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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 21, 1996.
REGISTRATION NO. 33-63209
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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REPUBLIC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4953 73-1105145
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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200 EAST LAS OLAS BLVD., SUITE 1400
FORT LAUDERDALE, FLORIDA 33301
(954) 627-6000
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
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COPY TO:
RICHARD L. HANDLEY JONATHAN L. AWNER
SENIOR VICE PRESIDENT AKERMAN, SENTERFITT & EIDSON, P.A.
REPUBLIC INDUSTRIES, INC. ONE S.E. THIRD AVENUE
200 EAST LAS OLAS BLVD., SUITE 1400 SUITE 2800
FT. LAUDERDALE, FL 33301 MIAMI, FLORIDA 33131
(954) 627-6000 (305) 374-5600
(Name, address, including zip code, and
telephone number, including area code, of
agent for service)
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FILING AMENDED PROSPECTUS AND
AMENDING ITEMS 13, 15 AND 16 OF PART II
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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REPUBLIC INDUSTRIES, INC.
(CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K)
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LOCATION OR CAPTION
ITEM NUMBER IN PROSPECTUS
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page
2. Inside Front and Outside Back Cover Page of
Prospectus............................... Inside Front Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Not Applicable
6. Dilution................................... Not Applicable
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Plan of Distribution
9. Description of Securities to be
Registered............................... Description of Capital Stock
10. Interests of Named Experts and Counsel..... Legal Matters and Experts
11. Information with Respect to the
Registrant............................... Market Price of and Dividend on the
Registrant's Common Equity and
Related Stockholder Matters;
Selected Consolidated Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Properties; Legal and Administrative
Proceedings; Management; Executive
Compensation; Security Ownership of
Certain Beneficial Owners and Management;
Certain Relationships and Related
Transactions; Financial Statements.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
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PROSPECTUS
1,429,300 SHARES
(REPUBLIC INDUSTRIES, INC. LOGO)
COMMON STOCK
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This Prospectus relates to an aggregate of 1,429,300 shares (the "Shares")
of common stock, par value $.01 per share ("Common Stock"), of Republic
Industries, Inc., a Delaware corporation (the "Registrant" or the "Company"),
which may be offered and issued from time to time by the Company in connection
with future acquisitions of other businesses, properties or equity and/or debt
securities in business combination transactions in accordance with Rule 415(a)
(1)(viii) of Regulation C under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus may also be used, with the Company's prior
consent, by persons or entities, who have received or will receive the Shares
in connection with the acquisitions and who wish to offer and sell such Shares
under circumstances requiring or making desirable its use, and by certain
donees of such persons or entities. See "Plan of Distribution."
The Company will receive no portion of the proceeds from the sale of the
Shares offered hereby and will bear certain expenses incident to their
registration. See "Use of Proceeds."
The Common Stock is traded on The Nasdaq Stock Market ("Nasdaq") under the
symbol "RWIN." On May 17, 1996, the last reported sales price for the Common
Stock as reported by Nasdaq was $40.625 per share (before adjustment for the
Stock Split described below). On May 10, 1996, the Company's Board of Directors
declared a two-for-one stock split in the form of a 100% stock dividend to
stockholders of record on May 28, 1996, to be distributed on June 8, 1996. See
"Recent Developments -- Stock Split". Commencing on May 29, 1996, quotations
by Nasdaq relating to the Common Stock will reflect such split. Unless
otherwise provided herein, all references in this Prospectus to per share data
and numbers of shares of Common Stock (other than the number of shares covered
by this Prospectus) have been retroactively adjusted to reflect the Stock Split.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
THE CAPTION "RISK FACTORS" LOCATED ON PAGE 5 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
, 1996
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
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TABLE OF CONTENTS
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PAGE
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Available Information................. 2
Prospectus Summary.................... 3
Recent Developments................... 4
Risk Factors.......................... 5
Use of Proceeds....................... 10
Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters......... 10
Selected Consolidated Financial Data.. 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 19
Properties............................ 28
Legal and Administrative
Proceedings......................... 28
Management............................ 31
Executive Compensation................ 35
Security Ownership of Certain
Beneficial Owners and Management.... 38
Certain Relationships and Related
Transactions........................ 40
Description of Capital Stock.......... 41
Plan of Distribution.................. 42
Legal Matters and Experts............. 42
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, and, in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy and information
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's
regional offices located at Northwest Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661 and at Seven World Trade Center, New
York, New York 10048. Copies of the reports, proxy and information statements
and other information concerning the Company can also be obtained from the
Commission at prescribed rates through its Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Common Stock is traded on Nasdaq.
Information filed by the Company with Nasdaq may be inspected at the offices of
Nasdaq at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Shares offered hereby
(including all amendments and supplements thereto, the "Registration
Statement"). This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copies of such documents filed as exhibits to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto can be inspected and copied at the public
reference facilities and regional offices of the Commission and at the offices
of Nasdaq referred to above.
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PROSPECTUS SUMMARY
The Company is a diversified services company, which, through its
subsidiaries, primarily provides integrated solid waste collection, disposal
and recycling services to public and private sector customers. As of May 15,
1996, the Company owns or operates fourteen solid waste landfills
with five located in Texas, two in California and one each in Florida, Georgia,
Michigan, North Carolina, South Carolina, Indiana and North Dakota with
approximately 1,544 permitted acres and total available permitted disposal
capacity of approximately 63.8 million in-place cubic yards. The Company also
currently provides collection service to over 870,000 residential, commercial
and industrial customers, primarily in areas surrounding its landfill sites
noted above and certain areas of Georgia, Maine, New Hampshire, and Virginia and
throughout Florida. In addition, the Company provides related environmental
services including consulting and analysis, remediation and other technical
services.
