<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 27, 1996
-----------------
REPUBLIC INDUSTRIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-9787 73-1105145
------ ----------
(Commission (IRS Employer
File Number) Identification No.)
200 East Las Olas Boulevard
Suite 1400
Ft. Lauderdale, FL 33301
-------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (954) 627-6000
-------------
N.A.
-----------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
A. The Denver Fire Reporter & Protective Co. and Affiliate
On February 27, 1996, Republic Industries, Inc. (the "Registrant")
acquired all of the outstanding shares of The Denver Fire Reporter & Protective
Co., a Colorado corporation, and a related company affiliated by common
ownership and management with The Denver Fire Reporter & Protective Co.
(collectively, the "Denver Companies"), through a series of merger transactions
(the "Denver Mergers"), in which two wholly-owned subsidiaries of the
Registrant merged with and into the Denver Companies, and all of the issued and
outstanding shares of each of the Denver Companies were exchanged for an
aggregate of 1,631,752 shares of common stock, $0.01 par value per share,
issued by the Registrant to the stockholder of the Denver Companies. The
description contained herein of the Denver Mergers is qualified in its entirety
by reference to the Merger Agreement filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K dated February 14, 1996, which is incorporated
herein by reference. The Denver Mergers are being accounted for as pooling of
interests business combinations.
B. The Schaubach Companies
On February 29, 1996, the Registrant acquired all of the outstanding
shares of Incendere, Inc., a Virginia corporation, Area Container Services,
Inc., a Virginia corporation, and Smithton Sanitation Service, Inc. a North
Carolina corporation, (collectively, the "Schaubach Companies"), through a
series of merger transactions and a share exchange (the "Schaubach Mergers"),
in which two wholly-owned subsidiaries of the Registrant merged with and
into the Schaubach Companies, and all of the issued and outstanding shares of
the Schaubach Companies were exchanged for an aggregate of 1,282,700 shares of
common stock, $0.01 par value per share, issued by the Registrant to the
stockholders of the Schaubach Companies. The description contained herein of
the Schaubach Mergers is qualified in its entirety by reference to the
Reorganization Agreement filed as Exhibit 2.2 to the Registrant's Current
Report on Form 8-K dated February 14, 1996, which is incorporated herein by
reference. The Schaubach Mergers are being accounted for as pooling of
interests business combinations.
Item 5. Other Events.
REPORTING OF CERTAIN FINANCIAL INFORMATION FOR REGISTRATION AND OTHER PURPOSES.
The Registrant is filing as Exhibit 99 to this Current Report on Form 8-K the
following audited supplemental consolidated financial statements which have
been retroactively adjusted to reflect the mergers with the Denver Companies
and the Schaubach Companies which were accounted for under the pooling of
interests method of accounting and are hereby incorporated into the
Registrant's Registration Statements on Form S-3, file numbers 33-61649,
33-62489, 33-63735 and 33-65289, and on Form S-8, file number 33-93742.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The following Financial Statements are included herein
pursuant to Item 7(a):
<TABLE>
<CAPTION>
THE DENVER FIRE REPORTER & PROTECTIVE CO.
------------------------------------------
AND AFFILIATE (The Denver Alarm Companies)
------------------------------------------
Page
----
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . . 4
Combined Balance Sheet as of December 31, 1995 . . . . . . . . . . . . . . 5
Combined Statement of Income and Retained Earnings for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Combined Statement of Cash Flows for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Combined Financial Statements . . . . . . . . . . . . . . . . . . 8
INCENDERE, INC. AND AFFILIATES (The Schaubach Companies)
----------------------------------------------------------
Report of Independent Certified Public Accountants . . . . . . . . . . . . 11
Combined Balance Sheet as of December 31, 1995 . . . . . . . . . . . . . . 12
Combined Statement of Operations for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Combined Statement of Stockholders' Equity (Deficit) for the Year
Ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 14
Combined Statement of Cash Flows for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Combined Financial Statements . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
(b) Pro Forma Financial Information.
The following Pro Forma Financial Information is included herein pursuant to Item 7(b):
Page
-----
Unaudited Condensed Consolidated Pro Forma Financial Statements . . . . . . . . 24
Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the Nine Months Ended September 30, 1995 . . . . . . . . . . . 25
Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the Year Ended December 31, 1994 . . . . . . . . . . . . . . . 26
Notes to Unaudited Condensed Consolidated Pro Forma
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth elsewhere herein.
</TABLE>
3
<PAGE> 5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of
The Denver Fire Reporter & Protective Co.
and Guardian Security Services, Inc.:
We have audited the accompanying combined balance sheet of The Denver Fire
Reporter & Protective Co. and Guardian Security Services, Inc. (together, the
"Denver Alarm Companies"; both Colorado corporations affiliated through common
ownership) as of December 31, 1995, and the related combined statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Denver Alarm Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Denver Alarm
Companies as of December 31, 1995, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 5, 1996.
4
<PAGE> 6
DENVER ALARM COMPANIES
COMBINED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash................................................................................ $1,301,560
Accounts receivable, net of allowance for doubtful accounts of $97,966.............. 2,660,079
Inventories......................................................................... 589,137
Due from affiliates, net............................................................ 50,299
Other............................................................................... 61,782
----------
Total current assets........................................................... 4,662,857
----------
PROPERTY AND EQUIPMENT, net................................................................ 366,004
OTHER ASSETS............................................................................... 63,150
----------
Total assets................................................................... $5,092,011
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable.................................................................... $ 278,971
Accrued expenses.................................................................... 693,836
Customer deposits................................................................... 63,949
Deferred revenue.................................................................... 1,810,587
----------
Total current liabilities...................................................... 2,847,343
----------
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDER'S EQUITY (Note 4):
Common stock........................................................................ 2,590
Additonal paid-in capital........................................................... 155,641
Retained earnings................................................................... 2,086,437
----------
Total shareholder's equity..................................................... 2,244,668
----------
Total liabilities and shareholder's equity..................................... $5,092,011
==========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
5
<PAGE> 7
DENVER ALARM COMPANIES
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INSTALLATION, MONITORING AND SERVICE REVENUE................................................. $16,325,866
INSTALLATION, MONITORING AND SERVICE COST OF SALES........................................... 8,748,267
----------
Gross margin......................................................................... 7,577,599
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................................................. 4,443,145
----------
Income from operations................................................................ 3,134,454
----------
INTEREST INCOME.............................................................................. 57,778
----------
Net income............................................................................ 3,192,232
RETAINED EARNINGS, beginning of year......................................................... 2,979,205
Less: Distributions to shareholder.................................................... 4,085,000
----------
RETAINED EARNINGS, end of year............................................................... $2,086,437
==========
UNAUDITED PRO FORMA ADJUSTMENT TO REFLECT INCOME
TAX PROVISION ON S-CORPORATION EARNINGS (Note 1)......................................... $1,276,893
----------
Unaudited pro forma net income (Note 1)............................................... $1,915,339
==========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
6
<PAGE> 8
DENVER ALARM COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 3,192,232
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization................................................... 108,911
Provision for doubtful accounts................................................. 92,330
Changes in assets and liabilities-
Increase in accounts receivable.............................................. (74,849)
Increase in inventories...................................................... (28,848)
Decrease in due from affiliates.............................................. 547,071
Decrease in other assets..................................................... 41,484
Increase in accounts payable and accrued expenses............................ 364,831
Decrease in customer deposits................................................ (7,343)
Increase in deferred revenue................................................. 173,744
-----------
Net cash provided by operating activities............................. 4,409,563
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................................... (155,168)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholder...................................................... (4,085,000)
-----------
NET INCREASE IN CASH................................................................... 169,395
CASH AT BEGINNING OF YEAR.............................................................. 1,132,165
-----------
CASH AT END OF YEAR.................................................................... $ 1,301,560
===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
7
<PAGE> 9
DENVER ALARM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Business and Nature of Operations-
The accompanying combined financial statements include the accounts of the
Denver Fire Reporter & Protective Co. and Guardian Security Services, Inc.
(together, the "Companies"), which are affiliated through common ownership.
The Companies install commercial and residential security systems, access
control systems and fire alarm systems and provide monitoring services
primarily in the Denver, Colorado Springs and Fort Collins, Colorado
metropolitan areas.
(b) Principles of Combination-
All material intercompany transactions between the Companies have been
eliminated.
(c) Revenue Recognition-
Installation, monitoring and service revenue under the monitoring agreements
are recognized as earned over the life of the contract.
(d) Allowance for Doubtful Accounts-
Amounts determined to be uncollectible by management are provided for in the
financial statements in the period in which such determination is made.
(e) Inventories-
Inventories consist primarily of parts used in installation and servicing.
