<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1999
WASTE CONNECTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674
(Commission File Number)
94-3283464
(IRS Employer Identification No.)
2260 Douglas Boulevard, Suite 280, Roseville, California 95661
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (916) 772-2221
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
On April 12, 1999, Waste Connections, Inc., a Delaware corporation
("WCI"), filed a Form 8-K describing the acquisition on March 31, 1999, of all
of the outstanding capital stock of each of Management Environmental National,
Inc., a Washington corporation ("MENI"), and RH Financial Corporation, a
Washington corporation ("RHFC"). MENI and RHFC are the sole partners of two
limited partnerships, Columbia Resource Co., L.P. and Finley-Buttes Limited
Partnership. Certain financial statements of Columbia Resource Co., L.P. and
Finley-Buttes Limited Partnership and certain pro forma financial data of WCI
were not then available and therefore were not included in the April 12, 1999
Form 8-K filing. WCI hereby amends its Form 8-K filed on April 12,1999, to
include the financial statements and pro forma financial information set forth
below in Item 7.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired.
Columbia Resource Co., L.P. and Finley-Buttes Limited Partnership
Independent Auditors' Report
Combined Balance Sheets as of December 31, 1997 and 1998
Combined Statements of Income for each of the three years in the period
ended December 31, 1998
Combined Statements of Partners Capital and Comprehensive Income for
each of the three years in the period ended December 31, 1998
Combined Statements of Cash Flows for each of the three years in the
period ended December 31, 1998
Notes to Financial Statements
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Partners
Columbia Resource Co., L.P. and
Finley-Buttes Limited Partnership
Vancouver, Washington
We have audited the accompanying combined balance sheets of Columbia
Resource Co., L.P. and Finley-Buttes Limited Partnership as of December 31, 1997
and 1998, and the related combined statements of income, partners' capital and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Partnerships' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Columbia Resource
Co., L.P. and Finley-Buttes Limited Partnership at December 31, 1997 and 1998,
and the combined results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
PERKINS & COMPANY, P.C.
Portland, Oregon
March 9, 1999, except
for the second paragraph
of Note 12, as to which the
date is March 31, 1999
<PAGE> 4
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,579 $ 2,048
Investments in marketable securities...................... -- 5,640
Accounts receivable:
Trade, less allowance for doubtful accounts of $64 in
1998.................................................. 2,343 2,330
Related parties........................................ 39 137
Prepaid expenses.......................................... 225 300
Other assets.............................................. -- 668
------- -------
Total current assets.............................. 4,186 11,123
Property and equipment, net................................. 21,177 19,820
Investment in marketable securities......................... 3,900 --
Other assets................................................ 2,688 2,389
------- -------
$31,951 $33,332
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable:
Trade.................................................. $ 678 $ 821
Related parties........................................ 315 334
Accrued expenses.......................................... 403 536
Other liability........................................... -- 668
Current portion of long-term debt......................... 2,039 1,779
------- -------
Total current liabilities......................... 3,435 4,138
Long-term debt.............................................. 18,908 16,298
Other liability............................................. 533 --
Commitments and contingencies (Notes 4, 6 and 9)
Partners' capital:
Accumulated other comprehensive income.................... -- 740
Other partners' capital................................... 9,075 12,156
------- -------
9,075 12,896
------- -------
$31,951 $33,332
======= =======
</TABLE>
See accompanying notes.
<PAGE> 5
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $21,492 $22,940 $22,511
Operating expenses:
Cost of operations........................................ 10,986 11,975 10,675
Selling, general and administrative....................... 2,876 3,145 2,956
Depreciation and amortization............................. 2,745 2,846 2,729
------- ------- -------
Income from operations...................................... 4,885 4,974 6,151
Other income (expense):
Interest expense, net..................................... (1,675) (1,519) (1,258)
Other income, net......................................... 16 19 29
Gain on disposal of subsidiary............................ -- 2,544 --
------- ------- -------
(1,659) 1,044 (1,229)
------- ------- -------
Net income.................................................. $ 3,226 $ 6,018 $ 4,922
======= ======= =======
Pro forma income taxes (unaudited -- Note 11)............... $(1,255) $(1,935) $(1,785)
------- ------- -------
Pro forma net income (unaudited -- Note 11)................. $ 1,971 $ 4,083 $ 3,137
======= ======= =======
</TABLE>
See accompanying notes.
<PAGE> 6
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP
COMBINED STATEMENTS OF PARTNERS' CAPITAL AND COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER OTHER TOTAL
COMPREHENSIVE COMPREHENSIVE PARTNERS' PARTNERS'
INCOME INCOME CAPITAL CAPITAL
------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Balances at December 31, 1995............... $ -- $ 3,045 $ 3,045
Net income.................................. $3,226 -- 3,226 3,226
======
Capital contributions....................... -- 475 475
Distributions............................... -- (2,080) (2,080)
---- ------- -------
Balances at December 31, 1996............... -- 4,666 4,666
Net income.................................. $6,018 -- 6,018 6,018
======
Distributions............................... -- (1,609) (1,609)
---- ------- -------
Balances at December 31, 1997............... -- 9,075 9,075
Comprehensive income:
Net income................................ $4,922 -- 4,922 4,922
Other comprehensive income:
Unrealized gains on marketable
securities............................. 740 740 -- 740
------
$5,662
======
Distributions............................... -- (1,841) (1,841)
---- ------- -------
Balances at December 31, 1998............... $740 $12,156 $12,896
==== ======= =======
</TABLE>
See accompanying notes.