The Company, through certain recent acquisitions, is also
engaged in the electronic security services business, which consists of the
sale, installation and maintenance of electronic security systems for
commercial and residential use as well as the continuous electronic monitoring
of installed security systems. Currently, the Company monitors over 127,000
businesses and residences predominately in Florida and Colorado.
The Company's strategy is to aggressively grow as a diversified
services company by acquiring and integrating existing solid waste collection,
disposal and recycling businesses, and by expanding its recently acquired
electronic security services business through internal growth and additional
acquisitions. See "Business Acquisitions." In addition, it is currently
anticipated that the Company will expand its operations outside of solid waste
management and electronic security services, through acquisitions or otherwise.
See "Recent Developments."
In November 1995, the Company changed its name to Republic Industries,
Inc. from Republic Waste Industries, Inc. The Common Stock of the Company is
traded on Nasdaq under the trading symbol "RWIN." The Company's principal
executive offices are located at 200 East Las Olas Boulevard, Suite 1400, Ft.
Lauderdale, Florida 33301, and its telephone number is (954) 627-6000.
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RECENT DEVELOPMENTS
PENDING ACQUISITION OF AUTONATION INCORPORATED
On May 8, 1996, the Company entered into a merger agreement (the
"Merger Agreement") with RI/ANI Merger Corp., a Florida corporation and
wholly-owned subsidiary of the Company, AutoNation Incorporated, a Florida
corporation ("AutoNation"), H. Wayne Huizenga, Steven R. Berrard and JM Family
Enterprises, Inc., a Delaware corporation ("JMFE"), which provides for the
acquisition of AutoNation by the Company in a merger transaction (the
"Merger"). The Merger Agreement provides that the Company will issue
17,467,248 shares of its Common Stock in exchange for all of the outstanding
shares of common stock of AutoNation. Concurrent with the execution of the
Merger Agreement, the Company and AutoNation also entered into a loan agreement
(the "Loan Agreement") pursuant to which the Company will provide AutoNation a
line of credit until the closing of the Merger.
The Merger Agreement and the transactions contemplated thereby have
been approved by a special committee of the Company's Board of Directors
(comprised of disinterested outside Directors), as well as by the Board of
Directors and shareholders of AutoNation. In connection with the Merger, the
Company has received an opinion from its financial advisor that the Merger is
fair to the Company from a financial point of view.
Consumation of the Merger is subject to various conditions, including,
but not limited to, approval of the Merger by the stockholders of the Company.
Upon consummation of the Merger, it is expected that (i) Steven R.
Berrard, Chief Executive Officer of AutoNation, will be named the Company's
President and Chief Operating Officer and will be appointed to its Board of
Directors; (ii) James M. Moran, founder and Chairman of JMFE, will be appointed
to the Board of Directors of the Company; and (iii) Harris W. Hudson, currently
the Company's President and a Director, will be appointed Vice Chairman of the
Board of Directors of the Company.
RESIGNATION OF GREGORY K. FAIRBANKS
On May 9, 1996, the Company announced that Gregory K. Fairbanks,
Executive Vice President and Chief Financial Officer of the Company, resigned
his position effective July 1, 1996 citing personal reasons. Mr. Fairbanks will
remain in his position until July 1, 1996 in order to assist with the orderly
transition of his responsibilities.
STOCK SPLIT
On May 10, 1996, the Company's Board of Directors declared a
two-for-one stock split (the "Stock Split") in the form of a 100% stock
dividend to stockholders of record on May 28, 1996 (the "Record Date"). The
stock dividend will be distributed on June 8, 1996. Unless otherwise expressly
provided herein, all references in this Prospectus to per share data and
numbers of shares of Common Stock have been retroactively adjusted to reflect
the Stock Split.
PRIVATE PLACEMENT TRANSACTION
On May 20, 1996, the Company issued and sold 9,878,400 shares of Common
Stock in a private placement transaction for $20.25 per share resulting in net
proceeds of approximately $197,500,000 million after deducting fees and
commissions.
PROPOSED ACQUISITION OF CONTINENTAL WASTE INDUSTRIES, INC.
On May 20, 1996, the Company announced its intention to acquire
Continental Waste Industries, Inc. ("Continental") in a merger transaction.
Under the terms of the proposed transaction, each share of common stock of
Continental would be exchanged, on a tax-free basis, for 4/5ths of a share of
Common Stock (after giving effect to the Stock Split). The proposed
transaction, which will be accounted for as a pooling of interests, is subject
to the execution of a definitive agreement, approval of Continental's
stockholders, approval by the Boards of Directors of Continental and the
Company, and other customary closing conditions, including regulatory approval.
Continental's three largest stockholders, representing approximately 25% of
Continental's outstanding common stock have agreed to vote their shares in
favor of the transaction, which is expected to close during the third quarter
of 1996.
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RISK FACTORS
An investment in the Shares being offered hereby involves a significant
degree of risk. In addition to the other information set forth in this
Prospectus, prospective purchasers of the Shares should consider carefully the
following factors in evaluating an investment in the Company.
Control Of The Company. As of April 30, 1996, H. Wayne Huizenga,
Chairman of the Board and Chief Executive Officer of the Company, Michael G.
