<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report October 17, 1995
(Date of earliest event reported)
REPUBLIC WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-9787 73-1105145
-------- ------ ----------
(State or other (Commission File (I.R.S. Employer
jurisdiction Number) Identification
of incorporation) No.)
200 East Las Olas Blvd.
Suite 1400
Ft. Lauderdale, Florida 33301
(Address of principal executive offices)
Registrant's telephone number, including area code (305) 627-6000
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With respect to each contract, agreement or other document referred to herein
and filed with the Securities and Exchange Commission (the "Commission") as an
exhibit to this report, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
ITEM 2. ACQUISITION OF ASSETS.
ACQUISITION OF SOUTHLAND ENVIRONMENTAL SERVICES, INC. On October 17, 1995,
Republic Waste Industries, Inc., a Delaware corporation ("Republic"), acquired
all of the outstanding shares of Southland Environmental Services, Inc., a
Florida corporation ("Southland"), through a merger transaction (the
"Southland Merger"), in which a wholly-owned subsidiary of Republic merged with
and into Southland, and all of the issued and outstanding shares of Southland
were exchanged for an aggregate of 2,600,000 shares of common stock, $0.01 par
value per share, issued by Republic. The Merger Agreement for the Southland
Merger was described in, and was filed as Exhibit 2.1 to, the Current Report
on Form 8-K dated August 24, 1995 by Republic, which is incorporated herein by
reference for all purposes. The Southland Merger is being accounted for as a
pooling of interests business combination.
ITEM 5. OTHER EVENTS.
REPORTING OF CERTAIN FINANCIAL INFORMATION FOR REGISTRATION STATEMENT AND OTHER
PURPOSES. Republic is filing as part of this Current Report on Form 8-K the
following supplemental consolidated financial statements which have been
retroactively adjusted to reflect the mergers with Kertz Security Systems II,
Inc. and Kertz Security Systems, Inc., United Waste Service, Inc. and Southland
Environmental Services, Inc. which were accounted for under the pooling of
interests method of accounting and are hereby incorporated into the Company's
Registration Statements on Form S-3, file numbers 33-61649 and 33-62489, and on
Form S-8, file number 33-93742:
<TABLE>
<CAPTION>
Page
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<S> <C>
REPUBLIC WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . 3
Supplemental Consolidated Balance Sheets as of June 30, 1995
(unaudited) and December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . 4
Supplemental Consolidated Statements of Income for the Six
Months Ended June 30, 1995 and 1994 (unaudited) and the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Supplemental Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . 6
Supplemental Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1995 and 1994 (unaudited) and the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Supplemental Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 8
</TABLE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired. The consolidated
financial statements of Southland Environmental Services, Inc. and
subsidiaries were previously filed on Republic's Current Report on
Form 8-K/A dated September 27, 1995.
(b) Pro Forma Financial Information. The following pro forma financial
information is included herein pursuant to Item 7(b):
<TABLE>
<S> <C>
Page
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Unaudited Condensed Consolidated Pro Forma Financial Statements . . . . . . . . . . . . . . . 28
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of
June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the Six Months Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . 30
Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the Year Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . 31
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements . . . . . . . . . . . 32
</TABLE>
(c) Exhibits. The Exhibits to this Report are listed in the Exhibit Index
set forth elsewhere herein.
2
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Waste Industries, Inc.:
We have audited the accompanying supplemental consolidated balance
sheets of Republic Waste Industries, Inc. (a Delaware corporation) and
subsidiaries as of December 31, 1994 and 1993 and the related supplemental
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These
supplemental consolidated statements give retroactive effect to the mergers with
Kertz Security Systems II, Inc. and Kertz Security Systems, Inc. on August 28,
1995, United Waste Service, Inc. on October 11, 1995 and Southland
Environmental Services, Inc. on October 17, 1995, which have been accounted for
as poolings of interests as described in Note 1. These supplemental
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental financial
statements based on our audits.
We did not audit the financial statements of United Waste Service,
Inc. included in the supplemental consolidated financial statements of Republic
Waste Industries, Inc., which statements reflect total assets constituting 5.1%
and 5.2% as of December 31, 1994 and 1993, respectively, of the related
supplemental totals and revenue constituting 15.3%, 14.7% and 15.9% for the
years ended December 31, 1994, 1993 and 1992, respectively, of the related
supplemental totals. We also did not audit the consolidated financial
statements of Southland Environmental Services, Inc. and subsidiaries included
in the supplemental consolidated financial statements of Republic Waste
Industries, Inc., which statements reflect total assets constituting 9.2% and
7.0% as of December 31, 1994 and 1993, respectively, of the related
supplemental totals and revenue constituting 21.4%, 20.7% and 19.9% for the
years ended December 31, 1994, 1993 and 1992, respectively, of the related
supplemental totals. These statements were audited by other auditors whose
reports thereon have been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for United Waste Service, Inc.
and Southland Environmental Services, Inc., is based solely upon the report of
other auditors.
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, based upon our audit and the reports of other auditors,
the supplemental consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Republic Waste
Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994, after giving retroactive effect to the
mergers with Kertz Security Systems II, Inc. and Kertz Security Systems,
Inc., United Waste Service, Inc. and Southland Environmental Services, Inc. as
described in Note 1, all in conformity with generally accepted accounting
principles.
As discussed in Note 11 to the supplemental consolidated financial
statements, Southland Environmental Services, Inc. changed its method of
accounting for income taxes in its fiscal year ended September 30, 1993.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida
October 17, 1995.
3
<PAGE> 4
REPUBLIC WASTE INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
---------------------------
June 30,
1995 1994 1993
----------- ---------- ----------
ASSETS (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 3,278 $ 3,940 $ 4,669
Accounts receivable, less allowance for doubtful accounts of
$785 (unaudited), $632 and $592, respectively . . . . . . . . . . 15,277 12,545 9,678
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,399 1,571 1,704
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 3,664 3,528 3,361
---------- ---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . 23,618 21,584 19,412
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 110,273 104,656 98,102
Goodwill, net of accumulated amortization of $1,642 (unaudited), $1,395 and
$1,016, respectively . . . . . . . . . . . . . . . . . . . . . . . 16,816 13,112 8,851
Net assets of discontinued operations . . . . . . . . . . . . . . . . . . . . - 20,292 16,872
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,736 1,667 1,529
---------- ---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 152,443 $ 161,311 $ 144,766
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,140 $ 5,723 $ 4,968
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5,330 6,720 5,213
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,032 440 816
Current maturities of long-term debt . . . . . . . . . . . . . . . 4,585 4,247 3,953
Current portion of accrued environmental and landfill costs . . . . 2,080 1,404 1,715
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 303 160 351
---------- ---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . 20,470 18,694 17,016
Long-term debt, net of current maturities . . . . . . . . . . . . . . . . . . 37,969 32,097 28,335
Accrued environmental and landfill costs, net of current portion . . . . . . 7,267 8,244 8,757
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,904 11,973 11,930
---------- ---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 78,610 71,008 66,038
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 9) . . . . . . . . . . . . . . . . . . . - - -
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01 per share; 5,000,000 shares
authorized; none issued . . . . . . . . . . . . . . . . . . . . . . - - -
Common stock, par value $0.01 per share; 100,000,000 shares
authorized; 32,373,506 (unaudited), 32,375,731, and 32,538,388
issued, respectively . . . . . . . . . . . . . . . . . . . . . . . 324 324 325
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 64,562 100,526 101,328
Retained earnings (accumulated deficit) since January 1, 1990 . . . . 9,172 (9,874) (22,252)
Notes receivable arising from stock purchase agreements . . . . . . (225) (673) (673)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 73,833 90,303 78,728
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . $ 152,443 $ 161,311 $ 144,766
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
4
<PAGE> 5
REPUBLIC WASTE INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION> For the Six Months
Ended June 30, Year Ended December 31,
----------------------- -------------------------------------
1995 1994 1994 1993 1992
---------- --------- -------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,288 $ 47,523 $ 97,460 $ 87,900 $ 76,198
Expenses:
Cost of operations . . . . . . . . . . . . . . . . 39,643 30,932 64,114 56,772 49,060
Selling, general and administrative . . . . . . . 9,815 9,720 19,055 20,055 18,905
Restructuring and unusual charges . . . . . . . . - - - 10,040 2,250
Other (income) expense:
Interest and other income . . . . . . . . . . . . (317) (179) (306) (417) (2,528)
Interest expense . . . . . . . . . . . . . . . . . 1,662 1,297 2,717 2,082 1,724
--------- --------- -------- -------- ----------
50,803 41,770 85,580 88,532 69,411
--------- --------- -------- -------- ----------
Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 8,485 5,753 11,880 (632) 6,787
Income tax provision . . . . . . . . . . . . . . . . . . . 2,356 439 688 272 253
--------- --------- -------- -------- ----------
Income (loss) from continuing operations . . . . . . . . . 6,129 5,314 11,192 (904) 6,534
--------- --------- -------- -------- ----------
Discontinued operations:
Income (loss) from discontinued operations, net of
income tax benefit of $298 (unaudited), $0
(unaudited), $0, $210 and $123, respectively . . 508 681 2,684 (14,579) (1,117)
Loss on disposition . . . . . . . . . . . . . . . . - - - - (17,563)
--------- --------- -------- -------- ----------
508 681 2,684 (14,579) (18,680)
--------- --------- -------- -------- ----------
Income (loss) before cumulative change in an accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . 6,637 5,995 13,876 (15,483) (12,146)
Cumulative effect of a change in an accounting principle . - - - (462) -
--------- --------- -------- -------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 6,637 $ 5,995 $ 13,876 $(15,945) $ (12,146)
========= ========= ======== ======== ==========
Earnings (loss) per common and common equivalent
share:
Continuing operations . . . . . . . . . . . . . . $ 0.18 $ 0.16 $ 0.34 $ (0.03) $ 0.21
Discontinued operations . . . . . . . . . . . . . 0.01 0.02 0.09 (0.45) (0.60)
--------- --------- -------- -------- ----------
Income (loss) before cumulative change in
an accounting principle . . . . . . . . . . . . . 0.19 0.18 0.43 (0.48) (0.39)
Cumulative effect of a change in an accounting
principle . . . . . . . . . . . . . . . . . . . . - - - (0.01) -
--------- --------- -------- -------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . $ 0.19 $ 0.18 $ 0.43 $ (0.49) $ (0.39)
========= ========= ======== ======== ==========
Weighted average common and common equivalent
shares . . . . . . . . . . . . . . . . . . . . . . . . . 34,119 32,660 32,607 32,698 31,541