<PAGE> 7
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 3,226 $ 6,018 $ 4,922
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on disposal of subsidiary......................... -- (2,544) --
Depreciation and amortization.......................... 2,745 2,846 2,729
Loss on disposition of property and equipment.......... 2 1 1
Changes in operating assets and liabilities:
Accounts receivable.................................. 3,641 (184) (85)
Prepaid expenses..................................... (65) (7) (73)
Inventories.......................................... 13 (37) --
Accounts payable..................................... (224) (318) 163
Accrued expenses..................................... (740) (3) 133
Other liability...................................... 106 117 134
------- ------- -------
Net cash provided by operating activities................. 8,704 5,890 7,924
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in commercial paper............................ -- -- (1,000)
Proceeds from (investment in) municipal bonds............. (1,200) 1,200 --
Purchases of property and equipment....................... (848) (1,330) (227)
Investment in cell development............................ (855) (1,590) (1,069)
Investment in other assets................................ (353) (393) (448)
------- ------- -------
Net cash used in investing activities..................... (3,256) (2,113) (2,744)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on short-term borrowings..................... (1,000) -- --
Proceeds from long-term debt.............................. 1,000 -- --
Principal payments on long-term debt...................... (3,142) (1,989) (2,870)
Capital contributions..................................... 400 -- --
Distributions paid to partners............................ (2,080) (1,609) (1,841)
------- ------- -------
Net cash used in financing activities..................... (4,822) (3,598) (4,711)
------- ------- -------
Net increase in cash and cash equivalents................. 626 179 469
Cash and cash equivalents, beginning of period.............. 774 1,400 1,579
------- ------- -------
Cash and cash equivalents, end of period.................... $ 1,400 $ 1,579 $ 2,048
======= ======= =======
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION AND
NON-CASH TRANSACTIONS:
Cash paid for interest................................. $ 1,872 $ 1,657 $ 1,501
Advance due to partner contributed to Columbia......... $ 75 $ -- $ --
Marketable securities received for sale of
subsidiary........................................... $ -- $ 3,900 $ --
</TABLE>
See accompanying notes.
<PAGE> 8
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Columbia Resource Co., L.P. (Columbia) is a Washington limited partnership
which was formed in December 1989. On January 1, 1992, Columbia began
significant operations. Columbia has a long-term contract with a county in
Washington (the County) to receive and dispose of all municipal waste generated
within its geographical boundaries. Columbia's headquarters are located in
Vancouver, Washington.
Finley-Buttes Limited Partnership (Finley) is an Oregon limited partnership
which was formed in December 1989. On November 1, 1990, Finley began significant
operations. Finley has a long-term contract with a governmental subdivision of
Oregon to operate a regional landfill for solid waste. A substantial portion of
Finley's operations involves providing landfill services to Columbia.
The general partner of both partnerships is Management Environmental
National of Washington, Inc. (MENWI). The limited partner of both partnerships
is RH Financial Corporation (RHFC). Both partners are Washington corporations
and are owned by the same individual. MENWI and RHFC have no operations or
activity other than those of Columbia and Finley, as reflected in the
accompanying financial statements.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Columbia and
Finley (the Partnerships) as a result of their common ownership and management.
Significant intercompany balances and transactions have been eliminated in
combination. For periods prior to the sale of Columbia's subsidiary on December
31, 1997, the combined financial statements also include the accounts of
Wastech, Inc. (Note 10).
CASH AND CASH EQUIVALENTS
The Partnerships consider all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
The Partnerships grant credit to customers with a large portion of revenue
generated from business with large regional and national commercial waste
hauling companies. The Partnership maintains allowances for losses based on the
expected collectibility of accounts receivable. Credit losses have been within
management's expectations.
The Partnerships limit their credit exposure for cash and cash equivalents
by investing in what they believe to be only high quality investments.
The Partnerships maintain cash in bank deposit accounts which may exceed
federally insured limits. The Partnerships have not experienced any losses in
such accounts.
INVESTMENT IN COMMERCIAL PAPER
Investments in commercial paper of $1,000 at December 31, 1998 maturing on
February 17, 1999 are considered available for sale and are recorded at cost
which approximates fair value.
<PAGE> 9
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
INVESTMENT IN EQUITY SECURITIES
Equity securities (Note 10) are accounted for at fair value. Unrealized
holding gains and losses on securities classified as available for sale are
excluded from earnings and reported as a separate component of other
comprehensive income until realized. Realized gains and losses are determined on
the basis of historical cost.
The fair value of such securities was $3,900 and $4,640 at December 31,
1997 and 1998, respectively. Unrealized holding gains, added to other
comprehensive income during 1998 were $740. There have been no realized gains or
losses on these securities.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
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, construction of landfill improvements, cell
development costs and direct costs of personnel dedicated for these purposes.