DeGroote, Vice Chairman of the Board of the Company, Harris W. Hudson, a
Director and the President of the Company (and Mr. Huizenga's brother-in-law),
and John J. Melk, a Director of the Company, beneficially own an aggregate of
83,022,556 shares of Common Stock (including shares beneficially owned by
certain of their spouses, with respect to which they each respectively disclaim
beneficial ownership, and including warrants and options exercisable within 60
days for an aggregate of 29,605,116 shares of Common Stock), or an aggregate
of 42% of the issued and outstanding shares of Common Stock. Although there is
no agreement among any of Messrs. Huizenga, DeGroote, Hudson or Melk to vote
together on any matters submitted to a vote of the Company's stockholders,
these stockholders acting together would be able to exert considerable
influence over the election of the Company's directors and the outcome of most
corporate actions requiring stockholder approval. See "Management."
Dependence on Key Personnel. The Company's future success depends to a
significant extent on its management team. The loss of the services of any of
the members of its management team, in general, or Mr. Huizenga in particular
(whether such loss is through resignation or otherwise), could have a material
adverse effect on the operations and future success of the Company.
Possible Depressing Effect of Future Sales of Common Stock. Future
sales of the Shares, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. There can be no
assurance as to when, and how many of, the Shares will be sold and the effect
such sales may have on the market price of the Common Stock. Since August 11,
1995, the Company has registered for sale, from time to time on a continuous
basis under several shelf registration statements, by certain selling
stockholders an aggregate of 171,837,286 shares of Common Stock, of which
36,290,000 shares were reserved for issuance pursuant to certain outstanding
options and warrants. These registration statements cover, among other shares,
51,378,400 shares of Common Stock issued in various private placements and
60,570,696 shares of Common Stock issued in various private business combination
transactions since July 1995. Since August 11, 1995, approximately 17% of
such shares have been sold to the public. In addition, the Company intends to
continue to issue Common Stock and/or options or warrants to purchase Common
Stock pursuant to exemptions from registration available under the Securities
Act in connection with certain of its acquisitions. Such securities are subject
to resale restrictions in accordance with the Securities Act and the
regulations promulgated thereunder. As such restrictions lapse or if such
shares are registered for sale to the public, such securities may be sold to
the public. In the event of the issuance and subsequent resale of a substantial
number of shares of Common Stock, or a perception that such sales could occur,
there could be a material adverse effect on the prevailing market price of the
Common Stock.
Dilution. The issuance of additional shares of Common Stock, upon
exercise of warrants, or upon completion of acquisitions or other business
combinations, may have a dilutive effect on earnings per share and will have a
dilutive effect on the voting rights of the holders of Common Stock.
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Absence of Operating History in Electronic Security Services Business
and Other Lines of Business. Through the acquisition of several companies
commencing in August 1995, the Company is engaged in the electronic security
services business. Prior to such time, the Company had no history of operations
in the electronic security services industry. In addition, the Company
currently anticipates that it will, through acquisitions, enter into other
lines of business, including previously-owned vehicle retailing and related
businesses through its pending acqusition of AutoNation, which is a developing
chain of used car megastores. The success of AutoNation's aggressive
development plans are dependent upon a number of factors, including, but not
limited to, economic conditions, competitive environment, adequate capital,
accurate site selection, supply of used vehicles, and the building of brand
recognition. There can be no assurance that the Company will be successful in
the electronic security services industry, the previously-owned vehicle
industry or in any other industry which it enters.
Need for Substantial Additional Capital. The Company's strategy is to
aggressively grow as a diversified services company by acquiring and
integrating existing solid waste collection, disposal and recycling companies,
and by expanding its recently acquired electronic security services business
by internal growth and additional acquisitions. In addition, it is currently
anticipated that the Company will expand its operations outside of the solid
waste management and electronic security services industries. See "Recent
Developments -- Pending Acquisition of AutoNation Incorporated". Although the
Company has substantially no debt and has approximately $307 million in cash
available for general corporate purposes as well as a $250 million credit
facility (which presently has no outstanding borrowings), the Company believes
that additional capital may be necessary to fully capitalize on acquisition and
expansion opportunities that may become available to the Company. There can be
no assurance that additional financing will be available on a timely basis, if
at all, or that it will be available on terms acceptable to the Company. In the
event that adequate financing is not available or is not available in the
amounts or on terms acceptable to the Company, the implementation of the
Company's acquisition and expansion strategy could be impeded.
Impediments to Completing Future Acquisitions. The Company's
acquisition strategy depends on its ability to identify and acquire appropriate
solid waste collection, disposal and recycling companies, electronic security
service companies, and companies operating in other lines of business, to
integrate the acquired operations effectively and to increase its market share
in such businesses. A number of the Company's competitors are better known
companies, with significantly greater financial resources. There can be no
assurance that the Company will be able to identify viable acquisition
candidates, that any identified candidates will be acquired, that acquired
companies will be effectively integrated to realize expected efficiencies and
economies of scale or that any such acquisitions will prove to be profitable.
Acquisition of companies requires the expenditure of sizeable amounts of
capital, and the intense competition among companies pursuing similar
acquisitions may further increase such capital requirements. In the event that
acquisition candidates are not identifiable or acquisitions are prohibitively
costly, the Company may be forced to alter its future growth strategy. As the
Company continues to pursue its acquisition strategy in the future, its
financial position and results of operations may fluctuate significantly from
period to period.
