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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 31, 1998
(Date of earliest event reported)
BROWNING-FERRIS INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
Commission file number 1-6805
Delaware 74-1673682
(State of Incorporation) (I.R.S. Employer Identification No.)
757 N. Eldridge
Houston, Texas 77079
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (281)870-8100.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 10, 1997, Browning-Ferris Industries, Inc. (the "Company") announced
the signing of an agreement to merge its operations outside North America with
SITA, a societe anonyme formed under the laws of the Republic of France
("SITA"). On March 31, 1998, the Company announced that it had completed this
transaction. Under the terms of the agreement, the Company received cash in the
amount of US$950 million and ordinary shares, FF50 par value, of SITA resulting
in approximately a 20 percent equity ownership in SITA. Formal transfer of the
Hong Kong operations is subject to satisfaction of certain requirements of Hong
Kong regulatory authorities which is expected soon.
Suez Lyonnaise des Eaux, a societe anonyme formed under the laws of the Republic
of France ("Suez Lyonnaise"), owns greater than 50% of the ordinary shares of
SITA. Pursuant to a Shareholders' Agreement between the Company and Suez
Lyonnaise, the Company is entitled to representation on the board of directors
of SITA.
Paris-based SITA is a leading industrial waste services company, providing
collection, recycling, waste-to-energy and disposal services related to
residential, commercial, industrial and medical waste.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
None
(b) PRO FORMA FINANCIAL INFORMATION
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BROWNING-FERRIS INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF
OPERATIONS AND BALANCE SHEET
In November 1997, the Company entered into an agreement to merge its operations
outside North America with SITA, a subsidiary of Suez Lyonnaise des Eaux. On
March 31, 1998, the Company announced that this transaction had been completed.
Under the terms of the agreement, the Company received cash totaling U.S. $950
million and shares of SITA stock amounting to approximately a 20 percent equity
interest in SITA. Suez Lyonnaise des Eaux owns more than 50 percent of SITA.
Formal transfer of the Hong Kong operations is subject to satisfaction of
certain requirements of Hong Kong regulatory authorities which is expected soon.
The following unaudited pro forma consolidated statements of operations and
balance sheet give effect to (i) the divestiture of the Company's operations
outside of North America associated with the SITA transaction as discussed above
and the disposition of the remainder of these operations as a result of this
transaction with SITA, (ii) the repurchase of 15 million shares of common stock
of the Company ($585 million) as a result of a Dutch auction tender offer which
was completed in October 1997 and (iii) the purchase of approximately 11 million
additional shares of the Company's common stock on the open market through March
31, 1998 at a cost of approximately $370 million under the Company's $1 billion
stock buyback program. The pro forma balance sheet reflects the Company's
estimated investment related to its equity interest in SITA. However, the
related earnings associated with this investment have not been considered. In
addition, these pro forma statements do not give effect to (i) the remaining $45
million of shares of the Company's common stock to be purchased under its $1
billion stock buyback program, (ii) the $500 million increase in the existing
stock buyback program that the Company expects to complete by December 31, 1998,
or (iii) the issuance of common stock associated with the automatic common
exchange security units in June 1998 for cash of approximately $410 million.
The unaudited pro forma consolidated statements of operations for the year ended
September 30, 1997 and the three months ended December 31, 1997 were prepared
assuming that the transactions described above were consummated on October 1,
1996. The unaudited pro forma consolidated balance sheet as of December 31, 1997
was prepared assuming that the transactions described above were consummated on
December 31, 1997.
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The pro forma financial results are not necessarily indicative of the actual
results of operations that would have occurred had these transactions occurred
on October 1, 1996, nor are they indicative of future results. The unaudited pro
forma consolidated statements of operations and balance sheet should be read in
conjunction with the Company's historical consolidated financial statements and
related notes thereto included in its Annual Report on Form 10-K for the fiscal
year ended September 30, 1997 and Quarterly Report on Form 10-Q for the three
months ended December 31, 1997.
The pro forma adjustments included in the following pro forma statements of
operations and balance sheet represent preliminary estimates of the total fair
value of the consideration and related costs associated with the merger of the
Company's international operations with SITA, which will be revised as
additional information concerning the valuation of these amounts becomes
available.