========= ========= ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
5
<PAGE> 6
REPUBLIC WASTE INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Retained Notes
Earnings Receivable
(Accumulated Arising
Deficit) From
Additional Since Stock
Common Paid-In January 1, Purchase
Stock Capital 1990 Agreements
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 . . . . . . $ 299 $ 84,198 $ 11,022 $ (698)
Exercise of MGD warrants, net
of expenses. . . . . . . . . . . . . 20 10,980 - -
Exercise of stock options and
related tax benefits . . . . . . . . 1 1,745 - -
Shares issued for business
acquisitions . . . . . . . . . . . . 5 2,959 - -
Contributions to capital from pooled
entities . . . . . . . . . . . . . . - 864 50 -
Distributions to former shareholders
of acquired companies . . . . . . . - - (1,756) -
Collections on notes receivable . . . - - - 25
Foreign currency translation
adjustment . . . . . . . . . . . . . - - (983) -
Other . . . . . . . . . . . . . . . . - (105) - -
Net loss . . . . . . . . . . . . . . . - - (12,146) -
------ --------- -------- -------
BALANCE AT DECEMBER 31, 1992 . . . . . . 325 100,641 (3,813) (673)
Cancellation of shares held in
escrow issued for an
acquisition . . . . . . . . . . . . (1) (944) - -
Shares issued for contingent
consideration. . . . . . . . . . . . 1 265 - -
Contributions to capital from pooled
entities . . . . . . . . . . . . . . - 1,366 - -
Distributions to former shareholders
of acquired companies . . . . . . . - - (2,022) -
Foreign currency translation
adjustment . . . . . . . . . . . . . - - (472) -
Net loss . . . . . . . . . . . . . . . - - (15,945) -
------ --------- -------- -------
BALANCE AT DECEMBER 31, 1993 . . . . . . 325 101,328 (22,252) (673)
Shares issued for contingent
consideration, net of shares returned
in settlement. . . . . . . . . . . . 2 (2) - -
Purchases and retirements
of treasury stock . . . . . . . . . (3) (853) - -
Contributions to capital from pooled
entities . . . . . . . . . . . . . . - 53 - -
Distributions to former shareholders
of acquired companies . . . . . . . - - (1,516) -
Foreign currency translation
adjustment . . . . . . . . . . . . . - - 18 -
Net income . . . . . . . . . . . . . . - - 13,876 -
------ --------- -------- -------
BALANCE AT DECEMBER 31, 1994 . . . . . . $ 324 $ 100,526 $ (9,874) $ (673)
====== ========= ======== =======
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
6
<PAGE> 7
REPUBLIC WASTE INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
----------------------- ------------------------------------
1995 1994 1994 1993 1992
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Income (loss) from continuing operations . . . . . . . . . $ 6,129 $ 5,314 $11,192 $ (904) $ 6,534
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing operations:
Restructuring and unusual charges . . . . . . . . . . . . - - - 10,040 -
Depreciation, depletion and amortization . . . . . . . . 4,665 3,760 7,782 6,446 4,796
Provision for doubtful accounts . . . . . . . . . . . . . 159 39 174 371 161
Provision for accrued environmental and landfill costs. . 170 110 377 215 76
Gain on the sale of equipment . . . . . . . . . . . . . . (103) (237) (325) (149) (759)
Gain on sale of marketable securities . . . . . . . . . . - - - - (2,000)
Changes in assets and liabilities, net of
effects from business acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . (2,337) (1,375) (1,586) (899) (1,120)
Prepaid expenses and other assets . . . . . . . . . . . 21 19 64 (1,886) 12
Accounts payable and accrued liabilities . . . . . . . (275) (905) (224) (2,420) 1,116
Income taxes payable . . . . . . . . . . . . . . . . . 143 242 (191) (688) 1,585
Other liabilities . . . . . . . . . . . . . . . . . . . 399 140 (797) 1,089 (1,063)
------- ------- ------- ------- -------
Net cash provided by continuing operations . . . . . . 8,971 7,107 16,466 11,215 9,338
------- ------- ------- ------- -------
CASH PROVIDED BY (USED BY) DISCONTINUED OPERATIONS. . . . . . (263) 765 (736) (4,360) (17,610)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired . . . . . . . (5,947) (500) (4,059) (5,664) (2,899)
Purchases of property and equipment . . . . . . . . . . . . (7,617) (4,673) (11,502) (6,617) (15,086)
Proceeds from the sale of equipment . . . . . . . . . . . . 339 489 820 565 1,018
Purchases of marketable securities . . . . . . . . . . . . - - - - (7,554)
Proceeds from the sale of marketable securities . . . . . . - - - - 9,554
------- ------- ------- ------- -------
Net cash used in investing activities . . . . . . . . . . . (13,225) (4,684) (14,741) (11,716) (14,967)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and warrants. . . . . . . . . . . 181 - - - -
Capital contribution to Republic Environmental
Systems, Inc. . . . . . . . . . . . . . . . . . . . . . (2,520) - - - -
Payments of long-term debt and notes payable . . . . . . . (6,243) (4,196) (10,231) (10,252) (17,274)
Proceeds from long-term debt and notes payable . . . . . . 12,772 4,399 11,031 17,848 17,553
Purchases of treasury stock . . . . . . . . . . . . . . . . (223) (450) (856) - -
Contributions to capital from pooled entities . . . . . . . - - - 691 686
Distributions to former shareholders of acquired
businesses . . . . . . . . . . . . . . . . . . . . . . . (560) (1,148) (1,662) (1,866) (1,525)
Payments of debt issuance costs . . . . . . . . . . . . . . - - - (494) -
Proceeds from issuances of common stock . . . . . . . . . . - - - - 11,466
Payments of common stock issuance costs . . . . . . . . . . - - - - (78)
Payments received on notes receivable arising from
stock purchase agreements. . . . . . . . . . . . . . . . 448 - - - 648
------- ------- ------- ------- -------
Net cash provided by (used in) financing activities . . . . 3,855 (1,395) (1,718) 5,927 11,476
------- ------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . (662) 1,793 (729) 1,066 (11,763)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . 3,940 4,669 4,669 3,603 15,366
------- ------- ------- ------- -------
End of period . . . . . . . . . . . . . . . . . . . . . . . $ 3,278 $ 6,462 $ 3,940 $ 4,669 $ 3,603
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,513 $ 1,180 $ 2,578 $ 1,942 $ 1,707
Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 1,228 $ 767 $ 1,010 $ 452 $ 572
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchases of $1,216,000, $1,449,000 and $2,665,000 were financed
in the years ended December 31, 1994, 1993 and 1992, respectively, by
borrowings and capitalized lease obligations.
The accompanying notes are an integral part of these supplemental
consolidated financial statements.
7
<PAGE> 8
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The accompanying supplemental
consolidated financial statements include the accounts of Republic Waste
Industries, Inc. and its wholly-owned subsidiaries ("Republic" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated. In 1994, the Board of Directors authorized management to pursue a
plan to distribute its hazardous waste services segment, Republic Environmental
Systems, Inc. ("RESI"), to Republic stockholders. In February 1995, the Board
of Directors approved this distribution to Republic stockholders. Accordingly,
as discussed in Note 2, this segment has been accounted for as a discontinued
operation and the accompanying supplemental consolidated financial statements
for all periods presented have been restated to report separately the net
assets and operating results of these discontinued operations.
In the opinion of management, the unaudited supplemental consolidated
financial statements contain all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the consolidated financial
position of the Company at June 30, 1995, and the consolidated results of their
operations and cash flows for the six months ended June 30, 1995 and 1994.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS. The accompanying
supplemental consolidated financial statements give retroactive effect to the
mergers with Kertz Security Systems II, Inc. and Kertz Security Systems, Inc.
("Kertz"), United Waste Service, Inc. ("United") and Southland Environmental
Services, Inc. ("Southland"). On August 28, 1995, the Company issued
1,090,000 shares of the Company's common stock, $0.01 par value per share
("Common Stock"), in exchange for all of the outstanding shares of common
stock of Kertz. Kertz provides electronic security monitoring and maintenance
to over 30,000 residential and commercial customers predominantly in the South
Florida, Tampa and Orlando areas. On October 11, 1995, the Company acquired
all of the outstanding common stock of United in exchange for 1,500,000 shares
of Common Stock. United provides solid waste collection, transfer and
recycling services in the Atlanta, Georgia metropolitan area and serves over
8,000 residential and commercial customers. On October 17, 1995, the Company
issued 2,600,000 shares of Common Stock in exchange for all of the outstanding
common stock of Southland. Southland provides solid waste collection services
in the Northeast Florida area serving over 70,000 residential and commercial
customers. These transactions were accounted for under the
pooling-of-interests method of accounting and, accordingly, the accompanying
supplemental consolidated financial statements have been retroactively adjusted
as if the Company and Kertz, United and Southland had operated as one entity
since inception. These supplemental consolidated financial statements will be
the same as the restated statements that will be issued after post-merger
operating results have been published.
For the years ended December 31, 1994, 1993 and 1992, United and
Southland were consolidated for their fiscal years ended on September 30. In
connection with the United and Southland mergers, effective January 1, 1995,
the Company has changed the year ends of United and Southland to conform with
that of the Company. The results of operations for United and Southland for
the three months ended December 31, 1994 have been reported as a direct credit
to the Company's retained earnings. Such amount was not material to the
supplemental consolidated financial position and results of operations of the
Company.
8
<PAGE> 9
Details of the results of operations of the previously separate
companies for the periods prior to the combination are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------------- ------------------------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
The Company . . . . . . . $ 29,919 $ 23,957 $ 48,766 $ 41,095 $ 35,341
Kertz . . . . . . . . . . 5,782 6,821 12,943 15,722 13,638
United . . . . . . . . . 8,511 6,173 14,897 12,912 12,080
Southland . . . . . . . . 15,076 10,572 20,854 18,171 15,139
-------- -------- -------- -------- --------
$ 59,288 $ 47,523 $ 97,460 $ 87,900 $ 76,198
======== ======== ======== ======== ========
Net income (loss):
The Company . . . . . . . $ 4,750 $ 4,829 $ 11,187 $(18,484) $(14,004)
Kertz . . . . . . . . . . (202) (111) 156 702 201
United . . . . . . . . . 724 564 1,407 924 556
Southland . . . . . . . . 1,365 713 1,126 913 1,101
-------- -------- -------- -------- --------
$ 6,637 $ 5,995 $ 13,876 $(15,945) $(12,146)
======== ======== ======== ======== ========
Earnings (loss) per share:
The Company . . . . . . . $ 0.14 $ 0.15 $ 0.35 $ (0.57) $ (0.44)
Kertz . . . . . . . . . . (0.01) -- -- 0.02 --
United . . . . . . . . . 0.02 0.01 0.04 0.03 0.02
Southland . . . . . . . . 0.04 0.02 0.04 0.03 0.03
-------- -------- -------- -------- --------
$ 0.19 $ 0.18 $ 0.43 $ (0.49) $ (0.39)
======== ======== ======== ======== ========
</TABLE>
REVENUE RECOGNITION. The Company recognizes revenue as services
are provided.
9
<PAGE> 10
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARKETABLE SECURITIES. The Company purchases marketable securities
for investment purposes which are recorded at the lower of cost or market. The
Company includes gains and losses incurred in connection with marketable
securities in interest and other income. In 1992, the Company realized gains
on marketable securities purchased and subsequently sold during the year. The
Company currently holds no equity securities as defined under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
OTHER CURRENT ASSETS. Inventories consisting principally of equipment
parts, compost materials and supplies are valued under a method which
approximates the lower of cost (first-in, first-out) or market. At December
31, 1994 and 1993, other current assets included inventories of $2,195,000 and
$1,921,000, respectively.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
Expenditures for major additions and improvements are capitalized, while minor
replacements, maintenance and repairs are charged to expense as incurred. When
property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in current operations.