Risks Associated with Acquisitions. Although the Company performs due
diligence investigations on each company or business it seeks to acquire, there
may be liabilities which the Company fails or is unable to discover, including
liabilities arising from non-compliance with certain federal, state or local
environmental laws by prior owners, and for which the Company, as a successor
owner, may be responsible. The Company generally seeks to minimize its
exposure to such liabilities by obtaining indemnification from each seller
which may be supported by deferring payment of a portion of the purchase
price. However, there is no assurance that such indemnifications, even if
obtainable, enforceable and collectible (as to which there also is no
assurance), will be sufficient in amount, scope or duration to fully offset
the possible liabilities arising from the acquisitions.
Environmental Regulation. The collection and disposal of solid waste,
operation of landfills and rendering of related environmental services are
subject to certain federal, state and local requirements which regulate health,
safety, environment, zoning and land-use. Operating permits are generally
required for landfills and certain collection vehicles, and these permits are
subject to revocation, modification and renewal. Federal, state and local
regulations vary, but generally govern disposal activities and the location and
use of facilities and also impose restrictions to prohibit or minimize soil,
air and water pollution. In connection with landfills, it may be necessary to
expend considerable time, effort and money to bring the Company's existing or
acquired facilities into compliance with applicable requirements and to obtain
the permits and approvals necessary to increase their capacity. In addition,
governmental authorities have the power to enforce
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these regulations and, in connection therewith, to obtain injunctions
or impose fines or penalties, including criminal penalties. These regulations
are administered by the Environmental Protection Agency ("EPA") and various
other federal, state and local environmental and health and safety agencies
and authorities, including the Occupational Safety and Health Administration
("OSHA") of the United States Department of Labor. Certain of the Company's
waste disposal operations traverse state boundaries. Although such operations
currently constitute an immaterial portion of the Company's business, their
importance may increase as the Company completes future acquisitions. Such
operations could be adversely affected if the federal government or the state
in which a landfill is located limits or prohibits, imposes discriminatory fees
on or otherwise seeks to discourage the disposal, within state boundaries, of
waste collected outside of the state.
The Solid Waste Disposal Act ("SWDA"), as amended by the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), and the
regulations promulgated thereunder establish a framework for regulating the
storage, collection and disposal of non-hazardous solid wastes. They also
require states to develop programs to ensure the safe disposal of solid wastes
in sanitary landfills. Subtitle D of RCRA establishes a framework for
regulating the disposal of municipal solid wastes. In the past, the states were
largely responsible for the regulation of non-hazardous waste storage,
collection and disposal. However, in October 1991, the EPA imposed minimum
federal comprehensive solid waste management criteria and guidelines, on, among
other things, location restrictions, facility design and operating criteria,
closure and post-closure requirements, groundwater monitoring requirements and
corrective action standards, many of which had not previously been in effect or
enforced. All of the Company's planned landfill expansions or new landfill
development projects have been engineered to meet or exceed Subtitle D
requirements, and operating and design criteria for existing operations have
been modified to comply with such requirements. Compliance with Subtitle D
regulations has resulted in significant increases in costs. If environmental
laws become more stringent, the Company's environmental capital expenditures
and costs for environmental compliance may increase in the future. In addition,
due to the possibility of unanticipated regulatory or other developments, the
amounts and timing of future environmental expenditures could vary
substantially from those currently anticipated. See "Business--Regulations."
Hazardous Substances Liability. The Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"),
provides for, among other things, the cleanup of sites from which there is a
release or threatened release of a hazardous substance into the environment.
CERCLA imposes liability for the costs of cleanup and for damages to natural
resources upon: (i) any person who currently owns or operates a facility or
site from which there is a release or threatened release of hazardous
substances; (ii) any person who owned or operated such a facility or site at
the time hazardous substances were disposed of; (iii) any person who by
contract, agreement or otherwise, arranged for the disposal or treatment (or
for transport for disposal or treatment) of hazardous substances owned or
processed by such person at such facility or site; and (iv) any person who
accepts or accepted hazardous substances for transport for treatment or
disposal at such a facility or site selected by such person. Liability under
CERCLA is not dependent upon the intentional disposal of hazardous wastes. It
can be founded upon the release or threatened release, even as a result of
unintentional and non-negligent action, of thousands of hazardous substances,
including very small quantities of such substances. More than 20% of the sites
on the EPA's National Priorities List are solid waste landfills which
ostensibly never received any hazardous wastes. Thus, even if the Company's
landfills have never received hazardous wastes, it is possible that one or
more hazardous substances may have come to be located at its landfills. Because
of the extremely broad definition of hazardous substances, the same is true
of other properties which the Company may have owned or operated. If there is a
release or threatened release of hazardous substances from a facility where the
Company is an owner or operator, the Company could be liable under CERCLA for
the cost of cleaning up such hazardous substances at the sites and for damages
to natural resources, even if those substances were deposited at the Company's
facilities before the Company acquired or operated them. CERCLA liability may
also attach to the Company with regard to non-Company owned or operated
facilities where the Company arranged for disposal or treatment of hazardous
substances at, or transportation of hazardous substances to, such a facility,
or where the Company was the waste transporter who selected such facility for
treatment or disposal of hazardous substances. The costs of a CERCLA cleanup
can be significant. Given the difficulty of obtaining insurance for
environmental impairment liability, such liability could have a material impact
on the Company's business and financial condition. See "Business--Regulations."