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
(f) Property and Equipment-
Property and equipment are recorded at cost. Depreciation is computed using
accelerated methods for all major asset classes utilizing the following useful
lives:
<TABLE>
<S> <C>
Buildings and improvements....................... 10-15 years
Computers and office equipment................... 5 years
Vehicles......................................... 5 years
Furniture and fixtures........................... 7 years
</TABLE>
Repair and maintenance costs are expensed as incurred.
Depreciation and amortization expense on property and equipment totaled
$108,911 in 1995.
8
<PAGE> 10
DENVER ALARM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(g) Income Taxes-
The Companies have elected S-Corporation status for income tax reporting
purposes. Accordingly, income or loss and the related differences that arise
in the recording of income and expense items for financial reporting and income
tax reporting purposes are included in the individual tax returns of the
shareholder. The unaudited pro forma adjustment to reflect income taxes on
S-Corporation earnings included in the accompanying combined statement of
income and retained earnings is for informational purposes only. Such
unaudited pro forma income taxes have been provided to yield an overall
estimated pro forma income tax rate of 40 percent.
(h) Use of Estimates-
The preparation of these financial statements required the use of certain
estimates by management in determining the Companies' assets, liabilities,
revenue and expenses.
(2) PROPERTY AND EQUIPMENT, net:
Property and equipment, net, as of December 31, 1995, consist of the following:
<TABLE>
<S> <C>
Vehicles........................................................ $1,020,457
Computers and equipment......................................... 703,073
Furniture and fixtures.......................................... 776,392
Buildings....................................................... 138,531
Building improvements........................................... 368,408
-------
3,006,861
Less: Accumulated depreciation and amortization................ (2,640,857)
----------
$ 366,004
==========
</TABLE>
(3) 401(k) SAVINGS PLAN:
The Companies sponsor a 401(k) defined contribution savings plan, whereby
employees may elect to make tax deferred contributions upon meeting certain age
and length-of-service requirements. Substantially all employees are eligible to
participate. The plan provides for an annual, discretionary employer
contribution which totaled $30,000 in 1995.
(4) SHAREHOLDER'S EQUITY:
Common stock consists of the following authorized, issued and outstanding
shares as of December 31, 1995:
<TABLE>
<CAPTION>
Shares Issued
Shares and
Company Authorized Outstanding Par Value Amount
------- ---------- ------------- --------- ------
<S> <C> <C> <C> <C>
The Denver Fire Reporter & Protective Co. ......... 50,000 1,490 $1.00 $1,490
Guardian Security Systems, Inc. ................... 1,000,000 1,100 1.00 1,100
--------- ----- ------
1,050,000 2,590 $2,590
========= ===== ======
</TABLE>
9
<PAGE> 11
DENVER ALARM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(5) RELATED PARTY TRANSACTIONS:
The Companies leased certain properties for their operations in Denver and Fort
Collins from the Companies' shareholder and certain related parties. Rent
expense under these lease agreements totaled approximately $280,000 in 1995.
The Companies continue to rent office and warehouse space from the shareholder
and certain related parties. Such rentals include monthly lease payments of
$2,303 for one facility, subject to annual renewal, and a month-to-month
payment of $1,000 for another facility. The Company also utilizes space in two
other facilities owned by the Companies' shareholder. There is no formal lease
agreement or monthly payment for utilization of this space of approximately
7,300 square feet; however, the Companies paid repair and maintenance costs
which totaled $8,518 in 1995.
(6) SUBSEQUENT EVENTS:
On February 27, 1996, the Companies merged with Republic Industries, Inc.
("Republic") pursuant to a merger agreement, whereby Republic acquired all of
the outstanding capital stock of the Companies in exchange for 1,631,752 shares
of Republic common stock. In connection with the merger, the Companies'
shareholder contributed a building valued at $1,250,000 to the Companies. The
building is utilized as office space for the Companies' principal operations.
Rent expense on this building in 1995 totaled approximately $240,000.
10
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Area Container Services, Inc., Incendere, Inc. and
Smithton Sanitation Service, Inc.:
We have audited the accompanying combined balance sheet of Area Container
Services, Inc., Incendere, Inc. and Smithton Sanitation Service, Inc.
(collectively, the "Schaubach Companies") as of December 31, 1995, and the
related combined statements of operations, stockholders' equity (deficit) and
cash flows for the year then ended. These financial statements are the
responsibility of the Schaubach Companies' management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 the Schaubach Companies as of
December 31, 1995, and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 9, 1996
(Except with respect to the matter
discussed in Note 11, as to which
the date is February 29, 1996).
11
<PAGE> 13
THE SCHAUBACH COMPANIES
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash .................................................................................... $ 193
Accounts receivable, less allowance for doubtful accounts of $615........................ 2,348
Due from affiliates...................................................................... 26
Inventories.............................................................................. 99
Prepaid expenses......................................................................... 178
--------
Total current assets................................................................ 2,844
PROPERTY AND EQUIPMENT, net.................................................................. 7,107
INTANGIBLE ASSETS, net....................................................................... 865
OTHER ASSETS................................................................................. 96
--------
Total assets........................................................................ $ 10,912
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable......................................................................... $ 1,969
Short-term notes payable................................................................. 502
Current portion of long-term debt........................................................ 2,087
Accrued liabilities...................................................................... 1,965
Deferred revenue......................................................................... 212
--------
Total current liabilities........................................................... 6,735
LONG-TERM DEBT, less current portion......................................................... 4,734
--------
Total liabilities................................................................... 11,469
--------
COMMITMENTS AND CONTINGENCIES (Notes 4, 5, 6, 7 and 10)
STOCKHOLDERS' DEFICIT:
Commmon stock ........................................................................... 13
Additional paid-in capital............................................................... 120
Accumulated deficit...................................................................... (690)
--------
Total stockholders' deficit......................................................... (557)
--------
Total liabilities and stockholders' deficit......................................... $ 10,912
========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
12
<PAGE> 14
THE SCHAUBACH COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE.................................................................................... $ 18,524
COST OF OPERATIONS......................................................................... 13,906
--------
GROSS PROFIT............................................................................... 4,618
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................... 4,434
--------
INCOME FROM OPERATIONS..................................................................... 184
INTEREST EXPENSE........................................................................... (487)
OTHER EXPENSE, net......................................................................... (33)
--------
NET LOSS................................................................................... $ (336)
========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
13
<PAGE> 15
THE SCHAUBACH COMPANIES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION> Retained
Additional Earnings
Common Paid-In (Accumulated
Stock Capital Deficit)
------- ---------- --------
<S> <C> <C> <C>
BALANCE, beginning of year.................................... $ 13 $ 123 $ 2,160
Net loss.................................................. - - (336)
Stockholder distributions................................. - - (669)
Stock redemption (Note 10)................................ - (3) (1,845)
---- ----- -------
BALANCE, end of year.......................................... $ 13 $ 120 $ (690)
==== ===== =======
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
14
<PAGE> 16
THE SCHAUBACH COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................... $ (336)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization......................................................... 1,565
Provision for doubtful accounts....................................................... 209
Loss on sale of fixed assets.......................................................... 36
Loss from equity investments.......................................................... 15
Changes in assets and liabilities:
Accounts receivable................................................................. (997)
Inventories......................................................................... 94
Prepaid expenses.................................................................... 3
Accounts payable and accrued liabilities............................................ 1,721
--------
Net cash provided by operating activities.................................... 2,310
--------
NET ASSETS SPUN OFF INTO AWI (NOTE 10)........................................................ (87)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment......................................................... (3,901)
Proceeds from the sale of equipment........................................................ 26
Loans to affiliates and others............................................................. (6)
Purchase of intangibles and other assets................................................... (342)
Proceeds from the sale of equity securities................................................ 130
--------
Net cash used in investing activities........................................ (4,093)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable from unrelated parties......................................... (2,041)
Proceeds of notes payable from unrelated parties........................................... 3,804
Repayments of loans from stockholders and affiliates....................................... (1,282)
Proceeds of loans from stockholders and affiliates......................................... 1,482
Distributions to stockholders.............................................................. (270)
--------
Net cash provided by financing activities.................................... 1,693
--------
DECREASE IN CASH AND CASH EQUIVALENTS......................................................... (177)
CASH AND CASH EQUIVALENTS, beginning of year.................................................. 370
--------
CASH AND CASH EQUIVALENTS, end of year........................................................ $ 193
========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest................................................................................... $ 466
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
15
<PAGE> 17
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) NATURE OF OPERATIONS:
Incendere, Inc. ("Incendere"), a Virginia Subchapter S corporation, was
primarily engaged in the transportation and destruction of regulated medical
waste until October 31, 1995 at which time the company reorganized its medical
waste destruction business into a separate company. See Note 10.