The Company revises the estimated useful lives of property and
equipment acquired through its business acquisitions as of the effective date
of the acquisition to conform with its policies regarding property and
equipment. Depreciation is provided over the estimated useful lives of the
assets involved using the straight-line method. The estimated useful lives
are: twenty to forty years for buildings and improvements, three to fifteen
years for vehicles and equipment and five to seven years for furniture and
fixtures. Landfills are stated at cost and are depleted based on consumed
airspace. Landfill improvements include direct costs incurred to obtain a
landfill permit and direct costs incurred to construct and develop the site,
and these costs are also depleted based on consumed airspace. No general and
administrative costs are capitalized as landfills and landfill improvements.
ACCRUED LIABILITIES. The Company provides accruals for estimated
insurance claims for the self-funded portion of its insurance plans. At
December 31, 1994 and 1993, insurance claims reserves of $926,000 and $665,000,
respectively, were included in accrued liabilities.
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS. Accrued environmental and
landfill costs include landfill site closure and post-closure costs. Landfill
site closure and post-closure costs include costs to be incurred for final
closure of the landfills and costs for providing required post-closure
monitoring and maintenance of landfills. These costs are accrued based on
consumed airspace. The Company estimates its future cost requirements for
closure and post-closure monitoring and maintenance for its solid waste
facilities based on its interpretation of the technical standards of the United
States Environmental Protection Agency's Subtitle D regulations. These
estimates do not take into account discounts for the present value of such
total estimated costs. Environmental costs are accrued by the Company through
a charge to income in the appropriate period for known and anticipated
environmental liabilities.
INCOME TAXES. The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes," which the Company adopted in 1992, the effect of which was
not material. Accordingly, deferred income taxes have been provided to show
the effect of temporary differences between the recognition of revenues and
expenses for financial and income tax reporting purposes and between the tax
basis of assets and liabilities and their reported amounts in the financial
statements.
GOODWILL. Goodwill is amortized over the lesser of the estimated life
or forty years, on a straight-line basis. Amortization expense related to
goodwill and other intangible assets was $573,000, $382,000 and $270,000 in
1994, 1993 and 1992, respectively.
10
<PAGE> 11
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company continually evaluates whether events and circumstances
have occurred that may warrant revision of the estimated useful life of
goodwill and other long-lived assets or whether the remaining balance of
goodwill should be evaluated for possible impairment. The Company uses an
estimate of the related undiscounted net income over the remaining life of
goodwill in measuring whether the goodwill is recoverable.
ACCOUNTING FOR ACQUISITIONS. At the time the Company acquires a
business to be accounted for as a purchase, the Company allocates the purchase
price to assets and liabilities based on its best estimate of the fair value of
each asset and liability. For a one-year period subsequent to the acquisition
date, the estimates are refined if additional facts become known regarding
contingencies that existed at the date of acquisition. At the end of the
one-year period following the date of acquisition, the estimates are finalized
and no other entries are made to purchase accounting.
Acquisitions accounted for under the pooling-of-interests method of
accounting are included retroactively in the Company's financial statements as
if the companies had operated as one entity since inception.
STATEMENTS OF CASH FLOWS. The Company considers all highly liquid
investments with purchased maturities of three months or less to be cash
equivalents. The effect of non-cash transactions related to business
combinations, as discussed in Note 3, and other non-cash transactions are
excluded from the statements of cash flows.
FOREIGN CURRENCY TRANSLATION. All asset and liability accounts of
foreign subsidiaries are translated to U.S. dollars at the rate of exchange in
effect at the balance sheet date. All income statement accounts of foreign
subsidiaries are translated at average exchange rates during the year.
Resulting translation adjustments arising from these translations are charged
or credited directly to stockholders' equity. Gain or loss on foreign currency
transactions are included in income as incurred. There was no material effect
on foreign cash balances of foreign currency translations in 1994 and 1993.
All of the Company's foreign subsidiaries are a part of the hazardous waste
services segment of the Company. In connection with the spin-off of the
hazardous waste services segment, as discussed in Note 2, this segment of the
Company's business has been accounted for as a discontinued operation.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The book values of cash, trade
accounts receivable, trade accounts payable and financial instruments included
in other current assets and other assets approximate their fair values
principally because of the short-term maturities of these instruments. The
fair value of the Company's long-term debt is estimated based on the current
rates offered to the Company for debt of similar terms and maturities. Under
this method the Company's fair value of long-term debt was not significantly
different than the stated value at December 31, 1994 and 1993.
In the normal course of business, the Company has letters of credit,
performance bonds and other guarantees which are not reflected in the
accompanying supplemental consolidated balance sheets. The Company's
management believes that the likelihood of performance under these financial
instruments is minimal and expects no material losses to occur in connection
with these financial instruments.
CONCENTRATIONS OF CREDIT RISK. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets into which the Company's services are provided, as well as their
dispersion across many different geographic areas. As a result, as of December
31, 1994, the Company does not consider itself to have any significant
concentrations of credit risk.
2. DISCONTINUED OPERATIONS
SPIN-OFF OF THE HAZARDOUS WASTE SERVICES SEGMENT IN 1994. In July
1994, the Company announced the contemplation of a plan to exit the hazardous
waste services segment of the environmental industry, and in October 1994, the
Board of Directors authorized management to pursue such plan, subject to final
approval from the Board of Directors and the resolution of certain legal
11
<PAGE> 12
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and financial requirements. The plan provides for the combination of the
Company's hazardous waste services operations in its wholly-owned subsidiary,
RESI, and the distribution of the stock of RESI to the stockholders of record
of Republic (the "Distribution"). On April 26, 1995, Republic stockholders
received one share of common stock of RESI for every five shares of Common
Stock of Republic owned on April 21, 1995 in connection with the spin-off of
RESI. Approximately 5.4 million RESI shares were distributed to Republic
stockholders. RESI's common stock commenced trading on the Nasdaq National
Market on April 27, 1995 under the trading symbol "RESI." The Company has had
no direct ownership interest in RESI since the Distribution.
The hazardous waste services segment of the Company's business has
been accounted for as a discontinued operation and, accordingly, the
accompanying supplemental consolidated financial statements of the Company have
been restated to report separately the net assets and operating results of
these discontinued operations. A summary of the net assets of this segment is
as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1994 1993
------- -------
<S> <C> <C>
Current assets . . . . . . . . . . . $13,595 $14,735
Non-current assets . . . . . . . . . 26,347 34,783
------- -------
Total assets . . . . . . . . . . 39,942 49,518
------- -------
Current liabilities . . . . . . . . . 13,040 14,465
Non-current liabilities . . . . . . . 6,610 18,181
------- -------
Total liabilities . . . . . . . 19,650 32,646
------- -------
Net assets of discontinued operations $20,292 $16,872
======= =======
</TABLE>
A summary of the operating results of the Company's hazardous waste
services segment is as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1994 1993 1992
-------- --------- --------
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . $ 46,599 $ 61,617 $ 74,668
Expenses:
Cost of operations . . . . . . . . . . . . . . . . . 33,377 47,028 54,634
Selling, general and administrative . . . . . . . . 10,349 13,480 15,141
Restructuring and unusual charges . . . . . . . . . 8,484 14,906 577
-------- --------- --------
Operating income (loss) . . . . . . . . . . . . . . . . ( 5,611) (13,797) 4,316
Other expense, net of other income . . . . . . . . . . 353 992 1,327
-------- --------- --------
Income (loss) before extraordinary
gain and income taxes . . . . . . . . . . . . . . . ( 5,964) ( 14,789) 2,989
Income tax provision (benefit) . . . . . . . . . . . . ( 3,092) ( 210) 1,442
-------- --------- --------
Income (loss) before extraordinary gain . . . . . . . . ( 2,872) ( 14,579) 1,547
Extraordinary gain on conversion of debt, net of income
tax provision of $3,092 . . . . . . . . . . . . . . 5,556 - -
-------- --------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 2,684 $ (14,579) $ 1,547
======== ========= ========
</TABLE>
12
<PAGE> 13
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In connection with the Distribution, the Company has entered into the
Distribution Agreement with RESI which sets forth the terms of the
Distribution. Under this agreement, Republic contributed the intercompany
balance to RESI's equity at the date of the Distribution. In April 1995,
Republic contributed approximately $2.5 million to RESI to repay certain
indebtedness of RESI and to provide working capital to RESI. Additionally, the
Company reclassified approximately $36.3 million to retained earnings from
additional paid-in capital in 1995 to effect the spin-off under Delaware law.
As a result of these transactions, the Company's equity at the date of the
Distribution was reduced by approximately $23.0 million.
The Company has also entered into various agreements with RESI which
govern certain matters between the two parties such as ongoing corporate
services to be provided by the Company to RESI, insurance coverage for RESI for
a certain period after the date of the Distribution, treatment of various tax
matters for periods through the date of the Distribution, responsibility for
any adjustments as a result of audit by any taxing authority and
indemnification between both parties. Republic has agreed to continue to
provide certain corporate services, including insurance, administration, human
resources management, financial reporting and tax, legal and environmental
engineering services to RESI after the Distribution until terminated by either
party. The Corporate Services Agreement and the Tax Sharing Agreement are
expected to be terminated by the end of 1995. During 1994, 1993 and 1992, the
Company allocated expenses for these services to RESI totaling $851,000,
$839,000 and $739,000, respectively, on a basis that approximated the cost of
actual services provided.
Since 1992, RESI has participated in the Company's combined risk
management programs for property and casualty insurance and will continue to do
so until the expiration of the Company's existing policies in June 1995. In
1994, 1993 and 1992, the Company charged RESI for annual premiums and reported
losses of $1,678,000, $1,745,000 and $1,116,000, respectively. RESI has agreed
to indemnify the Company against increases in current losses and any future
losses incurred in connection with RESI's participation in these programs.
SALE OF DEMOLITION AND EXCAVATION SUBSIDIARY IN 1992. In 1992, the
Company sold its demolition and excavation subsidiary, Republic Environmental
Services, Inc. ("RES Demolition") and recorded a non-cash loss on disposition
of $17.6 million. This segment of the Company's business was accounted for as
a discontinued operation and, accordingly, the Company's supplemental
consolidated financial statements report separately the operating results of
these discontinued operations through the date of sale in 1992. In 1992,
revenues and net loss of the discontinued operations of RES Demolition were
$2.9 million and $2.7 million, respectively.