Certain landfill costs related to the entire landfill are depreciated on
the straight-line method over the estimated useful life of the landfill.
Landfill preparation costs related specifically to cell development are
depreciated as airspace of the related cell is consumed. Finley estimates the
rate used to depreciate cell development costs by estimating costs in developing
cells which have been designed and the additional airspace which will be gained
upon completion of development. These estimates are updated on an annual basis.
Depreciation of other property and equipment is provided on the
straight-line method based upon the estimated useful lives of the assets. The
estimated useful lives are as follows:
<TABLE>
<S> <C>
Land improvements........................................... 15 - 20 years
Landfill, excluding cell development costs.................. 50 years
Buildings................................................... 20 - 31 years
Machinery and equipment..................................... 3 - 15 years
Furniture and fixtures...................................... 3 - 7 years
</TABLE>
DEFERRED COSTS
The Partnerships use the straight-line method for amortization of deferred
costs. Bid costs are amortized over 20 years, the life of the related contract.
Loan fees are amortized over the lives of the related loans. Bond issuance costs
are amortized over 15 years, the term of the related bond.
INCOME TAXES
Columbia and Finley are not taxpaying entities for federal or state income
tax purposes. Activity from the partnerships is taxable to each partner and is
reportable in the partners' tax returns.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Partnerships adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"),
which establishes new rules for the reporting
<PAGE> 10
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
and display of comprehensive income and its components; however, the adoption
had no impact on the Partnership's net income or partners' capital. SFAS 130
requires unrealized gains or losses on the Partnership's available for sale
securities, which prior to adoption would have been reported separately in
partners' capital, to be included in other comprehensive income. There was no
effect on prior year financial statements to conform to the requirements of SFAS
130.
ENVIRONMENTAL RISKS -- The Partnerships are subject to liability for any
environmental damage that the solid waste facilities they operate may cause to
neighboring landowners, particularly as a result of the contamination of
drinking water sources or soil. Any substantial liability for environmental
damage incurred by the Partnerships could have a material adverse effect on the
Partnership's financial condition, results of operations or cash flows.
LEGAL PROCEEDINGS -- In the normal course of its business and as a result
of the extensive governmental regulation of the solid waste industry, the
Partnerships may periodically become subject to various judicial and
administrative proceedings involving federal, state or local agencies. In these
proceedings, an agency may seek to impose fines or to revoke or deny renewal of
an operating permit held by the Partnerships. From time to time the Partnerships
may also become parties to various claims or suits for alleged damages to
persons and property, alleged violations of certain laws and alleged liabilities
arising out of matters occurring during the normal course of operating a waste
management business. However, as of December 31, 1998, there are no current
proceedings or litigation involving the Partnerships that they believe will have
a material adverse impact on the Partnerships' business, financial condition,
results of operations or cash flows.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Land and land improvements.................................. $ 6,137 $ 6,137
Landfill, including cell development costs.................. 15,330 16,399
Buildings................................................... 7,193 7,231
Machinery and equipment..................................... 6,622 6,793
Furniture and fixtures...................................... 303 249
-------- --------
35,585 36,809
Less accumulated depreciation............................... (14,408) (16,989)
-------- --------
$ 21,177 $ 19,820
======== ========
</TABLE>
<PAGE> 11
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
3. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Pollution liability self-insurance fund (Note 9)............ $1,778 $2,226
Deferred bid costs, net of accumulated amortization of $234
in 1997 and $273 in 1998.................................. 546 507
Deferred bond issuance costs, net of accumulated
amortization of $227 in 1997 and $265 in 1998............. 340 302
Other....................................................... 24 22
------ ------
2,688 3,057
Less current portion (Note 9)............................... -- (668)
------ ------
$2,688 $2,389
====== ======
</TABLE>
The pollution liability self-insurance fund is invested primarily in
short-term government bonds which are being held to maturity and recorded at
amortized cost which approximates fair value.
4. LINE OF CREDIT
Columbia has available a revolving line of credit of $1,000 with U.S. Bank
(the bank) which is subject to periodic review. Interest on the revolving line
of credit is payable monthly at the bank's prime rate plus a margin based on the
combined net worth of the Partnerships (7.75% at December 31, 1998). The
outstanding principal balance of this note is required to be paid in full for 30
consecutive days each year. This credit agreement also provides for a term loan
to Finley, which is supported by the same collateral base (Note 5).
Amounts due the bank are collateralized by essentially all assets of the
Partnerships. Also, the agreement contains provisions, among others, requiring
the maintenance of certain levels of net worth and operating income and limits
the amount of capital expenditures. As of December 31, 1998, the Partnerships
were in compliance with the covenants.
The note payable due to a related party totaling $5,575 at December 31,
1998 is subordinated to the bank to secure the Partnerships' obligations to the
bank (Note 5).