Area Container Services, Inc. ("Area"), a Virginia Subchapter S corporation and
Smithton Sanitation Service, Inc. ("Smithton") a North Carolina Subchapter S
corporation, provide solid waste collection and recycling services to
governmental, commercial, industrial and residential customers.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination-
The combined financial statements include the accounts of Area, Incendere and
Smithton, (together, the "Schaubach Companies" or the "Companies", which are
affiliated through common ownership. All material intercompany transactions
between the Companies have been eliminated.
The accounts of Smithton have been combined on the basis of a fiscal year ended
October 31, 1995.
Revenue Recognition-
Collection services may be billed up to three months in advance. Revenue on
such advance billings is deferred until services are performed. Such amounts
are included in deferred revenue in the accompanying combined balance sheet.
Inventories-
Inventories consist of boxes, containers and packaging supplies sold to the
customers of Incendere in connection with medical waste disposal. These
inventories are valued at the lower of cost (first-in, first-out method) or
market.
Property and Equipment-
The Companies provide for depreciation using the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Vehicles................................................. 3-8 years
Containers............................................... 5-10 years
Furniture, fixtures and equipment........................ 2-15 years
Buildings and leasehold improvements..................... 2-20 years
</TABLE>
Maintenance and repairs are charged to expense when incurred. Additions and
major renewals are capitalized.
Depreciation and amortization expense for property and equipment for the year
was $1,478,000.
16
<PAGE> 18
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Intangible Assets-
Intangible assets consist of the cost of purchased businesses in excess of the
market value of net assets acquired (goodwill), the costs of certain contracts
and royalty agreements obtained as part of businesses acquired, and noncompete
and consulting agreements obtained from former owners and management of
businesses acquired.
Intangible assets are amortized using the straight-line method over their
estimated useful lives and are comprised of the following (in thousands):
<TABLE>
<CAPTION>
Useful Lives Cost
<S> <C> <C>
Goodwill............................................ 40 years $ 351
Contracts........................................... 10 years 105
Royalty agreements.................................. 2 years 67
Noncompete and consulting agreements................ 1-10 years 547
-------
1,070
Less accumulated amortization (205)
-------
$ 865
=======
</TABLE>
The Companies continually evaluate whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be
evaluated for possible impairment.
Amortization expense for intangible assets in the combined statement of
operations was approximately $87,000.
Accrued Liabilities-
The Companies accrue estimated insurance claims for the self-funded portion of
their health and dental insurance plans. Insurance claim reserves of $57,800
are included in accrued liabilities.
The Companies accrue environmental and transfer station renovation and closure
costs to be incurred due to local zoning law changes, for required transfer
station monitoring and maintenance costs and for final closure costs of
transfer station sites. The Company estimates its future cost requirements
based on its interpretation of the local zoning laws and of the technical
standards of the United States Environmental Protection Agency's regulations.
These estimates do not take into account discounts for the present value of
such total estimated costs. Environmental reserves of $300,000 are included
in accrued liabilities.
17
<PAGE> 19
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
The Companies accrue dividends to shareholders based on shareholder agreements
which provide for the distribution of dividends in an amount sufficient to
cover personal federal and state income taxes resulting from the pass through
of corporate taxable income. Unpaid declared dividends of $550,000 are
included in accrued liabilities.
Income Taxes-
The Companies have elected S-corporation status for income tax reporting
purposes. Therefore, net income and the related differences that arise in the
recording of income and expense items for financial reporting and income tax
reporting purposes are included in the individual tax returns of the
stockholders of the Companies. Therefore no provision or liability for federal
and state income taxes has been included in the combined financial statements.
Upon closing of the merger transactions described in Note 11, the Companies
will no longer be eligible for S-corporation status. At that time, deferred
income taxes will be recorded in accordance with SFAS No. 109.
(3) PROPERTY AND EQUIPMENT:
A summary of property and equipment is shown below (in thousands):
<TABLE>
<S> <C>
Land............................................................................... $ 74
Buildings and leasehold improvements............................................... 553
Automotive equipment............................................................... 5,944
Containers......................................................................... 2,858
Furniture and fixtures............................................................. 340
Machinery and equipment............................................................ 1,581
-------
11,350
Less accumulated depreciation and amortization............................. (4,243)
-------
$ 7,107
=======
</TABLE>
18
<PAGE> 20
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<S> <C>
Notes payable to banks, variable and fixed interest rates, variable
interest rates adjust based on fluctuations in the banks' prime
lending rate (8.75% at December 31, 1995), fixed interest rates ranging
from 7.24% to 13% due 1996-2001, collateralized substantially by
property and equipment and other assets, and the personal guarantees
of stockholders.......................................................................... $ 4,590
Notes payable to a former stockholder of Smithton payable monthly with interest rates of
7.43% and 8%, due 1996-2005. Collateralized by the outstanding shares of Smithton and
limited guarantee of the stockholders of Smithton........................................
545
Covenant not to compete agreement payable to a former stockholder of Smithton, unsecured
and non-interest bearing agreement due 1996-2005.........................................
398
Notes payable to stockholders, unsecured, non-interest bearing and interest bearing with
interest rates of 8.25% and 9.00% ....................................................... 797
Notes and loans payable to companies affiliated by the common ownership of a
stockholder, unsecured, non-interest bearing and interest bearing with interest rates
of prime (8.75% at December 31, 1995) plus 1% and 8.5% .......................................
491
-------
6,821
Less current portion of long-term debt..................................................... (2,087)
-------
$ 4,734
=======
</TABLE>
The Companies have two commercial borrowing notes with a bank. The notes are
due on demand, with interest payable monthly at the bank's prime rate (8.75% at
December 31, 1995) on one note and at the bank's prime rate plus .25% on the
other. Total borrowings on these notes amounted to $434,000 at December 31,
1995 with $800,000 still available to the Companies. The Companies also have a
$100,000 working capital line of credit, of which approximately $68,000 was
outstanding at December 31, 1995. Interest is at prime (8.75% at December 31,
1995) plus 1%. The weighted average interest rate on the above amounts was
8.87% at December 31, 1995. The notes are collateralized by accounts
receivable and various equipment.
19
<PAGE> 21
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
In January, 1996, Area obtained an additional one year line of credit totaling
$750,000 of which the company borrowed $566,000.
Future debt principal payments in the aggregate are approximately as follows as
of December 31, 1995 (in thousands):
<TABLE>
<S> <C>
1996....................................... $2,087
1997....................................... 1,307
1998....................................... 1,128
1999....................................... 867
2000....................................... 776
Thereafter................................. 656
-------
$6,821
======
</TABLE>
(5) RELATED PARTY TRANSACTIONS:
The Companies lease various office, garage and shop space and land for a
transfer station from a stockholder and a limited partnership principally owned
by the stockholder. The operating leases expire at various dates through
January 1997 and provide for monthly rentals of approximately $30,000.
During the year, there were funds advanced to and received from a stockholder
and affiliated companies owned principally by the stockholder. At December 31,
1995, there were notes payable to such stockholder and his affiliated companies
totaling $1,288,000 (see Note 4).
The Companies have utilized the personal guarantee of a stockholder as
additional collateral on a significant portion of their debt (see Note 4).
The Companies have utilized the management services of an affiliated company
owned principally by a stockholder of the Companies. Total expense incurred
during the year presented in the accompanying combined financial statements
was $31,700 of which $16,200 was payable at the balance sheet date.
(6) LEASES:
In addition to the related party leases discussed above, the Companies lease
corporate office space and various local residential refuse convenience
drop-off centers at approximately $22,250 per month. The approximate future
minimum lease payments (including related party leases and the lease renewal
described above) are as follows (in thousands):
<TABLE>
<S> <C>
1996....................................... $ 171
1997....................................... 96
1998....................................... 74
1999....................................... 17
2000....................................... -
Thereafter................................. -
-----
$ 358
=====
</TABLE>
20
<PAGE> 22
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES:
The Companies provide commercial, industrial and residential waste collection
and recycling services under terms of contracts or franchise agreements with
several governmental agencies (municipalities and counties). Among other
things, these contracts and agreements specify the terms and conditions of
performance, rates, geographical boundaries and types of services to be
provided. The contracts and agreements expire at various times through 1998
and, in most cases, must be competitively bid for renewal.
The Companies have adopted a maximum premium group health insurance plan. The
plan calls for the Companies to pay approximately $120 per employee each month
to a third party administrator. This payment is used to purchase stop loss
health insurance coverage for employees participating in the plan. The stop
loss provision on the plan is $20,000, per individual, per year. Reserves are
estimated for both reported and unreported claims using the past years'
claims experience of the Companies. Revisions to estimated reserves are
recorded in the period in which they become known. The estimated reserve of
$107,000 represents management's best estimate, and management's opinion is
that any future adjustments to estimated reserves will not have a material
impact on the combined financial statements.