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BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended September 30, 1997
-----------------------------------------------------
Pro Forma Company
Company Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 5,782,972 $ (1,458,316)(A) $ 4,324,656
Cost of operations 4,289,614 (1,135,061)(A) 3,154,553
------------ ------------ ------------
Gross profit 1,493,358 (323,255) 1,170,103
Selling, general and
administrative expense 812,242 (208,623)(A) 603,619
Special charges (credits), net 81,879 (145,144)(A) (63,265)
------------ ------------ ------------
Income from operations 599,237 30,512 629,749
Interest expense, net 158,083 (31,343)(A) 130,765
(50,888)(B)
54,913 (C)
Equity in earnings of
unconsolidated
affiliates (53,988) 19,367 (A) (34,621)
------------ ------------ ------------
Income before income
taxes, minority interest and
extraordinary items 495,142 38,463 533,605
Income taxes 198,057 16,995 (A) 213,442
20,355 (B)
(21,965)(C)
Minority interest in income
of consolidated subsidiaries 13,390 (12,127)(A) 1,263
------------ ------------ ------------
Income before
extraordinary items $ 283,695 $ 35,205 $ 318,900
============ ============ ============
Earnings per share before
extraordinary items(D):
Basic $ 1.40 $ 1.80
============ ============
Diluted $ 1.39 $ 1.79
============ ============
Number of common shares
used in computing earnings
per share:
Basic 202,800 176,800
============ ============
Diluted 203,746 177,746
============ ============
</TABLE>
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BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended December 31, 1997
-----------------------------------------------------
Pro Forma Company
Company Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 1,344,742 $ (327,062)(A) $ 1,017,680
Cost of operations 981,359 (253,526)(A) 727,833
----------- ----------- -----------
Gross profit 363,383 (73,536) 289,847
Selling, general and
administrative expense 190,619 (44,646)(A) 145,973
Special credits, net (2,557) -- (2,557)
----------- ----------- -----------
Income from operations 175,321 (28,890) 146,431
Interest expense, net 35,619 (6,720)(A) 21,996
(12,722)(B)
5,819 (C)
Equity in earnings of
unconsolidated
affiliates (10,089) 3,730 (A) (6,359)
----------- ----------- -----------
Income before income
taxes, minority interest and
cumulative effect of change
in accounting principle 149,791 (18,997) 130,794
Income taxes 59,916 (10,360)(A) 52,317
5,089 (B)
(2,328)(C)
Minority interest in income
of consolidated subsidiaries 3,117 (2,448)(A) 669
----------- ----------- -----------
Income before cumulative
effect of change in
accounting principle $ 86,758 $ (8,950) $ 77,808
=========== =========== ===========
Earnings per share before
cumulative effect of change
in accounting principle:
Basic $ 0.45 $ 0.43
=========== ===========
Diluted $ 0.45 $ 0.43
=========== ===========
Number of common shares used
in computing earnings per
share:
Basic 190,911 179,240
=========== ===========
Diluted 192,282 180,611
=========== ===========
</TABLE>
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(A) To remove the accounts of the Company's operations outside of North
America which are to be either merged into SITA or otherwise disposed as
a result of the SITA transaction.
(B) To reflect changes in interest expense and related income taxes
associated with the estimated net cash proceeds of $885 million after
considering income taxes and other costs related to the SITA transaction.
It is assumed that the proceeds were used to pay down debt balances.
(C) To reflect increased interest expense and related income taxes associated
with the repurchase of the Company's common stock in connection with the
Company's Dutch auction tender offer of $585 million and open market
purchases of $370 million under the Company's $1 billion stock buyback
program. These stock purchases have been funded principally through debt
issuances.
(D) Excluding special charges and extraordinary items reflected in the fiscal
1997 operating results, earnings per share amounts were:
<TABLE>
<CAPTION>
Company
Company Pro Forma
--------------- ---------------
<S> <C> <C>
Basic $ 1.64 $ 1.59(i)
=============== ===============
Diluted $ 1.63 $ 1.58(i)
=============== ===============
</TABLE>
(i)Pro forma amounts give no effect to earnings from the Company's
ownership interest in SITA. Had estimated earnings from the
Company's equity investment in SITA been considered in the
Company pro forma earnings per share amounts presented above,
management believes that such amounts would have exceeded the
related historical earnings per share amounts.
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BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------
Pro Forma Company
Company Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Trade receivables, net $ 812,493 $ (226,082)(A) $ 586,411
Other current assets 374,698 (114,426)(A) 260,272
----------- ----------- -----------
Total current assets 1,187,191 (340,508) 846,683
Property and equipment, net 3,473,372 (741,799)(A) 2,731,573
Cost over fair value of net
tangible assets of acquired
businesses, net 1,397,197 (802,295)(A) 594,902
Other assets 427,726 (79,313)(A) 683,413
335,000 (B)
----------- ----------- -----------
Total assets $ 6,485,486 $(1,628,915) $ 4,856,571
=========== =========== ===========
Current liabilities $ 1,259,389 $ (231,133)(A) $ 1,028,256
Deferred items 891,328 (162,305)(A) 729,023
Long-term debt 2,300,923 (449,378)(A) 1,264,233
(885,000)(B)
297,688 (C)
Common stockholders' equity 2,033,846 (1,121,099)(A) 1,835,059
1,220,000 (B)
(297,688)(C)
----------- ----------- -----------
Total liabilities and common
stockholders' equity $ 6,485,486 $(1,628,915) $ 4,856,571
=========== =========== ===========
</TABLE>
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(A) To remove the accounts of the Company's operations outside of North
America which are to be either merged into SITA or otherwise disposed as
a result of the SITA transaction.
(B) To reflect cash proceeds of $950 million and the estimated investment in
shares of SITA stock that will result in approximately a 20 percent
ownership in SITA (estimated fair value of approximately $360 million),
after considering estimated income taxes and other costs of approximately
$65 million associated with the SITA transaction. It is assumed that the
proceeds were used to pay down outstanding debt balances. Additionally,
the pro forma entries give effect to the recognition of 80% of the
preliminary estimate of the gain associated with the transaction
(estimate of $99 million as of December 31, 1997), offset largely by 80%
of the cumulative foreign currency translation losses associated with
these operations outside of North America (approximately $89 million as
of December 31, 1997). The deferred portion of the gain has been
reflected as a reduction in the estimated investment in SITA.
(C) To reflect additional repurchases of the Company's common stock of
approximately $298 million subsequent to December 31, 1997 under the
Company's $1 billion stock buyback program. These stock purchases have
been funded principally through debt issuances.
(c) EXHIBITS
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
BROWNING-FERRIS INDUSTRIES, INC.
(Registrant)
April 15, 1998. By: /s/Jeffrey E. Curtiss
---------------------------------------
Jeffrey E. Curtiss
Senior Vice President and
Chief Financial Officer
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