3. BUSINESS COMBINATIONS
GENERAL. From January 1, 1992 through December 31, 1994, the Company
acquired five businesses, all of which were accounted for under the purchase
method of accounting with the exception of RESI (formerly known as Stout
Environmental, Inc.), which was accounted for as a pooling-of-interests. These
businesses were acquired for a combination of cash and shares of the
Company's Common Stock. The value of the Common Stock reflects the market
value of the Company's Common Stock at the closing of each acquisition,
adjusted to account for restrictions common to unregistered securities and for
registration rights, if applicable. The final determination of the cost of
certain of the Company's acquisitions is subject to the resolution of certain
contingencies, primarily the determination of contingent consideration payable
as described in Note 9. The operating results of the acquired businesses
accounted for under the purchase method of accounting have been included in
the supplemental consolidated financial statements from the dates of
acquisition.
The following table sets forth the purchase price of the Company's
acquisitions accounted for under the purchase method of accounting (in
thousands):
13
<PAGE> 14
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1993 1992
------- ------- --------
<S> <C> <C> <C>
Cash (net of cash
acquired) . . . . . . . $ 4,059 $ 5,664 $ 2,899
Common stock (including
contingent consideration
earned) . . . . . . . . 105 266 2,964
------- ------- --------
$ 4,164 $ 5,930 $ 5,863
======= ======= ========
</TABLE>
The following describes each of the acquisitions completed by the
Company in 1994:
LAUGHLIN ENVIRONMENTAL, INC. In February 1994, the Company acquired
Laughlin Environmental, Inc. ("Laughlin"), located in the Houston, Texas area.
Laughlin provides environmental services on a contract basis and serves to
complement the Company's special waste landfill located in the Dallas, Texas
area. Additionally, Laughlin internalized a portion of its operating costs in
1994 through the acquisition of the assets of a subcontractor.
WASTE HANDLING SYSTEMS, INC. In October 1994, the Company acquired
Waste Handling Systems, Inc. ("Waste Handling") which is located in Rutherford
County, North Carolina, approximately 75 miles west of Charlotte. Waste
Handling is a collection operation adjacent to the Company's existing landfill
and collection operation in southwest North Carolina and services collection
routes in a 30 mile radius of Forest City, North Carolina through the
transportation of municipal solid waste.
MIDWEST SANITATION SERVICE, INC. In November 1994, the Company
acquired Midwest Sanitation Service, Inc. ("Midwest"). Midwest is a landfill
and collection operation which was the largest private hauler in North Dakota.
As discussed in Note 9, the Company also paid additional consideration
to the sellers of previously completed acquisitions for the attainment of
certain earnings levels as specified in the respective acquisition agreements.
UNAUDITED PRO FORMA RESULTS OF OPERATIONS. The Company's unaudited
pro forma consolidated results of operations for 1994, 1993 and 1992 shown
below are presented assuming that the Company's business combinations had been
consummated January 1, 1992 (in thousands):
14
<PAGE> 15
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenue as reported . . . . . . . . . . . . . . . . . . . $ 97,460 $ 87,900 $ 76,198
Revenue of businesses acquired . . . . . . . . . . . . . 2,890 10,389 6,808
-------- -------- --------
Pro forma revenue . . . . . . . . . . . . . . . . . . . . $100,350 $ 98,289 $ 83,006
======== ======== ========
Income (loss) from continuing operations as reported . . $ 11,192 $ (904) $ 6,534
Net income of businesses acquired . . . . . . . . . . . . 97 353 443
Pro forma adjustments (A) . . . . . . . . . . . . . . . . 126 (11) 113
-------- -------- --------
Pro forma income (loss) from continuing operations . . . $ 11,415 $ (562) $ 7,090
======== ======== ========
Earnings (loss) per common and common equivalent
share from continuing operations as reported . . . . . $ 0.34 $ (0.03) $ 0.21
Effect of businesses acquired and pro forma adjustments . - 0.01 0.01
-------- -------- --------
Pro forma earnings (loss) per common and common
equivalent share from continuing operations . . . . . . $ 0.34 $ (0.02) $ 0.22
======== ======== ========
Weighted average common and common equivalent
shares as reported . . . . . . . . . . . . . . . . . . 32,607 32,698 31,541
Effect of shares issued for business acquisitions . . . . - - 349
-------- -------- --------
Pro forma weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . . . . 32,607 32,698 31,890
======== ======== ========
</TABLE>
(A) Pro forma adjustments include: (i) depreciation expense resulting from the
additional value assigned to acquired assets computed in accordance with the
Company's accounting policies; (ii) contractual reductions of former owners'
and officers' salaries and (iii) adjustments to the income tax provision to
reflect the Company's effective tax rate.
The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of January 1, 1992.
4. RESTRUCTURING AND UNUSUAL CHARGES
In the fourth quarter of 1993, the Company recorded restructuring and
unusual charges of $10.0 million based on the Company's reevaluation of each of
its solid waste operations. As a result of this reevaluation, the Company
decided to close one of its facilities due to low waste volumes and abandon
its permitting effort at another facility because of limited market opportunity
in that area and delays in the permitting process. In accordance with industry
standards, the Company provides for closure and post-closure over the life of a
facility. Accordingly, the Company fully provided for these costs on the
closed facility. The provision for closure and post-closure and the write-off
of property and equipment and accumulated permitting costs associated with
these facilities totaled $6.6 million. In conjunction with the reevaluation,
the Company also decided to terminate certain contracts and employees. Costs
related to employee relocations and terminations and other contract
terminations totaled $1.2 million. In addition, the Company also reevaluated
its exposure related to litigation and environmental matters and provided
additional accruals aggregating $2.2 million for the costs to defend or settle
certain litigation and environmental matters.
15
<PAGE> 16
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In March 1992, the Company acquired Stout Environmental, Inc. in a
merger transaction accounted for in accordance with the pooling-of-interests
method. In connection with the merger, the Company incurred substantial legal,
accounting, consulting and financing costs aggregating $2.2 million, which was
recorded as an unusual charge.
5. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
The computation of weighted average common and common equivalent
shares used in the calculation of earnings (loss) per share is shown below (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------- ---------------------------------
1995 1994 1994 1993 1992
------ ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Common shares outstanding . . . . . . . . . . . . . . . . . 32,373 32,611 32,376 32,538 32,471
Effect of using weighted average common shares
outstanding during the year . . . . . . . . . . . . . . . (5) - - - (1,116)
Common shares issuable under options, warrants and earn-out
agreements . . . . . . . . . . . . . . . . . . . . . . . . 1,751 49 82 160 186
Weighted average effect of treasury stock purchases . . . . - - 149 - -
------ ------ ------ ------ ------
Weighted average common and common equivalent shares . . . 34,119 32,660 32,607 32,698 31,541
====== ====== ====== ====== ======
</TABLE>
The difference between shares for primary and fully diluted earnings
(loss) per common and common equivalent share was not significant for the
periods presented.
6. PROPERTY AND EQUIPMENT
A summary of property and equipment is shown below (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------
1994 1993
-------- --------
<S> <C> <C>
Land, landfills and improvements. . . . . . . . . . . $ 83,069 $ 79,685
Vehicles and equipment . . . . . . . . . . . . . . . 38,977 31,937
Buildings and improvements . . . . . . . . . . . . . 6,526 4,816
Furniture and fixtures . . . . . . . . . . . . . . . 1,658 1,355
-------- --------
130,230 117,793
Less accumulated depreciation and depletion . . . (25,574) (19,691)
-------- --------
$104,656 $ 98,102
======== ========
</TABLE>
7. ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
The Company owns and operates ten solid waste landfills in the United
States. The Company is responsible for closure and post-closure monitoring and
maintenance costs at these landfills which are currently operating. Closure
and post-closure costs are provided in accordance with Subtitle D regulations.
Estimated aggregate closure and post-closure costs are to be fully accrued for
these landfills at the time that such facilities cease to accept waste and are
closed. Considering existing accruals at the end of 1994, approximately $7.6
million of such costs are to be expensed over the remaining lives of these
facilities. Included with the accrued costs associated with landfills at
December 31, 1994 is $179,000 related to post-closure activities at a closed
solid waste landfill formerly owned by the Company.
16
<PAGE> 17
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As discussed in Note 9, the Company is involved in litigation and is
subject to ongoing environmental investigations by certain regulatory agencies,
as well as other claims and disputes that could result in additional litigation
which are in the normal course of business.
For a discussion of the Company's significant accounting policies
related to these environmental and landfill costs, see Note 1 - "Summary of
Significant Accounting Policies - Accrued Environmental and Landfill Costs".
8. NOTES PAYABLE AND LONG-TERM DEBT
SHORT-TERM BORROWINGS AND NOTES PAYABLE. Notes payable at December
31, 1994 and 1993 consisted primarily of short-term insurance premium
financing.
LONG-TERM DEBT. Long-term debt consists of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------
1994 1993
------ ------
<S> <C> <C>
Revolving credit facility, secured by the stock of the
Company's subsidiaries, interest payable quarterly, at
prime or at a Eurodollar rate plus 1.5% (8.3% as of
December 31, 1994), due September 1996 . . . . . . . . $12,600 $12,200
Notes to banks and financial institutions, secured by
equipment and other assets, interest ranging from 7.0% to
12.9% (weighted average interest rate of 7.2% as of
December 31, 1994), payable monthly through 1998 . . . 10,712 7,530
Notes payable to former stockholders of acquired
companies, secured by common stock of the acquired
companies, interest at 9.5%, payable monthly
through 2004 . . . . . . . . . . . . . . . . . . . . . 6,058 6,114
Other notes, secured by equipment and
other assets, interest ranging from 4.0% to 11.5% (weighted
average interest rate of 6.0% as of December 31, 1994),
payable monthly through 2004 . . . . . . . . . . . . . 6,974 6,444
------- -------
36,344 32,288
Less current maturities . . . . . . . . . . . . . . . . (4,247) (3,953)
------- -------
$32,097 $28,335
======= =======
</TABLE>
In September 1993, the Company entered into a revolving credit
facility agreement with a U.S. commercial bank in the amount of $25,000,000,
which includes a line of credit with $10,000,000 available for standby letters
of credit. At December 31, 1994, the Company had standby letters of credit of
$5,591,000 outstanding under this facility and $6,809,000 available under the
revolving credit facility. In 1995, the Company extended the due date from
September 1996 to December 1997 and increased the availability under this
facility to $35,000,000. The credit agreement requires the Company, among
other restrictions, to meet certain financial ratios and places certain
limitations on dividend payments and other borrowing. As of December 31, 1994,
the Company was in compliance with all covenants under the credit agreement.