<PAGE> 12
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Industrial revenue bonds, collateralized by essentially all
assets of the Partnerships and by an irrevocable letter of
credit totaling $13,599 at December 31, 1998, interest at
6% to 7.5% paid semi-annually, principal payments due
periodically through 2006................................. $10,450 $ 9,565
Note payable to a related party, collateralized by
essentially all assets of the Partnerships, interest
payable monthly at 6.18% through January 2003, monthly
payments of $66 including interest from January 2003
through May 2012 (Notes 4 and 12)......................... 5,575 5,575
Note payable to bank, collateralized by essentially all
assets of the Partnerships, payable in monthly
installments of $70, plus interest at the prime rate plus
a margin based on debt to worth ratio (7.75% at December
31, 1998), through June 2002 (Notes 4 and 12)............. 3,776 2,937
Other notes payable......................................... 1,146 --
------- -------
20,947 18,077
Less current portion........................................ (2,039) (1,779)
------- -------
$18,908 $16,298
======= =======
</TABLE>
At December 31, 1998, annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
INDUSTRIAL NOTE PAYABLE
REVENUE TO A RELATED OTHER NOTES
BONDS PARTY PAYABLE TOTAL
---------- ------------ ----------- -------
<S> <C> <C> <C> <C>
Year ending December 31,
1999................................................. $ 940 $ -- $ 839 $ 1,779
2000................................................. 1,000 -- 839 1,839
2001................................................. 1,065 -- 839 1,904
2002................................................. 1,135 -- 420 1,555
2003................................................. 1,215 418 -- 1,633
Thereafter........................................... 4,210 5,157 -- 9,367
------ ------ ------ -------
$9,565 $5,575 $2,937 $18,077
====== ====== ====== =======
</TABLE>
The industrial revenue bond agreement requires Columbia to maintain a
certain level of partnership capital and restricts distributions from Columbia.
The note payable of $5,575 contains provisions, among others, requiring the
maintenance of certain levels of net worth and operating income and limits the
amount of capital expenditures.
As of December 31, 1998 the Partnerships were in compliance with the
covenants.
6. RELATED PARTY TRANSACTIONS
The following is a summary of significant related party transactions:
- Disposal fees and freight charges paid to a related entity totaled $3,118
in 1996, $2,979 in 1997 and $3,234 in 1998.
<PAGE> 13
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
- Interest paid to related parties totaled $366 in 1996, $349 in 1997 and
$344 in 1998.
- Revenues for landfill and disposal services provided to affiliated
companies totaled $635 in 1996 and $12 in 1997.
A substantial amount of the accounts payable due to related parties
represents balances due for regular disposal fees and freight charges.
7. MAJOR CUSTOMERS
In 1996, one customer represented approximately 22% and two customers
represented approximately 17% each of the revenue of the Partnerships.
In 1997, two customers represented approximately 20% each and Waste
Connections, Inc. (WCI) represented approximately 10% of the revenue of the
Partnerships.
In 1998, WCI represented approximately 29% and Waste Management, Inc.
represented 19% of the revenues of the Partnerships.
8. RETIREMENT PLAN
The Partnerships sponsor a 401(k) retirement plan. Substantially all
employees are covered under the plan. Contributions are made to the plan at the
discretion of management and totaled approximately $62 in 1996, $66 in 1997 and
$69 in 1998. Included in the contributions were approximately $4 in 1996 and $3
in 1997 for Wastech, Inc., a former subsidiary (Note 10).
9. COMMITMENTS AND CONTINGENCIES
A pollution liability self-insurance fund was created pursuant to the
requirements of the contract with the County. Monthly deposits are made to the
fund by Columbia based on tonnage of waste received under the contract. Amounts
held in the fund are to be used for potential pollution claims made against
Columbia in its performance of the terms of the contract.
Columbia's contract with the County was amended effective January 1, 1999,
resulting in changes in tipping fees, administrative fees and the pollution
liability self-insurance fund. The liability representing the fund balance of
future disbursements to the County (30% of the fund balance) at the effective
date is to be distributed to that county and the obligation of Columbia to make
monthly deposits to this fund has ceased.
The remaining 70% of the fund balance is to be held for a period of ten
years after the last date waste is received under the contract. Provided there
are no claims against the fund, Columbia may take distributions from the fund.
The balance in the fund as of December 31, 1997 and 1998 totaled $1,970 and
$2,409, respectively. At December 31, 1997 and 1998, $192 and $183,
respectively, is included in cash and cash equivalents because Columbia has
received reimbursement of these amounts for income taxes paid as a result of
taxability of the fund. The remaining balance is included in other assets.
Columbia has expensed 30% of each monthly deposit (net of related income taxes
to be paid) to the fund with a corresponding increase to other liability to
reflect the portion of future disbursements from the fund due to the County.
There have been no claims to date, and it is not possible to determine the
amount of future liability, if any.
Performance under the terms of the contract with the County is secured by a
$2,000 letter of credit.
<PAGE> 14
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
Finley has a royalty agreement with the previous owner of the property
which requires payments of $200 per year through the life of the landfill.
Payments are expensed and totaled $200, in each of 1996, 1997 and 1998.
Performance under terms of a permit issued to Finley by the State of Oregon
is secured by a $1,000 letter of credit.