In the normal course of business, the Companies have letters of credit and
performance and surety bonds which are not reflected in the accompanying
combined balance sheets. The aggregate value of these off balance sheet
financial instruments totaled approximately $185,000 at December 31, 1995. The
Companies' 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.
The Companies are involved in certain legal actions and claims arising in the
ordinary course of business. Based on advice of legal counsel, it is the
opinion of management that such litigation and claims will be resolved without
material effect on the Companies' combined financial position.
21
<PAGE> 23
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(8) 401(k) SAVINGS PLAN:
Employees of the Companies may participate in a 401(k) savings plan, whereby
the employees may elect to make contributions pursuant to a salary reduction
agreement upon meeting certain age and length-of-service requirements. The
Companies provide an employer matching contribution as defined by the plan.
Contributions by the Companies and plan expenses totaled $115,000 for the year.
(9) STOCKHOLDERS' EQUITY:
Common stock consists of the following authorized, issued and outstanding
shares as of December 31, 1995:
<TABLE>
<CAPTION>
Additional
Shares Common Paid-In
Shares Issued and Stock Capital
Authorized Outstanding (In thousands) (In thousands)
---------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Area........................................ 1,000 500 $ 13 $ 114
Incendere-Voting............................ 5,000 10 - -
Incendere-Nonvoting......................... 50,000 100 - 6
Smithton.................................... 100,000 100 - -
-------- ---------
$ 13 $ 120
======== =========
</TABLE>
(10) REORGANIZATION:
In July 1995, the shareholders of Incendere agreed to reorganize into two
separate companies: A medical and infectious waste destruction and
incineration company and a medical and infectious waste collection and
transport company. In accordance with the Agreement and Plan of Reorganization
and Corporate Separation dated September 26, 1995 (the "Reorganization Plan")
effective October 31, 1995, Incendere contributed certain assets and
liabilities specified in the Reorganization Plan to American Waste Industries,
Inc. ("AWI"), a newly formed subsidiary, in exchange for the capital stock of
AWI. Simultaneously, Incendere redeemed 10 shares of voting common stock and
100 shares of nonvoting common stock owned by a former shareholder of Incendere
in exchange for the capital stock of AWI. The Reorganization Plan also
specified that certain assets and liabilities be retained by Incendere and that
the
22
<PAGE> 24
THE SCHAUBACH COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
remaining assets and liabilities be classified as unallocated and liquidated by
Incendere. As required by the Reorganization Plan, the net proceeds collected
by Incendere on the unallocated assets were used to pay unallocated
liabilities, $100,000 to AWI and $100,000 to Incendere. The remaining proceeds
are to be used for an "Equalization Payment", as defined, to Incendere such
that the book value of net assets retained by Incendere equals the book
value of net assets transferred to AWI less $75,000, which was paid to AWI at
closing. Any excess proceeds would then be divided equally between Incendere
and AWI. Any future equalization payment is not expected to have a material
effect on the combined financial statements.
Additionally, Incendere entered into a medical waste incineration agreement
dated November 8, 1995 with AWI whereby minimum weekly payments of $25,315,
$20,712 and $13,808 are required for contract years ending through 2005, 2006
and 2007, respectively. For the year ended December 31, 1995, incineration
expense incurred under the medical waste incineration agreement totaled
$382,000. Incendere also entered into an agreement with the former chief
operating officer for the payment of $5,000 per month for 60 months for prior
and future consulting services. The total $300,000 payable under the agreement
was recorded as an expense of the current year as the value of future services
to be provided under this agreement are not expected to be significant.
Incendere has entered into a ten year noncompete agreement.
(11) SUBSEQUENT EVENT:
On February 15, 1996, the Companies entered into reorganization agreements with
Republic Industries, Inc. ("Republic") whereby Republic would acquire
all of the outstanding capital stock of the Companies for approximately 1.3
million shares of Republic common stock. The mergers were consummated on
February 29, 1996.
23
<PAGE> 25
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
REPUBLIC 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 Industries, Inc. and subsidiaries (the "Company") which include the
results of operations of the following entities: United Waste Service, Inc.
("United") and Southland Environmental Services, Inc. ("Southland"), with which
the Company merged in October 1995; J.C. Duncan Company, Inc. ("Duncan"),
Garbage Disposal Service, Inc. ("GDS"), Fennell Container Company, Inc.
("Fennell") and Scott Security Systems and affiliates ("Scott"), with which the
Company merged in November 1995; and The Denver Fire Reporter & Protective Co.
and Affiliate ("Denver") and Incendere, Inc. and Affiliates ("Incendere"),
with which the Company merged in February 1996. 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 United, Southland, Duncan,
GDS, Fennell, Scott, Denver and Incendere had operated as one entity since
inception.
The following unaudited condensed consolidated pro forma statements of
operations for the nine months ended September 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 Management Corporation and subsidiaries
and Envirocycle, Inc. (together, "HMC") had been consummated at the beginning of
the periods presented. The statements of operations also contain proforma
adjustments related to a series of equity transactions involving the sale of
common stock and warrants (the "Equity Transactions") as if the Equity
Transactions had occurred 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, HMC, United, Southland,
Duncan, GDS, Fennell, Scott, Denver and Incendere.
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 $0 for the nine months ended
September 30, 1995 and approximately $1,442,000 for the year ended December 31,
1994.
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 HMC 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 HMC 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.
24
<PAGE> 26
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES AND
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
THE ---------------------
COMPANY HMC COMBINED DR. CR. PRO FORMA
-------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . $ 210,679 $33,201 $243,880 $243,880
Expenses:
Cost of operations. . . . . . . . . . . . 140,152 21,772 161,924 $1,004(a) $ 289(b) 162,639
Selling, general and
administrative. . . . . . . . . . . . . 46,951 9,298 56,249 447(c) 55,802
Other (income) expense:
Interest and other income . . . . . . . . (2,745) - (2,745) (2,745)
Interest expense. . . . . . . . . . . . . 4,261 489 4,750 4,750(d) -
--------- ------- -------- ------ ------ --------
188,619 31,559 220,178 1,004 5,486 215,696
--------- ------- -------- ------ ------ --------
Income from continuing operations
before income taxes . . . . . . . . . . . 22,060 1,642 23,702 1,004 5,486 28,184
Income tax provision . . . . . . . . . . . . 6,985 657 7,642 1,670(e) 9,312
--------- ------- -------- ------ ------ --------
Income from continuing operations. . . . . . $ 15,075 $ 985 $ 16,060 $2,674 $5,486 $ 18,872
========= ======= ======== ====== ====== ========
Primary:
Earnings per share from continuing
operations. . . . . . . . . . . . . . . $ 0.27 $ 0.24
========= ========
Weighted average common and common
equivalent shares outstanding . . . . . 55,852 79,097
========= ========
Fully Diluted:
Earnings per share from continuing
operations. . . . . . . . . . . . . . . $ 0.26 $ 0.22
========= ========
Weighted average common and common
equivalent shares outstanding . . . . . 57,824 84,013
========= ========
</TABLE>
25
<PAGE>
<PAGE> 27
REPUBLIC 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 HMC COMBINED DR. CR. PRO FORMA
-------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . $ 218,173 $48,003 $266,176 $ $ $266,176
Expenses:
Cost of operations. . . . . . . . . . . . 143,375 35,048 178,423 1,722(a) 494(b) 179,651
Selling, general and
administrative. . . . . . . . . . . . . 49,245 9,444 58,689 1,787(c) 56,902
Other (income) expense:
Interest and other income . . . . . . . . (1,081) - (1,081) (1,081)
Interest expense. . . . . . . . . . . . . 4,487 505 4,992 4,992(d) --
--------- ------- -------- ------- ------ --------
$ 196,026 $44,997 $241,023 $ 1,722 $7,273 $235,472
--------- ------- -------- ------- ------ --------
Income from continuing operations
before income taxes . . . . . . . . . . . 22,147 3,006 25,153 1,722 7,273 30,704
Income tax provision . . . . . . . . . . . . 3,839 1,269 5,108 1,983(e) 7,091
--------- ------- -------- ------- ------ --------
Income from continuing operations. . . . . . $ 18,308 $ 1,737 $ 20,045 $ 3,705 $7,273 $ 23,613
========= ======= ======== ======= ====== ========
Earnings per share from continuing
operations. . . . . . . . . . . . . . . . $ 0.38 $ 0.35
========= ========
Weighted average common and common
equivalent shares outstanding . . . . . . 48,460 71,368
========= ========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
26
<PAGE> 28
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(a) Represents a net adjustment related to the elimination of the
historical amorization 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 HMC.
Intangible assets resulting from the purchase of HMC are being
amortized over a 40 year life which approximates the estimated
useful life.
(b) Represents a reduction to depreciation expense resulting from the
revision of estimated lives of acquired property and equipment of HMC
to conform with the Company's policies.