17
<PAGE> 18
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1994, aggregate maturities of long-term debt were as
follows (in thousands):
<TABLE>
<S> <C>
1995 . . . . . . . . . . . . . . . . . . $ 4,247
1996 . . . . . . . . . . . . . . . . . . 15,503
1997 . . . . . . . . . . . . . . . . . . 4,074
1998 . . . . . . . . . . . . . . . . . . 2,518
1999 . . . . . . . . . . . . . . . . . . 1,619
Thereafter . . . . . . . . . . . . . . . 8,383
-------
$36,344
=======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS. On May 3, 1991, the Company filed an action against
G.I. Industries, Inc. ("GI"), Manuel Asadurian, Sr. and Mike Smith in the
United States District Court for the Central District of California (the
"Court"). The Company requested a declaratory judgment that it did not
anticipatorily breach a merger agreement (the "Merger Agreement") between the
Company and GI and that the Merger Agreement had been properly terminated. The
Company also sought to recover $600,000 from GI, plus interest and costs, with
respect to a certain financial guaranty provided by Republic in 1990 for the
benefit of GI. In response to the Company's action, GI filed a counterclaim
alleging that the Company breached the Merger Agreement and that it had
suffered damages in excess of $16.0 million. In August 1993, the Court
rendered a ruling in favor of Republic and found that GI did not meet its
burden in proving that it could have performed its obligations under the Merger
Agreement. GI appealed that decision in September 1993. In March 1995, the
United States Court of Appeals for the Ninth Circuit (the "Court of Appeals")
vacated the August 1993 decision and remanded the case back to the Court for a
hearing on damages. The Company filed a motion for reconsiderations and
suggestion of en banc consideration with the Court of Appeals in an effort to
restore the original ruling denying GI's claim. On May 12, 1995, the Court of
Appeals denied the motion and suggestion. The Company filed a petition for
writ of certiorari with the United States Supreme Court, which was denied. The
Court has commenced proceedings that may lead to a trial on damages.
Subsequent to the Company's seeking recovery from GI for the guaranty,
GI filed for protection under Chapter 11 of the Bankruptcy Code. The Company
is a secured creditor and anticipates a complete recovery of the $600,000, plus
interest and costs, including attorneys' fees.
On November 9, 1992, A&B Investors, Inc. ("A&B") filed an action
against the Company in the District Court of Harris County, Texas alleging,
among other claims, breach of contract and securities fraud. On July 14, 1995,
this matter was resolved in an out-of-court settlement which did not have a
material effect on the Company's supplemental consolidated results of
operations or financial position.
Western Waste Industries, Inc. ("Western") filed an action against the
Company and others on July 20, 1990 for various causes of action including
interference with business relations and seeks $24.0 million in damages. The
lawsuit stems from Western's attempts to acquire Best Pak Disposal, Inc. This
case is currently scheduled for trial in late 1995 or early 1996.
While the results of the legal proceedings described above and other
proceedings which arose in the normal course of business cannot be predicted
with certainty, management believes that losses, if any, resulting from the
ultimate resolution of these matters will not have a material adverse effect on
the Company's supplemental consolidated results of operations or financial
position.
18
<PAGE> 19
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ENVIRONMENTAL MATTERS. The Company's solid waste and environmental
services activities are conducted in the context of a developing and changing
statutory and regulatory framework, aggressive government enforcement and a
highly visible political environment. Governmental regulation of the waste
management industry requires the Company to obtain and retain numerous
governmental permits to conduct various aspects of its operations. These
permits are subject to revocation, modification or denial. The costs and other
capital expenditures which may be required to obtain or retain the applicable
permits or comply with applicable regulations could be significant.
In 1992, the Company received notices from Imperial County, California
(the "County") and the California Department of Toxic Substances Control
("DTSC") that spent filter elements (the "Filters") from geothermal power
plants, which had been deposited at the Company's Imperial Landfill for
approximately five years, were classified as hazardous waste under California
environmental regulations. Under United States EPA regulations, the Filters
are not deemed hazardous waste as they are associated with the production of
geothermal energy.
In February 1993, the DTSC denied the Company's October 1992 request
to classify the Filters as "special waste" under California regulations.
DTSC's denial indicated that the Filters met all technical and analytical
requirements for reclassification as a special waste, but that a procedural
requirement related to the timing of the reclassification request was not met.
The Company is currently conducting active discussions with all appropriate
California regulatory agencies in order to seek a variance under California
regulations which will reclassify the Filters as a special waste, irrespective
of the reclassification application submittal timing issue, and allow the
Filters to be left in the landfill. If this occurs, the state, regional and
local regulatory agencies may nevertheless require that the affected area of
the landfill be capped and that the affected area accept no additional waste.
A decision on the reclassification issue is expected by October 1995. In the
event that the variance is not granted, the Regional Water Quality Control
Board and Integrated Waste Management Board will determine what remedial
measures must be taken based on the Filters' classification as a California
hazardous waste. One of those measures could include the removal of the
Filters or the closure of a portion of the landfill.
Management is currently unable to determine (i) whether the waste will
ultimately be classified as hazardous, (ii) what action, if any, will be
required as a result of this issue or (iii) what liability, if any, the Company
will have as a result of this inquiry. In January 1994, the Company filed suit
against the known past and present owners and operators of the geothermal power
plants for all losses, fines and expenses the Company incurs associated with
the resolution of this matter, including loss of airspace at the landfill, in
the United States District Court for the Southern District of California,
alleging claims for CERCLA response costs recovery and intentional
misrepresentation among other claims. The Company seeks to recover actual
expenses and punitive damages. Discovery and regulatory studies are
proceeding. The Company believes it will prevail, but no amounts have been
accrued for any recovery of damages.
Although it is possible that losses exceeding amounts already recorded
may be incurred upon the ultimate resolution of the environmental matters
described above, management believes that such losses, if any, will not have a
material adverse effect on the Company's supplemental consolidated results of
operations or financial position.
OPERATING LEASE COMMITMENTS. The Company and its subsidiaries lease
portions of their premises and certain equipment under various operating lease
agreements. At December 31, 1994, total minimum rental commitments becoming
payable under all operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . $1,336
1996 . . . . . . . . . . . . . . . . . . . . . . . $1,190
1997 . . . . . . . . . . . . . . . . . . . . . . . $ 586
1998 . . . . . . . . . . . . . . . . . . . . . . . $ 109
1999 . . . . . . . . . . . . . . . . . . . . . . . $ 53
Thereafter . . . . . . . . . . . . . . . . . . . . $ 27
</TABLE>
19
<PAGE> 20
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total rental expense incurred under operating leases was $1,438,000
$1,325,000 and $1,028,000 in 1994, 1993 and 1992, respectively.
POSTRETIREMENT BENEFITS. The Company does not provide postretirement
or postemployment benefits to its employees and, accordingly, has not reflected
any cost arising from the adoption of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" or SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." Effective January 1, 1994, the Company
instituted a defined contribution 401(k) savings plan for employees meeting
certain employment requirements. Under the plan, the Company may, at
its discretion, match a portion of employee contributions based on the
profitability and growth of the Company. No contributions under this plan were
made by the Company in 1994.
CONTINGENT CONSIDERATION. In certain of the business acquisitions
accounted for as purchases, the Company has agreed to issue contingent
consideration in the form of additional shares of the Company's common stock
and, in some cases, additional cash to the sellers of those businesses based on
the attainment of certain earnings levels and other contingencies. During the
years ended December 31, 1994, 1993 and 1992, the Company has issued
approximately 29,000, 160,000 and 186,000 shares of common stock and paid
$623,000, $432,000 and $40,000, respectively, for the attainment of such
earnings levels. These amounts have been capitalized as additional purchase
price. The maximum contingent consideration to be earned over the next
eight years as of December 31, 1994 consists of approximately 406,000 shares of
the Company's common stock and $412,000. Under the terms of an acquisition
agreement, the Company has agreed to pay additional consideration to the former
owners of a landfill site of a maximum of $2,500,000 upon the expansion of the
landfill airspace by up to 2,500,000 cubic yards.
OTHER MATTERS. At December 31, 1994, the Company had made cash
deposits into escrow accounts which total $735,000 in connection with landfill
closure and certain other obligations, of which $656,000 was included in cash
and cash equivalents and $79,000 was included in other assets. Additionally,
the Company has bonding facilities for the issuance of payment, performance and
bid bonds, of which $3,945,000 in bonds were outstanding at December 31, 1994.
The Company also has facilities available for the issuance of standby letters
of credit, of which $4,027,000 in letters of credit were outstanding at
December 31, 1994.
10. STOCKHOLDERS' EQUITY
PREFERRED STOCK. The Company has 5,000,000 authorized shares of
preferred stock, $.01 par value per share, none of which are issued or
outstanding. The Board of Directors has the authority to issue the preferred
stock in one or more series and to establish the rights, preferences and
dividends.
TREASURY STOCK. In October 1993, the Board of Directors authorized
the Company to repurchase up to 1.3 million shares, or 4.8% of its then
outstanding Common Stock, through October 1994, as deemed appropriate by
management. Through October 1994, 281,000 shares were repurchased for an
aggregate value of $856,000. In October 1994, the Board of Directors
authorized management to continue the repurchase program and to repurchase up
to an additional 1.3 million shares, or 4.8% of its then outstanding Common
Stock, through October 1995. The repurchasing of shares is intended to achieve
a more favorable balance between the market supply of the shares and market
demand, as well as take advantage of the relatively low price of the Company's
Common Stock. Repurchases have been effected at prevailing market prices from
time to time on the open market. The repurchased shares represent additions
to treasury stock. In October 1994, the Board of Directors authorized the
retirement of the 281,000 shares held in treasury, which were retired in the
fourth quarter of 1994. In December 1994, 28,993 shares of the Company's
Common Stock were returned to the Company in a settlement with a former owner
of one of its
20
<PAGE> 21
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
subsidiaries. These shares represented additions to treasury stock and were
subsequently retired in December 1994. The Company's stock repurchase program
expires in October 1995 and the Company does not currently plan to repurchase
any additional Common Stock.
1991 STOCK OPTION PLAN. In October 1991, the Board of Directors
approved a stock option plan (the "1991 Plan"), which was subsequently
approved by the Company's stockholders at the 1992 Annual Meeting of
Stockholders, under which employees and officers of the Company or any of its
subsidiaries or parent corporations and members of the Board of Directors of
the Company may be awarded options to purchase common shares. A maximum of
5,000,000 common shares, less shares issued or purchased pursuant to the 1990
Stock Option and Stock Purchase Plan (the "1990 Plan") as discussed below, have
been reserved for issuance to participants in the 1991 Plan in the form of
stock options. The option price under the 1991 Plan is to be determined by the
Board of Directors but shall not be less than the fair market value of the
common shares on the date the stock option is granted. Options are subject to
adjustment upon certain changes in the capital structure of the Company, such
as a stock dividend, stock split or other similar events.
1990 STOCK OPTION AND STOCK PURCHASE PLAN. In April 1990, the Board
of Directors approved a stock option and stock purchase plan for certain key
employees, directors, consultants and advisors. A maximum of 2,500,000 shares
of common stock were reserved for issuance to participants in the plan in the
form of either stock options or stock purchases, as determined by the
Compensation Committee. Options granted under the plan expire ten years from
the date of grant and vest over varying periods as determined by the
Compensation Committee. During the year ended December 31, 1990, 700,000
shares were purchased at $2.50 to $4.50 per share. When shares were purchased
under the 1990 Plan, the participant paid the par value of the shares in cash,
and issued a nonrecourse promissory note to the Company for the balance of the
purchase price. These promissory notes along with interest are due ten years
from the date of issuance and are collateralized by the shares purchased.
During 1992, the Company received payment of $648,000 on notes receivable
arising from stock purchase agreements pursuant to the 1990 Plan. The 1990
Plan has been replaced by the 1991 Plan, as discussed above.