A contract with a governmental subdivision of Oregon requires Finley to pay
an annual license fee based upon the total number of tons of solid waste
generated from certain geographic boundaries. The minimum annual license fee is
$50, as adjusted from time to time.
Finley is responsible for all closure and post-closure costs relating to
the disposal site owned and operated by Finley. Pursuant to a contract with a
governmental subdivision of Oregon, Finley has established a fund to provide for
closure and post-closure costs (the Closure Fund) and a fund to provide for the
maintenance of roads giving access to the landfill (a Road Fund). The funds are
held by the governmental subdivision in interest-bearing accounts. Finley
deposits amounts into the funds monthly based upon tonnage of solid waste
delivered to the landfill. Payments are expensed as they are paid. Finley's
obligation to make deposits to the Closure Fund terminates at such time as the
total amounts deposited, including interest, total $1,000. Amounts deposited to
date in the Closure Fund, including interest, total approximately $362 at
December 31, 1998.
10. SALE OF WASTECH, INC.
On December 31, 1997, Columbia sold its wholly owned subsidiary, Wastech,
Inc. (the Subsidiary) to Waste Management, Inc. (the Company) for 99,506 shares
(not in thousands) of stock of the Company (fair value of $3,900 at December
31, 1997). The stock is considered available for sale.
11. PRO FORMA INCOME TAX INFORMATION (UNAUDITED)
As described in Note 1, the Partnerships are not subject to federal income
taxes. In connection with the proposed stock purchase agreement with Waste
Connections, Inc. (WCI) (Note 12), the Partnerships (as wholly-owned
subsidiaries of WCI) will be subject to corporate income taxes. The Partnerships
had combined income for income tax purposes of $2,706, $3,455 and $4,973 for
1996, 1997 and 1998, respectively. Had the Partnerships filed income tax returns
as regular corporations for 1996, 1997 and 1998, income tax expense under the
provisions of Financial Accounting Standards No. 109 would have been $1,255,
$1,935 and $1,785, respectively.
<PAGE> 15
COLUMBIA RESOURCE CO., L.P.
AND FINLEY-BUTTES LIMITED PARTNERSHIP (CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
The following unaudited pro forma information reflects income tax expense
(benefit) for the Partnerships as if the Partnerships had been subject to income
taxes:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Current:
Federal............................................ $ 920 $1,175 $1,691
State.............................................. 126 158 198
------ ------ ------
1,046 1,333 1,889
Deferred............................................. 209 602 (104)
------ ------ ------
Pro forma income taxes............................... $1,255 $1,935 $1,785
====== ====== ======
</TABLE>
The pro forma provisions for income taxes for the years ended December 31,
1996, 1997 and 1998 differ from the amounts computed by applying the applicable
statutory federal income tax rate of (34%) to income before income taxes due to
certain non-deductible expenses, state income taxes and differences in the book
and tax gains on the sale of Wastech, Inc. in 1997.
The Partnership's pro forma deferred income tax asset of approximately $193
and $265 as of December 31, 1997 and 1998, respectively, relates principally to
differences in the recognition of vacation accruals, liability reserves and
certain other temporary differences. The Partnerships also had pro forma
deferred tax liabilities as of December 31, 1997 and 1998 of approximately
$1,168 and $1,131 which relate to differences between tax and financial methods
of depreciation, the unrealized gain on the investment in marketable securities,
and differences between the book and tax basis of accounts receivable and
accrued liabilities.
12. SUBSEQUENT EVENTS
On January 15, 1999, Finley distributed $365 to Partners for income tax
payments.
On February 12, 1999, MENWI, RHFC, the sole stockholder of MENWI and RHFC,
and Waste Connections, Inc. (WCI) announced they had signed a definitive
agreement under which all of the outstanding shares of MENWI and RHFC would be
sold to WCI for cash. The transaction closed on March 31, 1999. Prior to
closing, Columbia distributed to the partners the marketable securities
discussed in Note 10. At the time the transaction closed, the notes payable of
$5,575 and $2,937 (Note 5) became due and payable.
13. YEAR 2000 ISSUE (UNAUDITED)
Like other companies, the Partnerships could be adversely affected if the
computer systems we, our suppliers or customers use do not properly process and
calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices such as
production equipment, elevators, etc. At this time, because of the complexities
involved in the issue, management cannot provide assurances that the Year 2000
issue will not have an impact on the Partnerships' operations, however,
management does not expect operations to be significantly affected by Year 2000
issues.
<PAGE> 16
(b) Pro Forma Financial Information.
Waste Connections, Inc. Unaudited Pro Forma Financial Statements
Introduction to Unaudited Pro Forma Financial Statements
Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1998
Notes to Unaudited Pro Forma Statement of Operations
Unaudited Pro Forma Balance Sheet as of December 31, 1998
Notes to Unaudited Pro Forma Balance Sheet
<PAGE> 17
WASTE CONNECTIONS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
The Unaudited Pro Forma Statement of Operations for the year ended December
31, 1998 gives effect to the business combination involving WCI and Columbia
Resource Co., LP and Finley-Buttes Limited Partnership ("CRCFBLP") as if such
business combination occurred on January 1, 1998 and was accounted for using the
purchase method of accounting. In addition to reflecting the business
combination involving WCI and CRCFBLP, the following Unaudited WCI and the
Murrey Companies Pro Forma Combined Statement of Operations for the year ended
December 31, 1998 reflects the mergers with the Murrey Companies as
poolings-of-interests.