(c) Represents the contractual reduction of salary and benefits of the
sellers of HMC.
(d) Represents the assumed interest savings on the payoff of all existing
indebtedness of the Company and HMC with the proceeds from the Equity
Transactions.
(e) Represents the incremental change in the combined entity's provision
for income taxes as a result of the pre-tax earnings of HMC and all
pro forma adjustments as described above.
27
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
REPUBLIC INDUSTRIES, INC.
By: /s/ Gregory K. Fairbanks
--------------------------------------
Gregory K. Fairbanks
Executive Vice President
and Chief Financial Officer
Date: March 15, 1996
--------------
28
<PAGE> 30
REPUBLIC INDUSTRIES, INC.
EXHIBIT INDEX
Number and Sequential
Description of Exhibit Page Number
- ---------------------- -----------
1. None
2. None
4. None
16. None
17. None
21. None
23. Consent of Arthur Andersen LLP
24. None
27. None
99. Supplemental Consolidated Financial Statements
<PAGE> 1
EXHIBIT 23
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/A, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration Nos. 33-61649, 33-62489, 33-63735 and 33-65289) and S-8
(Registration No. 33-93742).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida
March 15, 1996.
<PAGE> 1
EXHIBIT 99
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
AUDITED SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . 2
Supplemental Consolidated Balance Sheets as of
September 30, 1995 (unaudited) and December 31, 1994 and 1993 . . . . 3
Supplemental Consolidated Statements of Operations for the
Nine Months Ended September 30, 1995 and 1994 (unaudited)
and the Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . 4
Supplemental Consolidated Statements of Stockholders'
Equity for the Years Ended December 31, 1994, 1993 and 1992 . . . . . 5
Supplemental Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994 (unaudited)
and the Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . 6
Notes to Supplemental Consolidated Financial Statements . . . . . . . . 7
</TABLE>
<PAGE> 2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Republic Industries, Inc.:
We have audited the accompanying supplemental consolidated balance sheets of
Republic 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 the Pooled Entities
described in Note 1 to the supplemental consolidated financial statements.
These transactions have been accounted for under the pooling of interests
method of accounting. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Republic 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 Denver Alarm Companies and Schaubach Companies as described
in Note 1 to the supplemental consolidated financial statements, all in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 15, 1996.
2
<PAGE> 3
REPUBLIC INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31,
---------------------------
September 30,
1995 1994 1993
----------- ---------- ----------
ASSETS (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $218,202 $ 11,485 $ 11,367
Accounts receivable, less allowance for doubtful accounts of
$2,683 (unaudited), $1,581 and $1,555, respectively. . . . . . . . 38,130 26,159 21,733
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 3,875 2,735 2,889
Current portion of deferred installation costs. . . . . . . . . . . . 4,732 2,360 1,535
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 8,128 6,493 6,391
-------- -------- --------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . 273,067 49,232 43,915
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 183,616 141,126 131,120
Goodwill, net of accumulated amortization of $3,608 (unaudited), $3,212
and $2,219,respectively . . . . . . . . . . . . . . . . . . . . . 91,464 15,605 9,910
Deferred installation costs, net of current portion . . . . . . . . . . . . . 27,157 21,833 8,512
Net assets of discontinued operations . . . . . . . . . . . . . . . . . . . . - 20,292 16,872
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,566 9,119 7,058
-------- -------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $586,870 $257,207 $217,387
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,674 $ 12,829 $ 11,499
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 23,374 11,635 7,165
Current portion of deferred revenue . . . . . . . . . . . . . . . . . 24,229 13,892 7,435
Current maturities of long-term debt and notes payable . . . . . . . 12,283 11,272 11,464
Current portion of accrued environmental and landfill costs . . . . 1,008 1,404 1,715
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 1,570 1,281 568
-------- -------- --------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . 82,138 52,313 39,846
Long-term debt, net of current maturities . . . . . . . . . . . . . . . . . . 46,060 46,699 42,930
Deferred revenue, net of current portion. . . . . . . . . . . . . . . . . . . 17,030 20,353 10,913
Accrued environmental and landfill costs, net of current portion . . . . . . 6,612 8,244 8,757
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,907 11,510 11,444
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,507 2,783 558
-------- -------- --------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 169,254 141,902 114,448
-------- -------- --------
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; 350,000,000, 100,000,000 and
100,000,000 shares authorized, respectively; 77,973,492 (unaudited),
48,228,167, and 48,390,824 issued, respectively . . . . . . . . . . 780 483 484
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 383,691 105,852 104,824
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . . 33,145 9,643 (1,696)
Notes receivable arising from stock purchase agreements . . . . . . - (673) (673)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 417,616 115,305 102,939
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . $586,870 $257,207 $217,387
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
3
<PAGE> 4
REPUBLIC INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
----------------------- -------------------------------------
1995 1994 1994 1993 1992
---------- --------- -------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $210,679 $164,162 $218,173 $182,495 $162,503
Expenses:
Cost of operations . . . . . . . . . . . . . . . . 140,152 108,397 143,375 121,640 109,412
Selling, general and administrative . . . . . . . 46,951 36,338 49,245 46,477 39,077
Restructuring and unusual charges . . . . . . . . - - - 10,040 2,250
Other (income) expense:
Interest and other income . . . . . . . . . . . . (2,745) (836) (1,081) (760) (3,144)
Interest expense . . . . . . . . . . . . . . . . . 4,261 3,031 4,487 2,936 2,569
--------- --------- -------- -------- ----------
188,619 146,930 196,026 180,333 150,164
--------- --------- -------- -------- ----------
Income from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 22,060 17,232 22,147 2,162 12,339
Income tax provision . . . . . . . . . . . . . . . . . . . 6,985 2,822 3,839 1,187 2,086
--------- --------- -------- -------- ----------
Income from continuing operations . . . . . . . . . 15,075 14,410 18,308 975 10,253
--------- --------- -------- -------- ----------
Discontinued operations:
Income (loss) from discontinued operations, net of
income tax benefit of $298 (unaudited), $0
(unaudited), $0, $210 and $123, respectively . . 508 1,669 2,684 (14,579) (1,117)
Loss on disposition . . . . . . . . . . . . . . . . - - - - (17,563)
--------- --------- -------- -------- ----------
508 1,669 2,684 (14,579) (18,680)
--------- --------- -------- -------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 15,583 $ 16,079 $ 20,992 $(13,604) $ (8,427)
========= ========= ======== ======== ==========
Primary earnings (loss) per common and common equivalent
share:
Continuing operations . . . . . . . . . . . . . . $ 0.27 $ 0.30 $ 0.38 $ 0.02 $ 0.22
Discontinued operations . . . . . . . . . . . . . 0.01 0.03 0.05 (0.30) (0.40)
--------- --------- -------- -------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . $ 0.28 $ 0.33 $ 0.43 $ (0.28) $ (0.18)
========= ========= ======== ======== ==========
Fully diluted earnings (loss) per common and
common equivalent share:
Continuing operations . . . . . . . . . . . . . . . $ 0.26 $ 0.30 $ 0.38 $ 0.02 $ 0.22
Discontinued operations . . . . . . . . . . . . . . 0.01 0.03 0.05 (0.30) (0.40)
--------- --------- -------- -------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . $ 0.27 $ 0.33 $ 0.43 $ (0.28) $ (0.18)
========= ========= ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
4
<PAGE> 5
REPUBLIC INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Notes
Receivable
Arising
Retained From
Additional Earnings Stock
Common Paid-In (Accumulated Purchase
Stock Capital Deficit) Agreements
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 . . . . . . . . . $ 458 $ 85,700 $ 32,622 $ (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 . . . . . . . . . . - - (4,586) -
Collections on notes receivable . . . . . . - - - 25
Foreign currency translation
adjustment . . . . . . . . . . . . . . . . - - (983) -
Capital contributions equal to the current
income taxes of S-Corporations . . . . . . - 365 - -
Net loss . . . . . . . . . . . . . . . . . . - - (8,427) -
------ --------- ------- -------
BALANCE AT DECEMBER 31, 1992 . . . . . . . . . 484 102,613 18,676 (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 . . . . . . . . . . . . . . . . . - 2,060 - -
Distributions to former shareholders
of acquired companies . . . . . . . . . . - - (6,350) -
Foreign currency translation
adjustment . . . . . . . . . . . . . . . . - - (472) -
Capital contributions equal to the current