Possible Lack of Environmental Liability Insurance Coverage. The
Company currently carries site-specific pollution liabiity insurance (for a
majority of its facilities), contractors' pollution liability insurance and
profession liability insurance. However, these insurance policies are limited
in scope and coverage. As a result, there can be no assurance that the level or
breadth of such insurance coverages will be sufficient to fully cover potential
claims. In addition, such insurance is becoming increasingly expensive and
difficult to obtain. There can be no assurance that adequate insurance coverage
will be available in the future at an acceptable cost, if at all, or in
sufficient amounts to protect the Company against liabilities. The obligation
to pay any environmental damages claim in excess of whatever insurance the
Company is able to acquire could have a material adverse effect on the
business, financial condition and future prospects of the Company.
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Risks of Pending and Future Legal Proceedings. In addition to the costs of
complying with environmental regulations, waste management companies will
continue to be involved in legal proceedings in the ordinary course of business.
Government agencies may seek to impose fines on the Company for alleged failure
to comply with laws and regulations or to deny, revoke or impede the renewal of
the Company's permits and licenses. In addition, such governmental agencies as
well as surrounding landowners, may claim that the Company is liable for
environmental damages. Citizen's groups have become increasingly active in
challenging the grant or renewal of permits and licenses, and responding to such
challenges has further increased the costs associated with establishing new
facilities or expanding current facilities. A significant judgment against the
Company, the loss of a significant permit or license or the imposition of a
significant fine could have a material adverse effect on the Company's
business, financial condition and future prospects. The Company is currently a
party to various legal proceedings as well as environmental proceedings which
have arisen in the ordinary course of its business. No assurance can be given
with respect to the outcome of these legal and environmental proceedings and
the effect such outcomes may have on the Company. Unfavorable resolution of any
matter individually or in the aggregate could have a material adverse effect on
the Company's business, financial condition and future prospects.
Seasonality. The Company believes that its collection and landfill
operations can be adversely affected by protracted periods of inclement weather
which could delay the development of landfill capacity or the transfer of waste
and/or reduce the volume of waste generated. There can be no assurance that
protracted periods of inclement weather will not have a material adverse effect
on the Company's business and financial conditions.
Competition in the Solid Waste Industry. The solid waste industry
is highly competitive and requires substantial amounts of capital. Entry into
the industry and ongoing operations within the industry require substantial
technical, managerial and financial resources. The solid waste industry in
North America is led by three large national waste management companies,
several large second tier companies and numerous regional and local companies,
all of which contribute to the high level of competition. Some of these
companies have significantly greater financial and operational resources and
more established market positions than the Company. In addition, the Company
must often compete with municipalities that maintain their own waste collection
and landfill operations and often have financial advantages due to the
availability of tax revenues and tax-exempt financing.
Further, alternatives to landfill disposal (such as recycling, composting
and waste-to-energy) are increasingly competing with landfills. There also has
been an increasing trend at the state and local levels to mandate waste
reduction at the source and to prohibit the disposal of certain types of wastes,
such as yard wastes, at landfills. This may result in the volume of waste going
to landfills being reduced in certain areas, which may affect the Company's
ability to operate its landfills at their full capacity and/or affect the prices
that can be charged for landfill disposal services. In addition, most of the
states in which the Company operates landfills have adopted plans or
requirements which set goals for specified percentages of certain solid waste
items to be recycled. Implementation and adoption of such plans or requirements
could have a material adverse effect on the Company's business and financial
condition.
Competition in the Electronic Security Service Industry. The security
alarm industry is highly competitive and highly fragmented. The Company's
electronic security service business competes with several large national
companies as well as numerous smaller regional and local companies.
Furthermore, new competitors are continuing to enter the industry. Certain of
the Company's competitors have greater financial and other resources than the
Company. Given this competitive business environment, there can be no
assurance that the Company will be able to compete effectively in the future.
8
<PAGE> 11
"False" Alarm Ordinances. The Company believes that approximately 95%
of alarm activations that result in the dispatch of police or fire department
personnel are not emergencies, and thus are "false" alarms. Significant concern
has arisen in certain municipalities about this high incidence of "false"
alarms. Recently, a trend has emerged on the part of local governmental
authorities to address such concern by adopting various measures aimed at
reducing the number of "false" alarms. Such measures include (i) subjecting
alarm monitoring companies to fines or penalties for transmitting "false"
alarms; (ii) licensing individual alarm systems and the revocation of such
licenses following a specified number of "false" alarms; (iii) imposing fines
on alarm subscribers for "false" alarms; (iv) imposing limitations on the
number of times the police will respond to alarms at a particular location
after a specified number of "false" alarms; and/or (v) requiring further
verification of an alarm signal before the police will respond. Enactment of
such measures could adversely affect the Company's electronic security services
business and operations. In addition, as a result of high incidence of "false"
alarms, the police may, in general, become less responsive to alarm
activations. The continuation of such trend, or perception by the public of
such trend, may make home security systems less attractive to consumers,
which could, in turn, have an adverse effect on the Company's electronic
security services business and operations.
Geographic Concentration of Company's Electronic Security Service
Business; Risks of Expansion. The existing subscriber base of the Company's
electronic security service business is geographically concentrated in certain
metropolitan areas primarily located in Florida and Colorado. Accordingly, the
performance of this business segment may be adversely affected by regional or
local economic conditions. The Company may from time to time make acquisitions
in regions outside of its current operating areas. In order for the Company to
expand successfully into a new area, the Company must obtain a sufficient
number and density of subscriber accounts in such area to support the
additional investment required when expanding to a new geographic area. There
can be no assurance that an expansion into new geographic areas would generate
operating profits.