The following Unaudited Pro Forma Balance Sheet as of December 31, 1998
assumes WCI's acquisition of CRCFBLP occurred on December 31, 1998. In addition
to reflecting the business combinations involving WCI and CRCFBLP, the following
Unaudited Pro Forma Combined Balance Sheet as of December 31, 1998 reflects the
mergers with the Murrey Companies as poolings-of-interests.
WCI has preliminarily analyzed the savings that it expects to be realized
by consolidating certain operational and general and administrative functions.
WCI has not and cannot quantify all of these savings due to the short period of
time since the CRCFBLP and Murrey Companies acquisitions occurred. It is
anticipated that these savings will be partially offset by the costs of being a
publicly held company and the incremental increase in costs related to WCI's
corporate management. However, these costs, like the savings they offset, cannot
be quantified accurately. Neither the anticipated savings nor the anticipated
costs have been included in the Unaudited Pro Forma Financial Statements.
The Unaudited Pro Forma Financial Statements include certain adjustments to
the historical financial statements, including adjusting depreciation expense to
reflect purchase price allocations of the entities acquired by WCI, adjusting
interest expense to reflect acquisition-related debt and the related income tax
effects of these adjustments.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The Unaudited Pro Forma Financial Statements do not purport
to represent what WCI's financial position or results of operations would
actually have been if such transactions in fact had occurred on those dates or
to project WCI's financial position or results of operations for any future
period. Because WCI, the Murrey Companies and CRCFBLP were not under common
control or management for all periods, historical combined results may not be
comparable to, or indicative of, future performance. The Unaudited Pro Forma
Financial Statements should be read in conjunction with the CRCFBLP financial
statements and notes thereto included elsewhere herein, WCI's consolidated
historical financial statements included in its Annual Report on Form 10-K, and
the Murrey Companies combined historical financial statements included in WCI's
Current Report on Form 8-K/A dated April 2, 1999.
<PAGE> 18
WASTE CONNECTIONS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WASTE THE MURREY
CONNECTIONS, INC. CRCFBLP PRO FORMA COMPANIES PRO FORMA
CONSOLIDATED COMBINED ADJUSTMENTS PRO FORMA COMBINED COMBINED
----------------- ------------ ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................. $ 54,042 $22,511 $(7,017)(a) $ 69,536 $32,528 $ 102,064
Operating expenses:
Cost of operations...... 36,554 10,675 (7,017)(a) 40,166 26,410 66,576
(46)(b)
Selling, general and
administrative........ 5,317 2,956 -- 8,273 2,791 11,064
Depreciation and
amortization.......... 4,112 2,729 (683)(c) 6,158 2,194 8,352
Stock compensation...... 632 -- -- 632 -- 632
---------- ------- ------- ---------- ------- -----------
Income from operations.... 7,427 6,151 729 14,307 1,133 15,440
Interest expense.......... (2,257) (1,258) (5,280)(d) (8,795) (535) (9,330)
Other income (expense),
net..................... -- 29 -- 29 79 108
---------- ------- ------- ---------- ------- -----------
Income before income
taxes................... 5,170 4,922 (4,551) 5,541 677 6,218
Income tax provision...... (2,395) -- (1,968)(e) (2,543) (535) (3,078)
1,820(f)
---------- ------- ------- ---------- ------- -----------
Income before
extraordinary item...... 2,775 4,922 (4,699) 2,998 142 3,140
Extraordinary
item -- early
extinguishment of debt,
net of tax benefit of
$264.................... (1,027) -- -- (1,027) -- (1,027)
---------- ------- ------- ---------- ------- -----------
Net income................ $ 1,748 $ 4,922 $(4,699) $ 1,971 $ 142 $ 2,113
========== ======= ======= ========== ======= ===========
Redeemable convertible
preferred stock
accretion............... (917) -- -- (917) -- (917)
---------- ------- ------- ---------- ------- -----------
Net income applicable to
common stockholders..... $ 831 $ 4,922 $(4,699) $ 1,054 $ 142 $ 1,196
========== ======= ======= ========== ======= ===========
Basic earnings per share:
Income before
extraordinary item.... $ 0.29 $ 0.32 $ 0.24
Extraordinary item...... (0.16) (0.16) (0.11)
---------- ---------- -----------
Net income per share.... $ 0.13 $ 0.16 $ 0.13
========== ========== ===========
Diluted earnings per
share:
Income before
extraordinary item.... $ 0.22 $ 0.25 $ 0.20
Extraordinary item...... (0.12) (0.12) (0.09)
---------- ---------- -----------
Net income per share.... $ 0.10 $ 0.13 $ 0.11
========== ========== ===========
Shares used in calculating
basic earnings per
share................... 6,460,293 6,460,293 9,349,173
========== ========== ===========
Shares used in calculating
diluted earnings per
share................... 8,371,415 8,371,415 11,260,295
========== ========== ===========
</TABLE>
See accompanying notes.