income taxes of S-Corporations . . . . . . - 830 54 -
Net loss . . . . . . . . . . . . . . . . . . - - (13,604) -
------ --------- -------- -------
BALANCE AT DECEMBER 31, 1993 . . . . . . . . . 484 104,824 (1,696) (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 . . . . . . . . . . . . . . . . . - 702 - -
Distributions to former shareholders
of acquired companies . . . . . . . . . . - - (9,671) -
Foreign currency translation
adjustment . . . . . . . . . . . . . . . . - - 18 -
Capital contributions equal to the current
income taxes of S-Corporations . . . . . . - 1,181 - -
Net income . . . . . . . . . . . . . . . . . - - 20,992 -
------ --------- -------- -------
BALANCE AT DECEMBER 31, 1994 . . . . . . . . . $ 483 $ 105,852 $ 9,643 $ (673)
====== ========= ======== =======
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
5
<PAGE> 6
REPUBLIC INDUSTRIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
----------------------- ------------------------------------
1995 1994 1994 1993 1992
-------- -------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Income from continuing operations . . . . . . . . . . . . $ 15,075 $ 14,410 $ 18,308 $ 975 $ 10,253
Adjustments to reconcile income from continuing
operations to net cash provided by continuing operations:
Restructuring and unusual charges . . . . . . . . . . . . - - - 10,040 -
Depreciation, depletion and amortization . . . . . . . . 15,011 11,744 16,159 13,790 11,300
Provision for doubtful accounts . . . . . . . . . . . . . 878 529 452 605 446
Provision for accrued environmental and landfill costs. . 255 308 377 215 76
Gain on the sale of equipment . . . . . . . . . . . . . . (383) (299) (286) (143) (1,040)
Gain on sale of marketable securities . . . . . . . . . . - - - - (2,000)
Changes in assets and liabilities, net of
effects from business acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . (5,614) (2,272) (3,206) (2,675) (3,213)
Prepaid expenses and other assets . . . . . . . . . . . (2,674) (632) (708) (2,348) (780)
Accounts payable and accrued liabilities . . . . . . . 5,548 1,416 2,681 251 2,226
Income taxes payable . . . . . . . . . . . . . . . . . (659) 212 712 (772) 1,906
Other liabilities . . . . . . . . . . . . . . . . . . . 2,366 638 356 1,392 (114)
-------- -------- -------- -------- --------
Net cash provided by continuing operations . . . . . . 29,803 26,054 34,845 21,330 19,060
-------- -------- -------- -------- --------
CASH PROVIDED BY (USED BY) DISCONTINUED OPERATIONS. . . . . . (261) 1,279 (736) (4,360) (17,610)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired . . . . . . . (6,099) (1,493) (4,776) (5,664) (4,003)
Purchases of property and equipment . . . . . . . . . . . . (28,577) (20,136) (25,472) (14,331) (22,787)
Proceeds from the sale of equipment . . . . . . . . . . . . 1,068 1,942 2,089 1,014 1,375
Capitalized installation costs . . . . . . . . . . . . . . (7,696) (9,669) (14,146) (7,768) (1,611)
Other investments . . . . . . . . . . . . . . . . . . . . . (1,013) 84 (901) (2,357) 820
Purchases of marketable securities . . . . . . . . . . . . - - - - (7,554)
Proceeds from the sale of marketable securities . . . . . . - - - - 9,554
-------- -------- -------- -------- --------
Net cash used in investing activities . . . . . . . . . . . (42,317) (29,272) (43,206) (29,106) (24,206)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and warrants. . . . . . . . . . . 6,333 - - - -
Capital contribution to Republic Environmental
Systems, Inc. . . . . . . . . . . . . . . . . . . . . . (2,520) - - - -
Payments of long-term debt and notes payable . . . . . . . (40,338) (13,207) (17,950) (16,035) (22,880)
Proceeds from long-term debt and notes payable . . . . . . 23,432 13,493 21,717 23,201 23,888
Proceeds from financing arrangements . . . . . . . . . . . 5,276 11,707 15,729 11,153 1,588
Purchases of treasury stock . . . . . . . . . . . . . . . . (222) (856) (856) - -
Contributions to capital from pooled entities . . . . . . . 283 353 301 964 686
Distributions to former shareholders of acquired
businesses . . . . . . . . . . . . . . . . . . . . . . . (5,473) (6,961) (9,726) (5,899) (4,355)
Payments of debt issuance costs . . . . . . . . . . . . . . - - - (494) -
Sales of common stock . . . . . . . . . . . . . . . . . . . 232,048 - - - 11,466
Payments of common stock issuance costs . . . . . . . . . . - - - - (78)
Payments received on notes receivable arising from
stock purchase agreements. . . . . . . . . . . . . . . . 673 - - - 648
-------- -------- -------- -------- --------
Net cash provided by financing activities . . . . . . . . . 219,492 4,529 9,215 12,890 10,963
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . 206,717 2,590 118 754 (11,793)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . 11,485 11,367 11,367 10,613 22,406
-------- -------- -------- -------- --------
End of period . . . . . . . . . . . . . . . . . . . . . . . $218,202 $ 13,957 $ 11,485 $ 11,367 $ 10,613
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,165 $ 2,291 $ 4,373 $ 2,688 $ 3,216
Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 3,590 $ 2,004 $ 2,278 $ 1,260 $ 1,507
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchases of $1,443, $1,867 and $2,873 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.
6
<PAGE> 7
REPUBLIC 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 Industries,
Inc. (formerly 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 September 30, 1995, and the consolidated results of
its operations and cash flows for the nine months ended September 30, 1995 and
1994.
The accompanying supplemental consolidated financial statements
include the financial position and results of operations of Kertz Security
Systems II, Inc. and Kertz Security Systems, Inc. (collectively, "Kertz"), with
which the Company merged in August 1995. This transaction was accounted for
under the pooling-of-interests method of accounting and, accordingly, the
Company's consolidated financial statements have been previously restated as
if the Company and Kertz had operated as one entity since inception. See
Note 3, Business Combinations, for a further discussion of this transaction.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS. The accompanying
supplemental consolidated financial statements give retroactive effect to the
mergers with United Waste Service, Inc. ("United") and Southland Environmental
Services, Inc. ("Southland"), which took place in October 1995; J.C. Duncan
Company, Inc. and affiliates ("Duncan"), Garbage Disposal Service, Inc.
("GDS"), Fennell Container Co., Inc. and affiliates ("Fennell") and Scott
Security Systems and affiliates ("Scott"), which took place in November 1995 and
The Denver Fire Reporter & Protective Co. and affiliate ("Denver") and
Incendere, Inc. and affiliates ("Incendere"), which took place in February
1996. These transactions were accounted for under the pooling of interests
method of accounting. The above merged companies, including Kertz, are
collectively referred to as the "Pooled Entities." See Note 3, Business
Combinations, for further discussion of these transactions.
For the years ended December 31, 1994, 1993 and 1992, United,
Southland, and GDS were consolidated for their fiscal years ended on September
30. In connection with the United, Southland and GDS mergers, effective
January 1, 1995, the Company has changed the year ends of United, Southland and
GDS to conform with that of the Company. The results of operations for United,
Southland and GDS 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.
REVENUE RECOGNITION. The Company recognizes revenue as services are
provided.
7
<PAGE> 8
REPUBLIC 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 $4,104,000 and
$3,895,000, 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 ten 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 as well as direct costs incurred to construct and develop the
site. 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 $1,009,000 and
$701,000, 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 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 $1,252,000, $939,000 and $701,000 in
1994, 1993 and 1992, respectively.
DEFERRED INSTALLATION COSTS. Deferred installation costs represent
capitalized direct labor and material costs associated with new monitoring
contracts installed by the Company.
The costs are amortized based on an estimated customer life determined
by the historical attrition rates. The amortization method applies the
attrition rate (converted to an estimated useful life) to the entire net book
value of the account base at the beginning of each period adjusted for
additions and divestitures during the period. These costs are being amortized
over periods ranging from eight to twelve years.
8
<PAGE> 9
REPUBLIC 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
9
<PAGE> 10
REPUBLIC 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 5,400,000 RESI shares were distributed to the Company's
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>
10
<PAGE> 11
REPUBLIC 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 $2,500,000 to RESI to repay certain
indebtedness of RESI and to provide working capital to RESI. Additionally, the
Company reclassified approximately $36,300,000 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 $23,000,000.
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 will be terminated as of March 31,
1996. 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 continued to do so
until the expiration of the Company's 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 $17,600,000. 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
$2,900,000 and $2,700,000, respectively.