Activity under the Company's 1990 and 1991 stock option plans during
each of the two years ended December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
1990 Plan 1991 Plan Total Option Price
--------- --------- ----- ------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1992 . . . . . . . 598,000 348,500 946,500 $2.50-$14.50
Granted . . . . . . . . . . . . . . . . . . 100,000 401,900 501,900 $4.00-$12.50
Cancelled . . . . . . . . . . . . . . . . . -- (331,900) (331,900) $7.25-$10.63
------- --------- ---------
Outstanding at December 31, 1993 . . . . . . . 698,000 418,500 1,116,500 $2.50-$14.50
Granted . . . . . . . . . . . . . . . . . . -- 176,000 176,000 $2.69-$ 3.38
Cancelled . . . . . . . . . . . . . . . . . (50,000) (130,500) (180,500) $2.69-$10.63
------- --------- ---------
Outstanding at December 31, 1994 . . . . . . . 648,000 464,000 1,112,000 $2.50-$14.50
======= ========= =========
Exercisable at December 31, 1994 . . . . . . . 648,000 113,450 761,450 $9.92(A)
======= ========= =========
Available for future grant at December 31, 1993 763,000 2,081,500 2,844,500
Cancelled . . . . . . . . . . . . . . . . . 50,000 130,500 180,500
Granted . . . . . . . . . . . . . . . . . . -- (176,000) (176,000)
-------- --------- ---------
Available for future grant at December 31, 1994 813,000 2,036,000 2,849,000
======== ========= =========
</TABLE>
___________________________________
(A) Represents the weighted average option price of options exercisable at
December 31, 1994.
21
<PAGE> 22
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COMMON STOCK WARRANTS. The Company has awarded warrants to purchase
shares of Common Stock to certain executive officers, directors, employees and
affiliates as additional incentive to continue in the service of the Company.
The warrants vest at 20% per year and are exercisable, with respect to each
portion vested, for a period of four years following such vesting. Activity
involving Common Stock warrants during each of the two years ended December 31,
1994 are summarized as follows:
<TABLE>
<CAPTION>
Exercise
Warrants Price Expiration Date
------------ ------------- ---------------------------
<S> <C> <C> <C>
Outstanding at December 31, 1992 . . . 6,480,750 $6.00-$12.75 June 1993-May 2001
Issued . . . . . . . . . . . . . . . 515,000 $4.00 December 2000
Expired . . . . . . . . . . . . . . (4,915,000) $6.50-$12.75 -
----------
Outstanding at December 31, 1993 . . . 2,080,750 $4.00-$12.75 August 1995-December 2000
Issued . . . . . . . . . . . . . . . 200,000 $2.69 May 2003
----------
Outstanding at December 31, 1994 . . . 2,280,750 $2.69-$12.75 August 1995-May 2003
==========
Exercisable at December 31, 1994 . . . 1,250,750 $7.61(A)
==========
</TABLE>
___________________________
(A) Represents the weighted average exercise price of warrants exercisable at
December 31, 1994.
11. INCOME TAXES
Kertz elected S-corporation status for income tax reporting purposes on
July 1, 1993 at which time deferred tax balances were eliminated through a
credit to the deferred income tax provision. Additionally, United has also
elected S-corporation status for federal and state income tax reporting
purposes. As a result, net income and the related differences that arise in
the recording of income and expense items for financial reporting and income
tax reporting purposes have been included in the individual tax returns of the
former stockholders of these entities. Upon the closing of the respective
merger transactions, Kertz and United were no longer eligible for S-corporation
status. Deferred income taxes recorded at closing upon the change in the tax
status were not material to the supplemental consolidated financial statements.
The components of the income tax provision related to continuing
operations are shown below (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 644 $ 541 $ 2,266
State . . . . . . . . . . . . . . . . . . . . 330 166 127
------- -------- -------
974 707 2,393
Federal deferred . . . . . . . . . . . . . . . . 2,919 (1,677) (602)
Tax reserve adjustments . . . . . . . . . . . . (1,963) - (1,538)
Change in valuation allowance . . . . . . . . . (1,242) 1,242 -
------- -------- -------
Income tax provision . . . . . . . . . . . . . . $ 688 $ 272 $ 253
======= ======== =======
</TABLE>
In addition to the above, the Company recorded an income tax benefit
of $210,000 and $123,000 in 1993 and 1992, respectively, related to its
discontinued operations.
In 1992, the Company changed its method of accounting for income taxes
from the method required under SFAS No. 96 to the method required under SFAS
No. 109. Since the approach under both statements is similar, there was no
significant income effect of the change on the recording of income taxes.
Under SFAS No. 109, deferred tax assets or liabilities at the end of each
period are determined by applying the current tax rate to the difference
between the financial reporting and income tax basis of assets and liabilities.
SFAS No. 109 was adopted by Southland in its fiscal year ended
September 30, 1993. The cumulative effect of the change for the prior periods
for Southland was $462,000 and has been included as a charge to income in 1993.
Although the acquisition of Southland has been accounted for under the
pooling-of-interests method of accounting, the effect of the change in
accounting principle was not material to require the conforming of transition
methods.
22
<PAGE> 23
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net operating loss ("NOL") carryforwards are recognized under SFAS No.
109 unless it is "more likely than not" that they will not be realized. In
1993, the Company recorded a $1,242,000 valuation allowance related to the
realization of deferred tax assets generated as a result of the 1993
restructuring and unusual charges. This valuation allowance was recorded due
to the uncertainty surrounding the future utilization of such deferred tax
assets. In 1994, the valuation allowance was eliminated based on the expected
realization of such deferred tax assets.
In the years immediately following an acquisition, the Company
provides income taxes at the statutory income tax rate applied to pre-tax
income. As part of its tax planning to reduce effective tax rates and cash
outlays for taxes, the Company employs a number of strategies such as combining
entities to reduce state income taxes, claiming tax credits not previously
claimed and recapturing taxes previously paid by acquired companies. At such
time as these reductions in the Company's deferred tax liabilities are
determined to be realizable, the impact of the reduction is recorded as tax
reserve adjustments in the tax provision. The Company's unaudited income tax
provision for the first quarter of 1995 was offset by such adjustments. The
Company's unaudited income tax provision of approximately 38% for the three and
six months ended June 30, 1994 was offset by reductions in valuation allowance,
as well as tax reserve adjustments.
A reconciliation of the statutory federal income tax rate to the
Company's effective tax rate as reported in the accompanying supplemental
consolidated statements of operations is shown below:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate . . . . . . . 34.0% (34.0)% 34.0%
Amortization of goodwill . . . . . . . . . . . 0.8 15.2 0.7
State income taxes, net of federal benefit . . 2.6 26.3 1.2
Tax reserve adjustments . . . . . . . . . . . . (16.5) - (22.7)
Change in valuation allowance . . . . . . . . . (10.5) 197.0 -
S-corporation earnings . . . . . . . . . . . . (4.9) (166.7) (9.2)
Other, net . . . . . . . . . . . . . . . . . . 0.3 5.2 (0.3)
----- ----- -----
Effective tax rate . . . . . . . . . . . . . 5.8% 43.0% 3.7%
===== ===== =====
</TABLE>
23
<PAGE> 24
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Components of the net deferred income tax liability are shown below
(in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------
1994 1993
---- ----
<S> <C> <C>
Deferred income tax liabilities:
Book basis in property over tax basis . . . . . . . . . $20,638 $20,981
Book capitalization of costs expensed for tax . . . . . 3 36
------- -------
20,641 21,017
------- -------
Deferred income tax assets:
Net operating losses . . . . . . . . . . . . . . . . . (5,185) (5,890)
Accrued environmental and landfill costs . . . . . . . (2,761) (3,054)
Accruals not currently deductible . . . . . . . . . . . (773) (1,424)
------- -------
(8,719) (10,373)
------- -------
11,922 10,644
Valuation allowance . . . . . . . . . . . . . . . . . . . . - 1,242
------- -------
Net deferred income tax liability . . . . . . . . . . . . . $11,992 $11,886
======= =======
</TABLE>
At December 31, 1994, the Company had available U.S. NOL carryforwards
of approximately $15,249,000 which expire $7,994,000, $6,342,000 and $913,000
in the years 2006, 2007 and 2008, respectively.
12. RELATED PARTY TRANSACTIONS
The Company has entered into an agreement to lease office space for
one of its subsidiaries with the former owner of this subsidiary who is a
current officer of this subsidiary. The Company also utilizes companies
affiliated with former owners of acquired businesses who are current officers
of the Company's subsidiaries for hauling and other services. Aggregate
payments for leases and such services were $132,000, $1,139,000 and $827,000 in
1994, 1993 and 1992, respectively. In September 1993, the Company internalized
a portion of these hauling services through the acquisition of substantially
all of the assets of a hauling company owned by an officer of a subsidiary of
the Company for $370,000 cash.
24
<PAGE> 25
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. OPERATIONS BY INDUSTRY SEGMENT
The following tables present information regarding the Company's
different industry segments based on the historical operations of the Company
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1993 1992
---------- ---------- -----------
<S> <C> <C> <C>
Revenue
Solid waste services . . . . . . . . . . . . . $ 84,517 $ 72,178 $ 62,560
Electronic security services . . . . . . . . . 12,943 15,722 13,638
--------- ---------- ----------
$ 97,460 $ 87,900 $ 76,198
========= ========== ==========
Operating income
Solid waste services . . . . . . . . . . . . . $ 14,078 421 5,627
Electronic security services . . . . . . . . . 213 612 356
Interest and other income (expense), net . . . . . . . (2,411) (1,665) 804
--------- ---------- ---------
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . $ 11,880 $ (632) $ 6,787
========= ========== =========
Depreciation, depletion and amortization
Solid waste services . . . . . . . . . . . . . $ 7,570 $ 6,244 $ 4,674
Electronic security services . . . . . . . . . 212 202 122
--------- ---------- ---------
$ 7,782 $ 6,446 $ 4,796
========= ========== =========
Capital expenditures
Solid waste services . . . . . . . . . . . . . $ 11,019 $ 5,988 $ 14,682
Electronic security services . . . . . . . . . 483 629 404
--------- ---------- ---------
$ 11,502 $ 6,617 $ 15,086
========= ========== =========
Identifiable assets
Solid waste services . . . . . . . . . . . . . $ 138,538 $ 125,456 $ 118,082
Electronic security services . . . . . . . . . 2,481 2,438 1,639
--------- ---------- ---------
Total identifiable assets . . . . . . . . . . . 141,019 127,894 119,721
Net assets of discontinued operations . . . . . . . . . 20,292 16,872 28,533
--------- ---------- ---------
Total assets . . . . . . . . . . . . . . . . . $ 161,311 $ 144,766 $ 148,254
========= ========== =========
</TABLE>
25
<PAGE> 26
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue 1994 $ 22,520 $24,831 $24,897 $ 25,212
1993 $ 20,481 $22,798 $22,402 $ 22,219
Gross profit 1994 $ 7,950 $ 8,388 $ 8,846 $ 8,162
1993 $ 7,427 $ 8,147 $ 8,036 $ 7,518
Income (loss) from 1994 $ 1,910 $ 3,144 $ 3,431 $ 2,707
continuing operations 1993 $ 1,981 $ 2,186 $ 2,401 $ (7,472)(a)
Net income (loss) 1994 $ 1,764 $ 3,971 $ 4,419 $ 3,722
1993 $ 1,510 $ 2,081 $ 2,799 $(22,335)
Earnings (loss) per share from 1994 $ 0.06 $ 0.10 $ 0.11 $ 0.08
continuing operations 1993 $ 0.06 $ 0.07 $ 0.07 $ (0.23)(a)
</TABLE>
____________
(a) As discussed in Note 4, restructuring and unusual charges of $10,040,000
were recorded by the Company in the fourth quarter of 1993 to reorganize
its operations.