9
<PAGE> 12
USE OF PROCEEDS
This Prospectus relates to Shares being registered for issuance from
time to time in connection with future acquisitions of other businesses,
properties or equity and/or debt securities in business combination
transactions. This Prospectus may also be used, with the Company's prior
consent, by persons or entities who have received or will receive the Shares in
connection with such acquisitions and who whish to offer and sell such Shares
under circumstances requiring or making desirable its use, and by certain
donees of such persons or entities. The Company will not receive any proceeds
from the sale of the Shares but will pay all expenses related to the
registration of such Shares. See "Plan of Distribution."
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on Nasdaq under the symbol
"RWIN" since September 4, 1990. The following table sets forth, for the periods
indicated, the high and low closing sales prices (before giving effect to the
Stock Split) for the Common Stock as quoted on Nasdaq.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ---------------------------------------------------------------------- ------- -------
<S> <C> <C>
1994:
March 31............................................................ $3 9/16 $ 2 3/4
June 30............................................................. 3 1/2 2 11/16
September 30........................................................ 3 9/16 3
December 31......................................................... 4 3 1/4
1995:
March 31............................................................ 4 1/16 3 1/8
June 30............................................................. 13 5/8 3 3/16
September 30........................................................ 26 1/16 13
December 31......................................................... 36 1/8 20
1996:
March 31............................................................ 34 26 3/4
June 30 (through May 17)............................................ 42 1/2 40
</TABLE>
On May 17, 1996, the closing price of Common Stock as reported by
Nasdaq was $40.625 per share (before giving effect to the Stock Split). The
number of record holders of the Common Stock as of March 31, 1996, was 2,110.
Effective February 16, 1996, the Company voluntarily delisted the
Common Stock from the Toronto Stock Exchange (the "TSE") due to a lack of
trading volume on the TSE.
Since commencement of operations as a waste management and
environmental services company in December 1989, the Company has not declared
or paid any cash dividends on its Common Stock. The Company currently intends to
retain its earnings for future growth and, therefore, does not anticipate paying
cash dividends in the foreseeable future.
10
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected income statement data for each of the three years
in the period ended December 31, 1995 and the balance sheet data at December 31,
1995 and 1994 are derived from consolidated financial statements of the Company
contained elsewhere herein, which have been audited by Arthur Andersen LLP. The
income statement data for the years ended December 31, 1992 and 1991 and the
balance sheet data at December 31, 1993, 1992 and 1991 have been derived from
audited consolidated financial statements not included herein. The income
statement data for the three month periods ended March 31, 1996 and 1995 and the
selected balance sheet data at March 31, 1996 are derived from unaudited interim
consolidated financial statements contained elsewhere herein. The unaudited
interim consolidated financial statements include all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary for
a fair presentation of the financial position and the results of operations for
these periods. Operating results for the three months ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1996. The data should be read in conjunction with the
consolidated financial statements, the unaudited interim consolidated financial
statements and management's discussion and analysis included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, (Restated)
--------------------- -----------------------------------------------------------
INCOME STATEMENT DATA: 1995
1996 (Restated) 1995 1994 1993 1992 1991
------ ---------- ------ ------ ------ ------ ------
(unaudited) (In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . $ 99,637 $63,094 $295,165 $218,173 $182,495 $162,504 $143,873
Income from continuing operations
before income taxes . . . . . . . . . . . . $ 18,106 $ 6,310 $ 39,540 $ 22,147 $ 2,162 $ 12,339 $ 8,820
Income (loss) from continuing operations . . $ 11,221 $ 3,780 $ 23,374 $ 16,849 $ (331) $ 9,000 $ 6,932
Earnings per common and common
equivalent share from continuing
operations . . . . . . . . . . . . . . . . $ 0.06 $ 0.04 $ 0.17 $ 0.17 $ - $ 0.09 $ 0.09
Weighted average common and
common equivalent shares . . . . . . . . . 193,962 96,666 137,400 96,920 97,102 94,788 80,576
DECEMBER 31,
MARCH 31, (Restated)
--------- ----------------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1991
------ ----- ----- ----- ----- -----
(unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Working capital (deficiency) . . . . . . . . . . $118,154 $140,816 $ (5,379) $ 5,651 $ 6,996 $ 18,502
Short-term debt, including current
maturities of long-term debt . . . . . . . . . $ - $ 2,087 $ 11,210 $ 11,464 $ 10,837 $ 9,191
Long-term debt, net of current maturities . . . . $ - $ 3,791 $ 40,703 $ 42,930 $ 31,043 $ 28,582
Stockholders' equity . . . . . . . . . . . . . . $504,181 $436,388 $115,218 $102,881 $121,071 $118,082
Total assets . . . . . . . . . . . . . . . . . . $636,374 $558,054 $257,207 $217,388 $202,967 $192,472
</TABLE>
See notes 2, 5, 9, 10 and 13 of Notes to Consolidated Financial
Statements included elsewhere in this Registration Statement for discussion of
business combinations, various equity transactions, the distribution of the
hazardous waste services segment and restructuring charges and their effect on
comparability of year-to-year data. See "Market Price and Dividends On the
Registrant's Common Equity and Related Stockholder Matters" for a discussion of
the Company's dividend policy.
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Consolidated Financial Data" and the Company's Consolidated Financial
Statements and the Notes thereto.