3. BUSINESS COMBINATIONS
In August 1995, the Company merged with Kertz. In October 1995, the
Company merged with United and Southland. In November 1995, the Company merged
with Duncan, GDS, Fennell and Scott. In February 1996, the Company merged with
Denver and Incendere. The Company issued 1,090,000 shares of the Company's
common stock, $.01 par value per share, ("Common Stock") in exchange for all
of the outstanding shares of common stock of Kertz, which provides electronic
security monitoring and maintenance predominantly in the South Florida, Tampa
and Orlando areas. The Company issued 1,500,000 shares of Common Stock in
exchange for all of the outstanding common stock of United which provides solid
waste collection, transfer and recycling services in the Atlanta, Georgia
metropolitan area. The Company issued 2,600,000 shares of Common Stock in
exchange for all of the outstanding common stock of Southland which provides
solid waste collection services in the Northeast Florida area. The Company
issued 5,256,055 shares of Common Stock in exchange for all of the outstanding
common stock of Duncan which provides solid waste collection and recycling
services in the Dallas-Fort Worth metropolitan area and throughout west Texas
and also operates two landfills. The Company issued 3,003,000 shares of
Common Stock in exchange for all of the outstanding common stock of GDS which
provides solid waste collection and recycling services throughout western North
Carolina. The Company issued 3,111,111 shares of Common Stock in exchange for
all of the outstanding common stock of Fennell which is a full-service solid
waste management company, providing services in and around Charleston and
Greenville, South Carolina and also owns a landfill. The Company issued
1,567,818 shares of Common Stock in exchange for all of the outstanding
common stock of Scott which is an electronic security alarm company, providing
monitoring and maintenance services in Jacksonville, Orlando and Tallahassee,
Florida, and other metropolitan areas in the southeastern United States,
including Charlotte, North Carolina, Savannah, Georgia and Nashville,
Tennessee. The Company issued 1,631,752 shares of Common Stock in exchange for
all of the outstanding common stock of Denver which provides electronic
security alarm installation, monitoring and maintenance services in Denver, Fort
Collins, Boulder, Colorado Springs and Pueblo, Colorado. The Company issued
1,282,700 shares of Common Stock in exchange for all of the outstanding common
stock of Incendere which provides solid waste collection and recycling services
in southeastern Virginia and eastern North Carolina and provides transportation
of medical waste throughout the Mid-Atlantic States. 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 Pooled Entities and the Company
had operated as one entity since inception. These supplemental consolidated
financial statements will be substantially the same as the restated
statements that will be issued after post-merger operating results have
been published.
Details of the results of operations of the Company and the Pooled
Entities for the periods prior to the combinations are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------------- ------------------------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
The Company . . . . . . . $ 55,945 $ 36,307 $ 48,766 $ 41,095 $ 35,341
Pooled entities . . . . . 154,734 127,855 169,407 141,400 127,162
-------- -------- -------- -------- --------
$210,679 $164,162 $218,173 $182,495 $162,503
======== ======== ======== ======== ========
Net income (loss):
The Company . . . . . . . $ 7,134 $ 8,117 $ 11,187 $(18,484) $(14,004)
Pooled entities . . . . . 8,449 7,962 9,805 4,880 5,577
-------- -------- -------- -------- --------
$ 15,583 $ 16,079 $ 20,992 $(13,604) $( 8,427)
======== ======== ======== ======== ========
</TABLE>
From January 1, 1992 through December 31, 1994, the Company
acquired seven businesses, all of which were accounted for under the purchase
method of accounting. The businesses accounted for under the purchase method
of accounting 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 pro forma effect of these acquisitions is not material to
the supplemental consolidated results of operations for all periods presented.
In August 1995, the Company acquired all of the outstanding shares of
common stock of Hudson Management Corporation and Envirocycle, Inc.
(collectively, "HMC"). The purchase price paid by the Company was approximately
$72,800,000 and consisted of 8,000,000 shares of Common Stock. HMC, as the
third largest solid waste management company in Florida, provides solid waste
collection and recycling services to commercial, industrial and residential
customers. This acquisition, as well as several other minor business
combinations in 1995, has been accounted for under the purchase method of
accounting and, accordingly, is included in the Company's supplemental
consolidated financial statements from the date of acquisition.
The Company's consolidated results of operations on an unaudited pro
forma basis assuming the acquisition of HMC had occurred at the beginning of
each of the periods presented are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
1995 1994
-------- --------
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . $243,880 $266,176
======== ========
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . $ 23,702 $ 25,153
======== ========
Net income . . . . . . . . . . . . . . . . . . . . . . $ 16,060 $ 20,045
======== ========
Fully diluted earnings per common and common
equivalent shares . . . . . . . . . . . . . . . . . . $ 0.24 $ 0.36
======== ========
Pro forma weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . . . 65,824 56,460
======== ========
</TABLE>
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.
11
<PAGE> 12
REPUBLIC INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the purchase price of the Company's
acquisitions accounted for under the purchase method of accounting (in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- -----------------------------------
1995 1994 1994 1993 1992
------- ------ ------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash (net of cash
acquired) . . . . . . . $ 6,099 $1,493 $ 4,776 $ 5,664 $ 4,003
Common stock (including
contingent consideration
earned) . . . . . . . . 72,800 - 105 266 2,964
------- ------ ------- ------- --------
$78,899 $1,493 $ 4,881 $ 5,930 $ 6,967
======= ====== ======= ======= ========
</TABLE>
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.
12
<PAGE> 13
REPUBLIC INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RESTRUCTURING AND UNUSUAL CHARGES
In the fourth quarter of 1993, the Company recorded restructuring and
unusual charges of $10,000,000 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 $6,600,000. 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 $1,200,000. In addition, the Company also reevaluated its
exposure related to litigation and environmental matters and provided
additional accruals aggregating $2,200,000 for the costs to defend or settle
certain litigation and environmental matters.
13
<PAGE> 14
REPUBLIC 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 $2,200,000, which was
recorded as an unusual charge.
5. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings 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. In computing earnings per common and common equivalent
share, the Company currently utilizes the modified treasury stock method and in
the prior year used the 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 computation of weighted average common and common equivalent
shares used in the calculation of primary and fully diluted earnings per share
are shown below:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- ---------------------------------
1995 1994 1994 1993 1992
------ ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Primary:
Common shares outstanding . . . . . . . . . . . . . . . . . 77,974 48,258 48,229 48,391 48,324
Common equivalent shares . . . . . . . . . . . . . . . . . 20,546 60 82 160 186
Weighted average treasury shares purchased . . . . . . . . (4,115) - 149 - -
Effect of using weighted average common and common
equivalent shares outstanding . . . . . . . . . . . . . . (38,553) 160 - - (1,116)
------- ------ ------ ------ ------
55,852 48,478 48,460 48,551 47,394
======= ====== ====== ====== ======
Fully diluted:
Common shares outstanding . . . . . . . . . . . . . . . . . 77,974 48,258 48,229 48,391 48,324
Common equivalent shares . . . . . . . . . . . . . . . . . 21,008 60 82 160 186
Weighted average treasury shares purchased . . . . . . . . (2,651) - 149 - -
Effect of using weighted average common and common
equivalent shares outstanding . . . . . . . . . . . . . . (38,507) 160 - - (1,116)
------- ------ ------ ------ ------
57,824 48,478 48,460 48,551 47,394
======= ====== ====== ====== ======
</TABLE>
6. PROPERTY AND EQUIPMENT
A summary of property and equipment is shown below (in thousands):
<TABLE>
<CAPTION>
December 31,
September 30, --------------------------
1995 1994 1993
------------ -------- --------
(Unaudited)
<S> <C> <C> <C>
Land, landfills and improvements. . . . . . . . . . . $ 89,551 $ 84,864 $ 81,601
Vehicles and equipment . . . . . . . . . . . . . . . 153,459 106,881 89,724
Buildings and improvements . . . . . . . . . . . . . 21,502 17,127 17,346
Furniture and fixtures . . . . . . . . . . . . . . . 8,893 8,128 7,150
-------- -------- --------
273,405 217,000 195,821
Less accumulated depreciation and depletion . . . (89,789) (75,874) (64,701)
-------- -------- --------
$183,616 $141,126 $131,120
======== ======== ========
</TABLE>
7. ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
The Company owns and operates twelve 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 $7,600,000 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.
14
<PAGE> 15
REPUBLIC 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 is 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,
September 30, -------------------------
1995 1994 1993
------------- ------ ------
(Unaudited)
<S> <C> <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 December 1997 . . . . . . . . $ - $12,600 $12,200
Notes to banks and financial institutions, secured by
equipment and other assets, interest ranging from 6.0% to
20.1% (weighted average interest rate of 7.2% as of
December 31, 1994), payable monthly through 2003 . . . 38,411 31,937 23,889
Notes payable to former stockholders of acquired
companies, secured by common stock of the acquired
companies, interest at 9.5%, payable monthly
through 2004 . . . . . . . . . . . . . . . . . . . . . 7,267 6,058 6,114
Other notes, secured by equipment and
other assets, interest ranging from 4.0% to 16.93% (weighted
average interest rate of 6.0% as of December 31, 1994),
payable monthly through 2011 . . . . . . . . . . . . . 12,665 7,376 12,191
--------- ------- -------
58,343 57,971 54,394
Less current maturities . . . . . . . . . . . . . . . . (12,283) (11,272) (11,464)
--------- ------- -------
$ 46,060 $46,699 $42,930
========= ======= =======
</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 borrowings. As of December 31, 1994,
the Company was in compliance with all covenants under the credit agreement.