<PAGE> 19
WASTE CONNECTIONS, INC.
NOTES TO UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
ASSUMPTIONS. The unaudited pro forma statement of operations for the year
ended December 31, 1998 is presented as if the acquisition of CRCFBLP occurred
on January 1, 1998. In addition, the unaudited pro forma combined statement of
operations for the year ended December 31, 1998 combines the pro forma
statements of operations for that period with the historical statement of
operations for the Murrey Companies for the year ended December 31, 1998.
BUSINESS COMBINATIONS. The acquisition of CRCFBLP is being accounted for
under the purchase method of accounting for business combinations. Certain items
affecting the purchase price and its allocation are preliminary. The preliminary
purchase price consists of the following:
<TABLE>
<CAPTION>
CRCFBLP
-------
<S> <C>
Cash paid to shareholders................................. $66,911
Liabilities assumed....................................... 18,935
Acquisition costs......................................... 316
-------
$86,162
=======
</TABLE>
The Company has preliminarily allocated the purchase price as follows:
<TABLE>
<CAPTION>
CRCFBLP
-------
<S> <C>
Tangible assets purchased, including landfill............. $85,962
Covenant not to compete................................... 200
-------
$86,162
=======
</TABLE>
WCI's mergers with the Murrey Companies are accounted for under the
pooling-of-interests method of accounting for business combinations. The pro
forma financial statements assume the issuance of 2,888,880 shares, which
represents the actual number of shares exchanged.
PRO FORMA ADJUSTMENTS. The unaudited pro forma statement of operations does
not reflect non-recurring costs resulting directly from the merger between the
Company and the Murrey Companies. The management of the Company estimates that
these costs will approximate $6,200 and will be charged to operations in the
quarter that the merger is consummated. The amount includes costs to merge the
companies, signing bonuses to be paid to Murrey Company officers, and
professional fees. The following adjustments have been made to the unaudited pro
forma statement of operations:
(a) Eliminate intercompany revenue and expense between WCI and CRCFBLP.
(b) To record closure and post closure amortization in accordance with the
Company's policies.
(c) To record site depletion expense in accordance with the Company's policies.
(d) To record interest expense on the debt obligations incurred by the Company
in connection with the acquisition of CRCFBLP.
(e) To record income tax provision for CRCFBLP which were limited partnerships
for income tax purposes for all periods prior to the acquisition by the
Company.
(f) To recorded estimate tax benefit for the year ended December 31, 1998
associated with the pro forma adjustments.
<PAGE> 20
WASTE CONNECTIONS, INC.
NOTES TO UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
PRO FORMA COMBINED PER SHARE DATA. The shares used in computing the
unaudited pro forma combined net income per share for the year ended December
31, 1998 are based upon the pro forma number of common shares as summarized in
the table below. See Note 11 of the Company's notes to financial statements
included elsewhere herein for information concerning the computation of basic
and diluted net income per share.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Basic Share Count:
Company weighted average shares outstanding............... 6,460,293
Shares issued in exchange for the Murrey Companies'
stock.................................................. 2,888,880
-----------
Shares used in calculating pro forma combined basic net
income (loss) per share................................ 9,349,173
===========
Diluted Share Count:
-----------
Shares used in calculating the Company's diluted income
(loss) per share....................................... 8,371,415
Shares issued in exchange for the Murrey Companies'
stock.................................................. 2,888,880
-----------
Shares used in calculating pro forma combined diluted net
income (loss) per share................................ 11,260,295
===========
</TABLE>
ACQUISITION COSTS. The Company incurred costs of $316 related to the
CRCFBLP acquisition which have been factored into the purchase price allocation.
Costs incurred by CRCFBLP were expensed as incurred.
No adjustments have been made in these pro forma statements of operations
to conform accounting policies of the Murrey Companies with those of the
Company. The nature and extent of such adjustments, if any, are not expected to
be significant.