15. SUBSEQUENT EVENTS
(A) EQUITY INVESTMENT BY H. WAYNE HUIZENGA AND ASSOCIATES, WESTBURY
(BERMUDA) LTD. AND HARRIS W. HUDSON. On May 21, 1995, the Company agreed to
issue and sell in aggregate 8,350,000 shares of Common Stock and warrants to
purchase an additional 16,700,000 shares of Common Stock to Mr. H. Wayne
Huizenga, Westbury (Bermuda) Ltd. (a Bermuda corporation controlled by Mr.
Michael G. DeGroote, then Chairman of the Board, President and Chief Executive
Officer of Republic) and Mr. Harris W. Hudson, and certain of their assigns for
an aggregate purchase price of $37,575,000. The warrants are exercisable at
prices ranging from $4.50 to $7.00 per share effective August 3, 1995. In July
1995, the Company agreed to sell an additional 1,000,000 shares of Common Stock
each to Mr. Huizenga and Mr. John J. Melk for $13.25 per share for aggregate
proceeds of $26,500,000. These transactions were completed on August 3, 1995.
On August 3, 1995, in connection with the equity investment, Mr.
Huizenga was elected Chairman of the Board of Directors and Chief Executive
Officer of Republic and Mr. DeGroote, former Chairman of the Board, President
and Chief Executive Officer of the Company, was elected Vice Chairman of the
Board. Additionally, Mr. Hudson was appointed as President of the Company and
as a member of the Board of Directors. Mr. Gregory K. Fairbanks was appointed
as Executive Vice President and Chief Financial Officer and Mr. Donald E.
Koogler resigned as a director but remains as Executive Vice President and
Chief Operating Officer of Republic.
26
<PAGE> 27
REPUBLIC WASTE INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(B) PRIVATE PLACEMENT TRANSACTIONS. In July 1995, the Company sold
5,400,000 shares of Common Stock in a private placement transaction for $13.25
per share, resulting in net proceeds of approximately $70 million after
deducting fees and commissions. In September 1995, the Company sold 5,000,000
shares of Common Stock in an additional private placement transaction for
$20.25 per share resulting in net proceeds of approximately $100 million after
deducting fees and commissions.
As a result of the transactions in (A) and (B) above, the Company
received approximately $234 million in cash in July, August and September 1995.
The Company used a portion of these proceeds to repay all outstanding
borrowings under its revolving line of credit facility totaling approximately
$15.5 million plus interest expense.
(C) ACQUISITION OF HUDSON MANAGEMENT CORPORATION AND ENVIROCYCLE,
INC. (the "Hudson Companies"). On August 3, 1995, the Company issued 8.0
million shares of Common Stock in exchange for all of the outstanding shares of
common stock of the Hudson Companies, each of which is owned by Mr. Hudson.
The Hudson Companies, as the third largest solid waste management company in
Florida, provide solid waste collection and recycling services to commercial,
industrial and residential customers. The acquisition will be accounted for
using the purchase method of accounting. Subsequent to the acquisition, the
Company repaid substantially all of the outstanding debt of the Hudson
Companies which totaled approximately $11 million.
27
<PAGE> 28
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
REPUBLIC WASTE INDUSTRIES, INC., AND SUBSIDIARIES AND
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
The following unaudited condensed consolidated pro forma financial
statements include the supplemental consolidated financial statements of
Republic Waste Industries, Inc. and subsidiaries (the "Company") which include
the financial position and results of operations of the following entities:
Kertz Security Systems II, Inc. and Kertz Security Systems, Inc. ("Kertz"), with
which the Company merged in August 1995; United Waste Service, Inc. ("United"),
with which the Company merged in October 1995; and Southland Environmental
Services, Inc. ("Southland"), with which the Company merged in October 1995.
These transactions have been accounted for under the pooling of interests method
of accounting and, accordingly, the Company's supplemental consolidated
financial statements have been retroactively adjusted as if the Company and
Kertz, United and Southland had operated as one entity since inception.
The following unaudited condensed consolidated pro forma balance sheet
presents the pro forma financial position of the Company as of June 30, 1995 as
if the acquisition of Hudson Management Corporation and subsidiaries and
Envirocycle, Inc. ("Hudson") had been consummated as of June 30, 1995. The
balance sheet also contains pro forma adjustments for a series of equity
transactions involving the sale of common stock and warrants (the "Equity
Transactions") as if the Equity Transactions had been consummated as of June
30, 1995.
The following unaudited condensed consolidated pro forma statements of
operations for the six months ended June 30, 1995 and the year ended December
31, 1994 present the pro forma results of continuing operations of the Company
as if the acquisition of Hudson and the Equity Transactions had been
consummated at the beginning of the periods presented. These unaudited pro
forma condensed consolidated financial statements should be read in
conjunction with the respective historical and supplemental consolidated
financial statements and notes thereto of the Company, Hudson and Southland.
The unaudited pro forma income from continuing operations per common and
common equivalent share is based on the combined weighted average number of
common shares and common share equivalents outstanding which include, where
appropriate, the assumed exercise or conversion of warrants and options.
Unless otherwise presented, the difference between primary and fully diluted
earnings per share is not significant. In computing the unaudited pro forma
income from continuing operations per common and common equivalent share, the
Company utilizes the modified treasury stock method. When using the modified
treasury stock method, the proceeds from the assumed exercise of all warrants
and options are assumed to be applied to first purchase 20% of the outstanding
common stock, then to reduce outstanding indebtedness and the remaining
proceeds are assumed to be invested in U.S. government securities or commercial
paper. The increase to income from continuing operations, net of tax, from
such interest savings and interest income was approximately $843,000 on a
primary basis and $0 on a fully diluted basis for the six months ended June 30,
1995. The increase to income from continuing operations for the year ended
December 31, 1994 was approximately $1,808,000.
The unaudited condensed consolidated pro forma financial statements were
prepared utilizing the accounting policies of the respective entities as
outlined in their historical financial statements except as described in the
accompanying notes. The acquisition of Hudson was accounted for under the
purchase method of accounting. Accordingly, the unaudited condensed
consolidated pro forma financial statements reflect the Company's preliminary
allocation of purchase price of Hudson which will be subject to further
adjustments as the Company finalizes the allocation of the purchase price in
accordance with generally accepted accounting principles. The unaudited pro
forma condensed consolidated results of operations do not necessarily reflect
actual results which would have occurred if the acquisition or Equity
Transactions had taken place on the assumed dates, nor are they necessarily
indicative of the results of future combined operations.
28
<PAGE> 29
REPUBLIC WASTE INDUSTRIES, INC. AND SUBSIDIARIES AND
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1995
(In thousands)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
THE EQUITY --------------------
COMPANY HUDSON TRANSACTIONS COMBINED DR. CR. PRO FORMA
-------- ------ ------------ -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........ $ 3,278 $ 630 $234,275 $238,183 $56,119(a) $182,064
Accounts receivable, net......... 15,277 5,765 21,042 21,042
Prepaid expenses and other
current assets................. 5,063 2,217 7,280 7,280
-------- ------- -------- -------- -------- ------- -------
Total current assets....... 23,618 8,612 234,275 266,505 56,119 210,386
Property and equipment, net...... 110,273 18,589 128,862 128,862
Goodwill, net of accumulated
amortization................... 16,816 2,679 19,495 $ 68,871(c) 2,679(b) 85,687
Other assets..................... 1,736 51 1,787 1,787
-------- ------- -------- -------- -------- ------- -------
Total assets............... $152,443 $29,931 $234,275 $416,649 $ 68,871 $58,798 $426,722
======== ======= ======== ======== ======== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
expenses....................... $ 12,470 $ 7,154 $ 19,624 $ 19,624
Current maturities of long-term
debt and notes payable......... 5,617 3,596 9,213 $ 9,213(a) -
Other current liabilities........ 2,383 2,316 4,699 4,699
-------- ------- -------- -------- -------- -------- --------
Total current
liabilities.............. 20,470 13,066 33,536 9,213 24,323
Long-term debt, net of current
maturities..................... 37,969 8,937 46,906 46,906(a) -
Accrued environmental and
landfill costs, net of
current maturities............. 7,267 - 7,267 7,267
Deferred income taxes............ 12,904 1,320 14,224 14,224
-------- ------- -------- -------- -------- -------- --------
Total liabilities.......... 78,610 23,323 101,933 56,119 45,814
-------- ------- -------- -------- -------- -------- ---------
Stockholders' equity
Common stock..................... 324 $ 208 532 $ 80(f) 612
Additional paid-in capital....... 64,562 73 234,067 298,702 1,809(e) 72,720(f) 375,837
6,224(d)
Retained earnings................ 9,172 6,535 15,707 6,224(d) 4,684
4,799(e)
Notes receivable arising from
stock purchase agreements........ (225) (225) (225)
-------- ------- -------- -------- -------- ------- --------
Total stockholders'
equity................... 73,833 6,608 234,275 314,716 12,832 79,024 380,908
-------- ------- -------- -------- -------- ------- --------
Total liabilities and
stockholders' equity..... $152,443 $29,931 $234,275 $416,649 $ 68,951 $79,024 $426,722
======== ======= ======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
29
<PAGE> 30
REPUBLIC WASTE INDUSTRIES, INC. AND SUBSIDIARIES AND
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
THE ---------------------
COMPANY HUDSON COMBINED DR. CR. PRO FORMA
-------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . $59,288 $28,617 $87,905 $87,905
Expenses:
Cost of operations. . . . . . . . . . . . 39,643 20,607 60,250 $ 861 (g) $ 248 (h) 60,863
Selling, general and
administrative. . . . . . . . . . . . . 9,815 5,061 14,876 447 (i) 14,429
Other (income) expense:
Interest and other income . . . . . . . . (317) (44) (361) (361)
Interest expense. . . . . . . . . . . . . 1,662 376 2,038 2,038 (j) -
------- ------- ------- ------- ------ -------
50,803 26,000 76,803 861 2,733 74,931
------- ------- ------- ------- ------ -------
Income from continuing operations
before income taxes . . . . . . . . . . . 8,485 2,617 11,102 861 2,733 12,974
Income tax provision . . . . . . . . . . . . 2,356 1,047 3,403 659 (k) 4,062
------- ------- ------- ------- ------ -------
Income from continuing operations. . . . . . $ 6,129 $ 1,570 $ 7,699 $ 1,520 $2,733 $ 8,912
======= ======= ======= ======= ====== =======
Primary:
Earnings per share from continuing
operations. . . . . . . . . . . . . . . $ 0.19 $ 0.17
======= =======
Weighted average shares outstanding . . . 32,878 58,318
======= =======
Fully Diluted:
Earnings per share from continuing
operations. . . . . . . . . . . . . . . $ 0.18 $ 0.14
======= =======
Weighted average shares outstanding . . . 34,119 61,912
======= =======
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
30
<PAGE> 31
REPUBLIC WASTE INDUSTRIES, INC. AND SUBSIDIARIES AND
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
THE ---------------------
COMPANY HUDSON COMBINED DR. CR. PRO FORMA
-------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................ $97,460 $48,003 $145,463 $145,463
Expenses:
Cost of operations.................. 64,114 35,048 99,162 $ 1,722 (g) $ 494 (h) 100,390
Selling, general and
administrative.................... 19,055 9,444 28,499 1,787 (i) 26,712
Other (income) expense:
Interest and other income........... (306) -- (306) (306)
Interest expense.................... 2,717 505 3,222 3,222 (j) -
------- ------- -------- ------- ------ --------
85,580 44,997 130,577 1,722 5,503 126,796
------- ------- -------- ------- ------ --------
Income from continuing operations
before income taxes................. 11,880 3,006 14,886 1,722 5,503 18,667
Income tax provision................... 688 1,269 1,957 1,310 (k) 3,267
------- ------- -------- ------- ------ --------
Income from continuing operations...... $11,192 $ 1,737 $ 12,929 $ 3,032 $5,503 $ 15,400
======= ======= ======== ======= ====== ========
Earnings per share from continuing
operations.......................... $ 0.34 $ 0.30
======= ========
Weighted average shares outstanding.... 32,607 57,479
======= ========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
31
<PAGE> 32
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
(a) Represents an entry to payoff all outstanding indebtedness of the Company and Hudson
using proceeds from the Equity Transactions.