On May 10, 1996, the Company's Board of Directors declared the
Stock Split, payable June 8, 1996 to holders of record on May 28, 1996. Unless
otherwise indicated herein, all references in this Prospectus to per share data
and numbers of shares of Common Stock have been retroactively adjusted to
reflect the Stock Split.
BUSINESS COMBINATIONS
The Company's strategy is to aggressively grow its solid waste
services business by acquiring and integrating existing solid waste collection,
disposal and recycling businesses, and to expand its recently acquired
electronic security services business through internal growth and additional
acquisitions. In addition, it is currently anticipated that the Company will
expand its operations outside of solid waste management and electronic security
services, through acquisitions or otherwise. The Company makes its decision
to acquire or invest in a business or businesses on a case by case basis based
on financial and strategic considerations.
12
<PAGE> 15
Significant businesses acquired through March 31, 1996 and accounted
for under the pooling of interests method of accounting have been included
retroactively in the financial statements as if the companies had operated as
one entity since inception. Each business acquired through March 31, 1996 and
accounted for under the purchase method of accounting is included in the
financial statements from the date of such acquisition.
PENDING ACQUISITIONS
On May 8, 1996, after approval by a special committee of disinterested
members of the Company's Board of Directors, the Company entered into the
Merger Agreement which provides for the acquisition of AutoNation. In
connection with the execution of the Merger Agreement, the Company and
AutoNation also entered into the Loan Agreement whereby the Company will
provide a line of credit to AutoNation until consummation of the acquisition of
AutoNation by the Company. AutoNation is a privately-owned corporation
developing a chain of megastores for the sale of reconditioned-to-be-like-new
vehicles in a customer friendly environment and is partially owned by H. Wayne
Huizenga, the Company's Chairman and Chief Executive Officer, and certain other
officers and directors of the Company. The proposed transaction is subject to
final approval by the stockholders of Republic, and other customary closing
conditions, including regulatory approvals. It is contemplated that the Company
will issue 17,467,248 shares of Common Stock in connection with the
transaction.
On May 20, 1996, the Company announced its intention to acquire
Continental in a merger transaction. Under the terms of the proposed
transaction, each share of common stock of Continental would be exchanged, on a
tax-free basis, for 4/5ths of a share of Common Stock (after giving effect to
the Stock Split). The proposed transaction, which will be accounted for as a
pooling of interests, is subject to the execution of a definitive agreement,
approval of Continental's stockholders, approval by the Boards of Directors of
Continental and the Company, and other customary closing conditions, including
regulatory approval. Continental's three largest stockholders, representing
approximately 25% of Continental's outstanding common stock have agreed to vote
their shares in favor of the transaction, which is expected to close during the
third quarter of 1996.
ACQUISITIONS COMPLETED DURING THE THREE MONTHS ENDED MARCH 31, 1996
In March 1996, the Company acquired substantially all of the assets of
Mid-American Waste Systems of Georgia, Inc. ("Mid-American Georgia"), for a
purchase price of approximately $52,000,000. At closing, the Company issued an
aggregate of 3,400,000 shares of Common Stock valued at approximately
$46,750,000 and has agreed to pay the remaining balance of the purchase price
(after taking into account certain post-closing adjustments) in cash or Common
Stock within 180 days of the closing. Mid-American Georgia owns and operates a
landfill, provides solid waste collection and recycling services to commercial,
residential and industrial customers and operates two transfer stations, in the
greater metropolitan Atlanta, Georgia area. The acquisition of Mid-American
Georgia has been accounted for under the purchase method of accounting.
In February 1996, the Company acquired, in merger transactions, all of
the outstanding shares of capital stock of Incendere, Inc. and certain waste
companies (collectively "Schaubach") controlled by Dwight C. Schaubach.
Schaubach provides solid waste collection and recycling services to residential,
commercial and industrial customers in southeastern Virginia and eastern North
Carolina and provides transportation of medical waste throughout the
Mid-Atlantic states.
In February 1996, the Company acquired, in merger transactions, all of
the outstanding shares of capital stock of certain electronic security
companies known as Denver Burglar Alarm ("Denver Alarm"). Denver Alarm provides
installation, monitoring and maintenance services to residential and commercial
customers in Denver, Fort Collins, Boulder, Colorado Springs and Pueblo,
Colorado.
The Company issued an aggregate of 5,828,904 shares of Common Stock to
acquire Schaubach and Denver Alarm, both of which have been accounted for as
pooling of interests business combinations.
During the three months ended March 31, 1996, the Company also acquired
21 other businesses in the solid waste, electronic security and out-of-home
advertising industries which were not significant under financial reporting
standards. In connection with such acquisitions, the Company issued an
aggregate of 1,937,752 shares of Common Stock for 18 acquisitions which were
accounted for under the purchase method of accounting and 1,804,390 shares of
Common Stock for three acquisitions which were accounted for under the pooling
of interests method of accounting. The acquisitions accounted for under the
pooling of interests method of accounting were not significant in the aggregate
and, consequently, prior period financial statements were not restated for such
acquisitions.
