, 1997
September
30, 1998
Revenue
$33,826
$46,257
Net income before extraordinary item
53
1,461
Net income
53
646
Pro forma basic income per share of
common stock
$.10
Pro forma diluted income per share
of common stock
$.08
Basic common shares outstanding
6,753,845
Dilutive common shares outstanding
8,158,681
The pro forma 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 pro forma 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:
Three months
ended
September 30,
1998
Nine months
ended
September
30, 1998
Numerator:
Income before extraordinary
item
$1,042,000
$1,617,000
Redeemable convertible
preferred stock
accretion
- -
(917,000)
Income applicable to common
stockholders
before extraordinary
item
1,042,000
700,000
Extraordinary item
- -
(815,000)
Net income (loss) applicable
to common stockholders
$1,042,000
$(115,000)
Denominator:
Denominator for basic
earnings per
common share-weighted
average
8,898,216
5,476,532
Conversion of Madera's
redeemable
common stock
Dilutive effect of redeemable
stock, stock options and
warrants
- -
1,907,942
377,290
1,584,836
Denominator for diluted
earnings per common share-
adjusted weighted average
shares and assumed
conversions
10,806,158
7,438,658
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the nine months ended September 30, 1998, outstanding options to
purchase 130,750 shares of common stock (with exercise prices ranging
from $15.19 to $22.13) and outstanding warrants to purchase 49,622
shares of common stock (with exercise prices ranging from $15.19
to $22.13) 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.
5. Subsequent Events
On October 15, 1998, the Company acquired the stock of R&N, LLC,
which provides solid waste collection and transportation services
to approximately 4,450 customers in southwestern Idaho.
On October 22, 1998, the Company entered into a merger agreement
with Murrey's Disposal Company, Inc., American Disposal Company,
Inc., D.M. Disposal Co., Inc., and Tacoma Recycling Company, Inc.
(together, the "Murrey Companies") under which the Murrey
Companies would become wholly owned subsidiaries of the Company.
The Murrey Companies, with approximately $35 million in annual
revenue, provide solid waste services to more than 65,000
customers in the Seattle-Tacoma, Washington area. The merger is
subject to several conditions, including the approval of the
Company's stockholders. If these conditions are satisfied, the
Company expects to consummate the merger in December 1998.
On October 30, 1998, the Company entered into an agreement to
purchase the stock of Columbia Sanitary Services, Inc., and
Moreland Sanitary Service, Inc., which provide solid waste
collection services to approximately 4,000 customers in Portland,
Oregon and surrounding areas. The acquisition is contingent on
satisfaction of several conditions. If these conditions are
satisfied, the Company expects the acquisition to be consummated
before the end of 1998.
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 (the "Securities Act") 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 September 30, 1998, the Company served more
than 200,000 commercial, industrial and residential customers in
Washington, Oregon, Nebraska, California, Idaho, Wyoming, Utah,
Oklahoma and South Dakota. The Company currently owns twenty-
three collection operations and operates or owns ten transfer
stations, two Subtitle D landfills and three recycling
facilities.
The Company generally intends to pursue an acquisition-based
growth strategy and, as of September 30, 1998 had acquired 31
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.
WASTE CONNECTIONS, INC. AND PREDECESSORS
Revenues. Total revenues increased $10.5 million, or 165.8%, to
$16.8 million for the three months ended September 30, 1998 from
$6.3 million for the three months ended September 30, 1997.
Revenues for the nine months ended September 30, 1998 increased
$17.2 million, or 95.1%, to $35.3 million from $18.1 million for
the nine months ended September 30, 1997. The increase was
primarily attributable to the inclusion of the acquisitions
closed since the beginning of 1998 ($9.6 million) and growth in
the base business ($907,000).
Cost of Operations. Total cost of operations increased $6.2
million, or 125.2%, to $11.2 million for the three months ended
September 30, 1998 from $5.0 million for the three months ended
September 30, 1997. Cost of operations for the nine months ended
September 30, 1998 increased $9.3 million, or 62.7%, to $24.0
million in 1998 from $14.8 million for the nine months ended
September 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 September 30, 1998, the Company had a working capital
deficit of $1.5 million, including cash and cash equivalents of
$1.0 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 September 30, 1998, an aggregate of
approximately $37.6 million was outstanding under the Company's
credit facility, and the interest rate on outstanding borrowings
under the credit facility was approximately 6.8%
For the nine months ended September 30, 1998, net cash provided
by operations was approximately $4.4 million of which $3.5
million was provided by operating results for the period
exclusive of non-cash charges and $839,000 was provided by a
decrease in working capital (net of acquisitions) for the period.
For the nine months ended September 30, 1998, net cash used by
investing activities was $46.1 million. Of this, $44.2 million
was used to fund the cash portion of acquisitions. The remaining
cash uses were investments in management information systems,
trucks and containers.
For the nine months ended September 30, 1998, net cash provided
by financing activities was $42.0 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 $1.6 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.