<PAGE> 21
WASTE CONNECTIONS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
WASTE THE MURREY
CONNECTIONS, INC. CRCFBLP PRO FORMA COMPANIES PRO FORMA PRO FORMA
CONSOLIDATED COMBINED ADJUSTMENTS PRO FORMA COMBINED ADJUSTMENTS COMBINED
----------------- -------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and equivalents.... $ 2,675 $ 2,048 $ --(2)(4)(5) $ 4,723 $ 173 $ -- $ 4,896
Investments in
Marketable
Securities............ -- 5,640 -- 5,640 -- -- 5,640
Accounts receivable,
net................... 10,769 2,330 (1,276)(8) 11,823 3,007 -- 14,830
Prepaid expenses and
other current
assets................ 2,246 1,105 -- 3,351 27 -- 3,378
-------- ------- -------- -------- ------- ------- --------
Total current
assets.......... 15,690 11,123 (1,276) 25,537 3,207 -- 28,744
Property and equipment,
net..................... 33,043 19,820 54,222(3) 107,085 13,943 -- 121,028
Intangible assets, net.... 98,785 -- 200(3) 98,985 1,801 -- 100,786
Other assets.............. 1,794 2,389 -- 4,183 184 -- 4,367
-------- ------- -------- -------- ------- ------- --------
$149,312 $33,332 $ 53,146 $235,790 $19,135 $ -- $254,925
======== ======= ======== ======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings... $ -- $ -- $ -- $ -- $ 1,500 $ -- $ 1,500
Accounts payable........ 6,598 1,155 (1,276)(8) 6,477 1,509 -- 7,986
Advances from a related
party................. -- -- -- -- 543 -- 543
Deferred revenue........ 2,052 -- -- 2,052 1,095 -- 3,147
Accrued liabilities..... 4,154 536 -- 4,690 1,330 -- 6,020
Current portion of
long-term debt........ 9,516 1,779 (839)(4) 10,456 731 -- 11,187
Other current
liabilities........... 2,087 668 -- 2,755 106 -- 2,861
Accrued merger related
expenses.............. -- -- -- -- -- 6,200(1) 6,200
-------- ------- -------- -------- ------- ------- --------
Total current
liabilities..... 24,407 4,138 (2,115) 26,430 6,814 6,200 39,444
Long-term debt............ 60,106 16,298 68,066(4)(5) 144,470 3,879 -- 148,349
Deferred income taxes..... 1,645 -- -- 1,645 623 -- 2,268
Other long-term
liabilities............. 2,091 -- 91(7) 2,182 353 -- 2,535
Stockholders' equity:
Common stock............ 94 -- -- 94 45 (16)(1) 123
Additional paid-in
capital............... 66,163 -- -- 66,163 455 16(1) 66,634
Deferred stock
compensation.......... (428) (428) -- -- (428)
Retained earnings
(deficit)............. (4,766) (4,766) 6,966 (6,200)(1) (4,000)
Accumulated other
comprehensive
income................ -- 740 (740)(6) -- -- -- --
Other Partners'
Capital............... -- 12,156 (12,156)(6) -- -- -- --
-------- ------- -------- -------- ------- ------- --------
Total
stockholders'
equity.......... 61,063 12,896 (12,896) 61,063 7,466 (6,200) 62,329
-------- ------- -------- -------- ------- ------- --------
$149,312 $33,332 $ 53,146 $235,790 $19,135 $ -- $254,925
======== ======= ======== ======== ======= ======= ========
</TABLE>
See accompanying notes.
<PAGE> 22
WASTE CONNECTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSUMPTIONS. The unaudited pro forma balance sheet as of December 31, 1998
combines the historical balance sheet of Waste Connections, Inc. with the
historical balance sheets of CRCFBLP to be accounted for as a purchase, and the
historical balance sheet of the Murrey Companies to be accounted for as
poolings-of-interests as of December 31, 1998.
PRO FORMA ADJUSTMENTS. The following adjustments have been made to the
unaudited pro forma consolidated balance sheet.
(1) To record Merger related entries consisting of estimated non-recurring
costs of the Merger with the Murrey Companies and the issuance of
2,888,880 shares of the Company's common stock. The management of the
Company estimates that the non-recurring costs will approximate $6,200
and will be charged to operations in the quarter the merger is
consummated. This estimated expense, has been charged to retained
earnings on the accompanying unaudited pro forma balance sheet.
(2) Cash payments to former owners of CRCFBLP ($66,911) and payment of
acquisition costs ($316).
(3) To increase site costs of CRCFBLP for the excess of purchase price over
net assets acquired of $54,422 and to record the fair value of the
covenant not to compete ($200).
(4) Pay off debt obligations of CRCFBLP ($8,512).
(5) Record additional long term debt associated with the acquisition of
CRCFBLP of $75,739.
(6) To eliminate equity accounts of CRCFBLP.
(7) To accrue closure and post closure liability in accordance with the
Company's policies
(8) To eliminate intercompany receivable between WCI and CRCFBLP.
No adjustments have been made in the unaudited pro forma balance sheet to
conform accounting policies of the Murrey Companies with those of the Company.
The nature and extent of such adjustments, if any, are not expected to be
significant.
<PAGE> 23
(c) Exhibits.
23.1 Consent of Perkins & Company, P.C., Independent Certified Public
Accountants
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WASTE CONNECTIONS, INC.
(Registrant)
Date: April 29, 1999 By /s/ Ronald J. Mittelstaedt
Ronald J. Mittelstaedt
President and
Chief Executive Officer
<PAGE> 25
EXHIBIT INDEX
23.1 Consent of Perkins & Company, P.C.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF PERKINS & COMPANY, P.C.
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the First Amended and Restated 1997 Stock
Option Plan of Waste Connections, Inc. of our report on the combined financial
statements of Columbia Resource Co., L.P. and Finley-Buttes Limited Partnership
included in the Current Report (Form 8-K/A) dated April 29, 1999.
PERKINS & COMPANY, P.C.
Portland, Oregon
April 29, 1999