In connection with the equity investment and private placement
transactions, as discussed in Note 10, Stockholders' Equity, the Company
received approximately $232,000,000 in cash during the three months ended
September 30, 1995. The Company used a portion of these proceeds to repay all
outstanding borrowings under the revolving credit facility totaling
approximately $15,500,000 plus interest expense in August 1995. In December
1995, the Company entered into a credit agreement (the "Credit Agreement") with
certain banks pursuant to which such banks have agreed to advance the Company
on an unsecured basis an aggregate of $250,000,000 for a term of 36 months.
Outstanding advances, if any, are payable at the expiration of the 36-month
term. The Credit Agreement requires, among other items, that the Company
maintain certain financial ratios and comply with certain financial covenants.
Interest is payable monthly and generally determined using either a competitive
bid feature or a LIBOR based rate. The Credit Agreement replaces the 1993
revolving credit arrangement among the Company and certain other banks.
15
<PAGE> 16
REPUBLIC 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 . . . . . . . . . . . . . . . . . . $11,272
1996 . . . . . . . . . . . . . . . . . . 21,014
1997 . . . . . . . . . . . . . . . . . . 8,089
1998 . . . . . . . . . . . . . . . . . . 5,483
1999 . . . . . . . . . . . . . . . . . . 2,906
Thereafter . . . . . . . . . . . . . . . 9,207
-------
$57,971
=======
</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 $16,000,000. 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 reconsideration 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 $24,000,000 in damages. The
lawsuit stems from Western's attempts to acquire Best Pak Disposal, Inc. This
case is expected to be scheduled for trial in May 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.
16
<PAGE> 17
REPUBLIC 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 the Spring of 1996. 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 . . . . . . . . . . . . . . . . . . . . . . . $2,893
1996 . . . . . . . . . . . . . . . . . . . . . . . $2,672
1997 . . . . . . . . . . . . . . . . . . . . . . . $1,708
1998 . . . . . . . . . . . . . . . . . . . . . . . $ 811
1999 . . . . . . . . . . . . . . . . . . . . . . . $ 437
Thereafter . . . . . . . . . . . . . . . . . . . . $ 261
</TABLE>
17
<PAGE> 18
REPUBLIC INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total rental expense incurred under operating leases was $3,672,000, $2,688,000
and $2,067,000 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
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 $37,500,000. 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.
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 $69,000,000 after
deducting expenses, 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 $99,000,000
after deducting expenses, fees and commissions.
As a result of the transactions discussed above, the Company received
approximately $232,000,000 in cash during the three months ended September 30,
1995. The Company used a portion of these proceeds to repay all outstanding
borrowings under its revolving line of credit facility and debt of the Pooled
Entities.
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 1,300,000 shares of its 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
1,300,000 shares of its 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
18
<PAGE> 19
REPUBLIC 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.
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 in the period 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.
19
<PAGE> 20
REPUBLIC 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
The Company files a consolidated federal income tax return which
includes the operations of the Pooled Entities for periods subsequent to the
dates of the acquisitions. The Pooled Entities each file a "short-period"
federal tax return through their respective acquisition dates. Certain of the
Pooled Entities were Subchapter S corporations for income tax purposes prior to
their acquisition by the Company. For purposes of these supplemental
consolidated financial statements, federal and state income taxes have been
provided as if these companies had filed Subchapter C corporation tax returns
for the pre-acquisition periods, and the current income tax expense is reflected
as an increase to additional paid-in capital. The Subchapter S corporation
status of these companies was terminated effective with the closing date of the
acquisitions.
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 . . . . . . . . . . . . . . . . . . . $ 3,973 $ 1,664 $ 3,798
State . . . . . . . . . . . . . . . . . . . . 618 279 311
------- -------- -------
4,591 1,943 4,109
Federal deferred . . . . . . . . . . . . . . . . 2,453 (1,998) (485)
Tax reserve adjustments . . . . . . . . . . . . (1,963) - (1,538)
Change in valuation allowance . . . . . . . . . (1,242) 1,242 -
------- -------- -------
Income tax provision . . . . . . . . . . . . . . $ 3,839 $ 1,187 $ 2,086
======= ======== =======
</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.
20
<PAGE> 21
REPUBLIC 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 for the nine months ended September
30, 1994 was partially 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 . . . . . . . . . . . 0.4 3.6 0.4
State income taxes, net of federal benefit . . 2.4 9.6 2.2
Tax reserve adjustments . . . . . . . . . . . . (8.9) (7.8) (12.4)
Change in valuation allowance . . . . . . . . . (5.1) 47.3 -
S-Corporation earnings . . . . . . . . . . . . (6.0) (44.7) (9.0)
Other, net . . . . . . . . . . . . . . . . . . 0.5 12.9 1.7
----- ----- -----
Effective tax rate . . . . . . . . . . . . . 17.3% 54.9% 16.9%
===== ===== =====
</TABLE>
21
<PAGE> 22
REPUBLIC 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 . . . . . . . . . $22,930 $22,617
Deferred costs . . . . . . . . . . . . . . . . . . . . 8,954 3,753
------- -------
31,884 26,370
------- -------
Deferred income tax assets:
Net operating losses . . . . . . . . . . . . . . . . . (5,186) (5,890)
Deferred revenue . . . . . . . . . . . . . . . . . . . (11,240) (5,420)
Accrued environmental and landfill costs . . . . . . . (2,761) (3,054)
Accruals not currently deductible . . . . . . . . . . . (1,187) (1,804)
------- -------
(20,374) (16,168)
------- -------
Valuation allowance . . . . . . . . . . . . . . . . . . . . -- 1,242
------- -------
Net deferred income tax liability . . . . . . . . . . . . . $11,510 $11,444
======= =======
</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.
22
<PAGE> 23
REPUBLIC 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 . . . . . . . . . . . . . $176,260 $146,107 $129,434
Electronic security services . . . . . . . . . 41,913 36,388 33,069
-------- -------- --------
$218,173 $182,495 $162,503
======== ======== ========
Operating income
Solid waste services . . . . . . . . . . . . . $ 23,201 $ 4,224 $ 9,046
Electronic security services . . . . . . . . . 2,352 114 2,718
Interest and other income (expense), net . . . . . . . (3,406) (2,176) 575
-------- -------- --------
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . $ 22,147 $ 2,162 $ 12,339
======== ======== ========
Depreciation, depletion and amortization
Solid waste services . . . . . . . . . . . . . $ 15,414 $ 13,238 $ 10,960
Electronic security services . . . . . . . . . 745 552 340
-------- -------- --------
$ 16,159 $ 13,790 $ 11,300
======== ======== ========
Capital expenditures
Solid waste services . . . . . . . . . . . . . $ 24,709 $ 13,257 $ 22,270
Electronic security services . . . . . . . . . 763 1,074 517
-------- -------- --------
$ 25,472 $ 14,331 $ 22,787
======== ======== ========
Identifiable assets
Solid waste services . . . . . . . . . . . . . $202,468 $179,837 $167,311
Electronic security services . . . . . . . . . 34,447 20,678 10,246
-------- -------- --------
Total identifiable assets . . . . . . . . . . . 236,915 200,515 177,557
Net assets of discontinued operations . . . . . . . . . 20,292 16,872 28,533
-------- -------- --------
Total assets . . . . . . . . . . . . . . . . . $257,207 $217,387 $206,090
======== ======== ========
</TABLE>
23
<PAGE> 24
REPUBLIC INDUSTRIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is an analysis of certain items in the Supplemental
Consolidated Statements of Operations by quarter for 1994 and 1993.
<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 $ 50,131 $ 54,088 $ 56,070 $ 57,884
1993 $ 42,814 $ 45,690 $ 47,165 $ 46,826
Gross profit 1994 $ 17,066 $ 17,593 $ 19,723 $ 20,416
1993 $ 14,024 $ 15,414 $ 16,058 $ 15,359
Income (loss) from 1994 $ 3,256 $ 4,611 $ 5,481 $ 4,960
continuing operations 1993 $ 2,305 $ 3,141 $ 3,104 $ (7,575)(a)
Net income (loss) 1994 $ 3,110 $ 5,438 $ 6,469 $ 5,975
1993 $ 1,834 $ 3,036 $ 3,502 $(21,976)
Earnings (loss) per share from 1994 $ 0.07 $ 0.10 $ 0.11 $ 0.10
continuing operations 1993 $ 0.05 $ 0.06 $ 0.06 $ (0.16)(a)
</TABLE>
____________
(a) As discussed in Note 4, restructuring and unusual charges of $10,000,000
were recorded by the Company in the fourth quarter of 1993 to reorganize
its operations.
24