YEAR 2000 ISSUES
The Company will need to modify or replace portions of its software so
that its computer systems will function properly with respect to dates
in the year 2000 and afterwards. The Company expects to complete those
modifications and upgrades during 1999, at a total cost of approximately
$100,000. The Company has spent part of its Year 2000 budget on replacing
its billing systems in Maltby and Vancouver, Washington. Because its
operations rely primarily on mechanical systems such as trucks to collect
solid waste, the Company does not expect its operations to be significantly
affected by Year 2000 issues. The Company's customers may need to make Year
2000 modifications to software and hardware that they use to generate
records, bills and payments relating to the Company. The Company does
not rely on vendors on a routine basis except for providers of disposal
services. The Company brings waste to a site and is normally billed
based on tonnage received. The Company believes that if its disposal
vendors encounter Year 2000 problems, they will convert to manual billing
based on scale recordings until they resolve those issues.
In assessing the Company's exposure to Year 2000 issues, management
believes its biggest challenges lie in the following areas: Year
2000 issues at the Company's banks, large (typically municipal)
customers, and acquired businesses between the time the Company
acquires them and the time it implements its own systems. The
Company is obtaining Year 2000 compliance certifications from its
vendors, banks and customers. If the Company and its vendors, banks
and customers do not complete the required Year 2000 modifications
on time, the Year 2000 issue could materially affect its operations.
The Company believes, however, that in the most reasonably likely
worst case, the effects of Year 2000 issues on its operations would
be brief and small relative to its overall operations. The Company
has not made a contingency plan to minimize operational problems if it
and its vendors, banks and customers do not timely complete all required
Year 2000 modifications.
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
Upon the initial public offering of the Company's common stock,
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
On July 31, 1998, the Company issued 146,608 shares of Common
Stock to the shareholders of Shrader Refuse and Recycling Service
Company ("Shrader") at a price of $20.4625 per share in
connection with the merger of a wholly owned subsidiary of the
Company into Shrader. Such shares were issued pursuant to
Regulation D under the Securities Act.
On August 3, 1998, the Company issued 51,746 shares of Common
Stock to the shareholders of J&J Sanitation, Inc., and Big Red
Roll Off, Inc., at a price of $19.325 per share, in connection
with the Company's acquisition of the stock of those companies.
Such shares were issued pursuant to Regulation D under the
Securities Act.
On August 21, 1998, the Company issued 6,974 shares of Common
Stock to the shareholders of Contractor's Waste, Inc., at a price
of $22.225 per share, in connection with the Company's
acquisition of certain assets of that company. Such shares were
issued pursuant to Regulation D under the Securities Act.
On September 9, 1998, the Company issued 6,510 shares of Common
Stock to the shareholders of Youngclaus Enterprises at a price of
$21.35 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.
WASTE CONNECTIONS, INC. AND PREDECESSORS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(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. The 8-K Report filed on July 1, 1998, 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 August 11, 1998, the Company filed a Form 8-K describing the
merger of a wholly owned subsidiary of the Company on July 31,
1998, into Shrader Refuse and Recycling Service Company, a
Nebraska corporation ("Shrader"), and Shrader's acquisition of
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. Certain financial statements of
Shrader and certain proforma financial data were not then
available and therefore were not included. The Company filed an
amended Form 8-KA on September 11, 1998, to include the financial
statements and proforma financial information.
WASTE CONNECTIONS, INC. AND PREDECESSORS
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 to be signed on its behalf by the undersigned thereto duly authorized.
WASTE CONNECTIONS, INC.
BY: /s/ Ronald J. Mittelstaedt Date: January 13, 1999
Ronald J. Mittelstaedt,
President and Chief Executive Officer
BY: /s/ Steven F. Bouck Date: January 13, 1999
Steven F. Bouck,
Vice President and Chief Financial Officer
WASTE CONNECTIONS, INC. AND PREDECESSORS
FORM 10-Q
INDEX TO EXHIBITS
27 Financial Data Schedule
EXHIBIT 27
FINANCIAL DATA SCHEDULE
This exhibit contains summary financial information extracted
from the September 30, 1998 Condensed Consolidated Balance Sheet
and Condensed Consolidated Statement of Operations for the nine-
month period ended September 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 1000
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END DEC-31-1998
PERIOD-START DEC-31-1998
PERIOD-END SEP-30-1998
CASH 1,090
SECURITIES 0
RECEIVABLES 9,046
ALLOWANCES 390
INVENTORY 0
CURRENT-ASSETS 10,909
PP&E 20,622
DEPRECIATION 2,184
TOTAL-ASSETS 114,495
CURRENT-LIABILITIES 12,391
BONDS 40,404
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 92
OTHER-SE 59,822
TOTAL-LIABILITY-AND-EQUITY 114,495
SALES 0
TOTAL-REVENUES 35,336
CGS 0
TOTAL-COSTS 24,007
OTHER-EXPENSES 6,772
LOSS-PROVISION 0
INTEREST-EXPENSE 1,427
INCOME-PRETAX 3,130
INCOME-TAX 1,513
INCOME-CONTINUING 1,617
DISCONTINUED 0
EXTRAORDINARY (815)
CHANGES 0
NET-INCOME 802
EPS-BASIC (.02)
EPS-DILUTED (.02)
17
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