(b) Represents an entry to eliminate the historical intangible assets of Hudson.
(c) Represents an entry to record intangible assets resulting from the preliminary allocation of the
purchase price for Hudson which was approximately $73 million.
(d) Represents an entry to record retained earnings as a contribution to capital upon the termination of S-Corp. status for
Kertz, United and Envirocycle, Inc.
(e) Represents an entry to eliminate the equity balances of Hudson.
(f) Represents the recording of equity resulting from the Company's issuance of its common stock to
the sellers of Hudson.
(g) Represents a net adjustment related to the elimination of the historical amortization of
intangible assets and the recording of amortization, on a straight-line basis, on the intangible
assets resulting from the preliminary purchase price allocation of Hudson. Intangible assets
resulting from the purchase of Hudson are being amortized over a 40 year life which approximates
the estimated useful life.
(h) Represents a reduction to depreciation expense resulting from the revision of estimated lives of
acquired property and equipment of Hudson to conform with the Company's policies.
(i) Represents the contractual reduction of salary and benefits of the sellers of Hudson.
(j) Represents the assumed interest savings on the payoff of all existing indebtedness of the
Company and Hudson with the proceeds from the Equity Transactions.
(k) Represents the incremental change in the combined entity's provision for income taxes as a
result of the pre-tax earnings of acquired entities and all pro forma adjustments as described
above.
</TABLE>
32
<PAGE> 33
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 thereunto duly authorized.
REPUBLIC WASTE INDUSTRIES, INC.
Date: October 26, 1995 By: /s/ Gregory K. Fairbanks
------------------------
Gregory K. Fairbanks,
Chief Financial Officer and
Executive Vice President
33
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- -------- -------
<CAPTION>
<S> <C>
2.1 Merger Agreement entered into as of August 24, 1995
by Republic Waste Industries, Inc., a Delaware
corporation; RS Mergersub, Inc., a Florida
corporation; Southland Environmental Services, Inc.,
a Florida corporation; Felix A. Crawford; Felix A.
Crawford, Trustee under the Felix A. Crawford
Revocable Living Trust; and CFP, Ltd., a Florida
limited partnership (incorporated by reference from
Exhibit 2.1 to the Company's Current Report on Form
8-K dated August 24, 1995).
2.2* First Amendment to Merger Agreement, dated as of
October 17, 1995 to the Merger Agreement dated as of
August 24, 1995 among Republic Waste Industries,
Inc., a Delaware corporation; RS Mergersub, Inc., a
Florida corporation; Southland Environmental
Services, Inc., a Florida corporation, Felix A.
Crawford; Felix A. Crawford, Trustee under the Felix
A. Crawford Revocable Living Trust; and CFP, Ltd., a
Florida limited partnership.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Grenadier, Appleby, Collins & Company.
23.3* Consent of Jones and Kolb.
27.1 Financial Data Schedule (for SEC use only)
99.1* Report of Grenadier, Appleby, Collins & Company on
the Consolidated Balance Sheets of Southland
Environmental Services, Inc. and Subsidiaries as of
September 30, 1994 and 1993 and the related
Consolidated Statements of Income, Stockholders'
Equity and Cash Flows for each of the three years
ended September 30, 1994, 1993 and 1992.
99.2* Report of Jones and Kolb of the Balance Sheets of
United Waste Service, Inc. as of September 30, 1994
and 1993 and the related Statements of Income,
Stockholders' Deficiency and Cash Flows for each of
the three years ended September 30, 1994, 1993 and
1992.
</TABLE>
- ----------
* Filed herewith.
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT
TO MERGER AGREEMENT
FIRST AMENDMENT TO MERGER AGREEMENT, dated as of October 16, 1995 to
the Merger Agreement, dated as of August 24, 1995 (the "Agreement") among
Republic Waste Industries, Inc., a Delaware corporation ("Republic"), RS
Mergersub, Inc., a Florida corporation and wholly-owned subsidiary of Republic
("Republic Merger Sub", and together with Republic, the "Republic Companies"),
Southland Environmental Services, Inc., a Florida corporation (the "Company"),
Felix A. Crawford ("Crawford"), Felix A. Crawford, as trustee of the Felix A.
Crawford Revocable Living Trust (the "Trust"), and CFP, Ltd., a Florida limited
partnership ("CFP").
WHEREAS, the Republic Companies, the Company, Crawford, the Trust and
CFP have requested that the Agreement be amended and such parties have agreed
to such amendment;
NOW THEREFORE, the parties hereto agree as follows:
1. AMENDMENT TO SUBSEQUENT 9.2 (SECURITY FOR THE COMPANY
SHAREHOLDERS' INDEMNIFICATION OBLIGATION). The number of shares of Republic
Common Stock to be delivered by Crawford to Republic, and which shall be set
aside and held by Republic as security for the agreement by Crawford to
indemnify and hold the Republic Companies harmless as described in the
Agreement, is hereby amended by substituting the following in the fourth line
of Subsection 9.2 of the Agreement:
"125,540"
2. Definitions. Unless otherwise defined herein, terms
defined in the Agreement shall have their defined meanings when used herein.
3. Limited Effect. Except as amended herein, the
Agreement shall continue to be, and shall remain, in full force and effect in
accordance with its terms.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Merger Agreement to be executed as of the date first written
above.
REPUBLIC WASTE INDUSTRIES, INC.
By: /s/ H. Wayne Huizenga
-----------------------------------
H. Wayne Huizenga,
Chief Executive Officer
RS MERGERSUB, INC.
By: /s/ Harris W. Hudson
-----------------------------------
Harris W. Hudson,
President
SOUTHLAND ENVIRONMENTAL SERVICES, INC.
By: /s/ Felix A. Crawford
-----------------------------------
Felix A. Crawford,
President
CFP, LTD.
By: /s/ Felix A. Crawford
-----------------------------------
Felix A. Crawford,
General Partner
FELIX A. CRAWFORD REVOCABLE LIVING TRUST
By: /s/ Felix A. Crawford
-----------------------------------
Felix A. Crawford,
Trustee
2
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in this Form 8-K, into the previously
filed Registration Statements of Republic Waste Industries, Inc. on Forms S-3
(Registration Nos. 33-61649 and 33-62489) and S-8 (Registration No. 33-93742).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
October 26, 1995.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report dated December 9, 1994 on the Consolidated
Financial Statements of Southland Environmental Services, Inc. and
Subsidiaries included in this Form 8-K into Republic Waste Industries, Inc.'s
previously filed Registration Statements on Forms S-3 (Registration Nos.
33-61649 and 33-62489) and S-8 (Registration No. 33-93742).
GRENADIER, APPLEBY, COLLINS & COMPANY
Jacksonville, Florida,
October 26, 1995.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report dated November 4, 1994 on the Financial Statements
of United Waste Service, Inc. included in this Form 8-K into Republic Waste
Industries, Inc.'s previously filed Registration Statements on Forms S-3
(Registration Nos. 33-61649 and 33-62489) and S-8 (Registration No. 33-93742).
JONES AND KOLB
Atlanta, Georgia,
October 26, 1995.
<PAGE> 1
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SOUTHLAND ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
We have audited the consolidated balance sheets of Southland Environmental
Services, Inc. and Subsidiaries as of September 30, 1994 and 1993 (not
presented herein), and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for each of the three years in the
period ended September 30, 1994 (not presented herein). These consolidated
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these consolidated 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 audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Southland Environmental Services, Inc. and Subsidiaries as of September 30,
1994 and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended September 30, 1994 in conformity
with generally accepted accounting principles.
GRENADIER, APPLEBY, COLLINS & COMPANY
Jacksonville, Florida,
December 9, 1994.
<PAGE> 1
EXHIBIT 99.2
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
United Waste Service, Inc.
Atlanta, Georgia
We have audited the balance sheets of United Waste Service, Inc. as of
September 30, 1994 and 1993 (not presented herein), and the related statements
of income, changes in stockholders' deficiency, and cash flows (not presented
herein) for each of the three years in the period ended September 30, 1994.
These financial statements are the responsibility of the Company's 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 audits 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 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 financial position of United Waste Service, Inc. as
of September 30, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1994 in
conformity with generally accepted accounting principles.
JONES AND KOLB
Atlanta, Georgia,
November 4, 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,278
<SECURITIES> 0
<RECEIVABLES> 16,062
<ALLOWANCES> 785
<INVENTORY> 0
<CURRENT-ASSETS> 23,618
<PP&E> 140,244
<DEPRECIATION> 29,971
<TOTAL-ASSETS> 152,443
<CURRENT-LIABILITIES> 20,470
<BONDS> 0
<COMMON> 324
0
0
<OTHER-SE> 73,509
<TOTAL-LIABILITY-AND-EQUITY> 152,443
<SALES> 59,288
<TOTAL-REVENUES> 59,288
<CGS> 39,643
<TOTAL-COSTS> 39,643
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,662
<INCOME-PRETAX> 8,485
<INCOME-TAX> 2,356
<INCOME-CONTINUING> 6,129
<DISCONTINUED> 508
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,637
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