ACQUISITIONS COMPLETED DURING THE YEAR ENDED DECEMBER 31, 1995
In August 1995, the Company acquired, in a merger transaction, Kertz
Security Systems, Inc. and Kertz Security Systems II, Inc. (collectively,
"Kertz"), which provides electronic security monitoring and maintenance
predominantly in the South Florida area. In October 1995, the Company
acquired, in merger transactions, United Waste Service, Inc. ("United") and
Southland Environmental Services, Inc. ("Southland"). United provides solid
waste collection, transfer and recycling services in the Atlanta, Georgia
metropolitan area, and Southland provides solid waste collection services in
the Northeast Florida area. In November 1995, the Company acquired, in merger
transactions, J.C. Duncan Company, Inc. and related companies ("Duncan"),
Garbage Disposal Service, Inc. ("GDS"), Fennell Container Company, Inc. and
several related companies (collectively, "Fennell") and Cana First Corporation
and several related companies (collectively, "Scott"). Duncan provides solid
waste collection and recycling services in the Dallas-Fort Worth metropolitan
area and throughout west Texas and also operates two landfills. GDS provides
solid waste collection and recycling services throughout western North
Carolina. Fennell is a full-service solid waste management company, providing
services in and around Charleston and Greenville, South Carolina and also owns
a landfill. Scott 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 an aggregate of 36,255,968 shares of Common Stock for the
acquisitions of Kertz, United, Southland, Duncan, GDS, Fennell, and Scott.
These acquisitions, together with the acquisitions of Schaubach and Denver Alarm
in February 1996 (collectively, the "Pooled Entities"), were accounted for
under the pooling of interests method of accounting and, accordingly, the
Consolidated Financial Statements have been restated as if the Company and the
Pooled Entities had operated as one entity since inception.
In August 1995, the Company acquired all of the outstanding shares of
capital 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 16,000,000 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 from January 1, 1993 to December 31, 1995, have been accounted
for under the purchase method of accounting.
13
<PAGE> 16
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
In 1994, the Company pursued a plan to exit the hazardous waste
services segment of its solid waste business. The plan provided for the
combination of the Company's hazardous waste services segment in its
subsidiary, Republic Environmental Systems, Inc. ("RESI"), and the distribution
of the stock of RESI to the Company's stockholders in 1995. The following
discussion excludes the operational activity and results of the hazardous waste
services segment of the Company, which are reflected in the Consolidated
Financial Statements and the Unaudited Condensed Consolidated Financial
Statements for all periods presented as discontinued operations.
Revenue
The Company's revenue from its collection operations consists of fees
from residential, commercial and industrial customers. The Company's revenue
from landfill operations is comprised primarily of tipping fees charged to
third parties. The Company's revenue from its electronic security services
business results from monitoring contracts for security systems and fees
charged for the sale and installation of such systems.
The following table presents revenue data from the Company's different
industry segments for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------- --------------------------------
1996 1995 1995 1994 1993
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Solid waste services . . . . . . . . . . . . $84,184 $51,295 $245,339 $176,260 $146,107
Electronic security services . . . . . . . . 15,453 11,799 49,826 41,913 36,388
------- ------- -------- --------- --------
$99,637 $63,094 $295,165 $218,173 $182,495
======= ======= ======== ========= ========
</TABLE>
The increase in revenue from the solid waste services segment for the
three months ended March 31, 1996 and for the year ended December 31, 1995 is
primarily a result of the acquisition of HMC and other businesses as well as
internal growth. The increase for 1994 is primarily attributable to internal
growth. The increases in revenue from the electronic security services segment
for the three months ended March 31, 1996 and for the years ended December 31,
1995 and 1994 are principally a result of implementation of an aggressive
expansion strategy aimed at generating new monitoring business.
Operating Costs and Expenses
Cost of operations for the Company's collection operations is variable
and includes disposal, labor, fuel and equipment maintenance costs. Landfill
cost of operations includes most daily operating expenses, the legal and
administrative costs of ongoing environmental compliance, costs of capital for
cell development and accruals for closure and post-closure costs. Certain
direct landfill development costs, such as engineering, upgrading, cell
construction and permitting costs, are capitalized and depleted based on
consumed airspace. All indirect landfill development costs, such as executive
salaries, general corporate overhead, public affairs and other corporate
services are expensed as incurred. Cost of operations for the Company's
electronic security services business primarily consists of the labor and
equipment associated with the sale, installation and monitoring of security
systems.
The following table sets forth the Company's total cost of operations
and selling, general and administrative expenses as percentages of total
revenue for the three months ended March 31, and the years ended December 31:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------ -----------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cost of operations . . . . . . . . . . 65% 65% 65% 66% 67%
Selling, general and administrative . . 18% 24% 21% 23% 25%
</TABLE>
Cost of operations was $65,035,000 and $40,911,000 for the three months
ended March 31, 1996 and 1995, respectively, and $192,213,000, $143,375,000 and
$121,640,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The increases are consistent with the increases in revenue for
such periods. The decreases in cost of operations as a percentage of revenue
for the years ended December 31, 1995 and 1994 are primarily a result of price
increases and the implementation of cost reduction measures.
14
<PAGE> 17
Selling, general and administrative expenses were $18,255,000 and
$15,015,000 for the three months ended March 31, 1996 and 1995, respectively,
and $63,010,000, $49,245,000 and $46,477,000 for the years ended December 31,
1995, 1994 and 1993, respectively. These increases primarily reflect the
growth of the Company's business through the acquisition of HMC and other
businesses. The decreases in selling, general and administrative expenses as
a percentage of revenue for the periods ended March 31, 1996 and 1995 and
the years ended December 31, 1995 and 1994 are largely due to the Company's
continued commitment to reduce and control expenses by implementing
efficiencies within the Company's administrative functions.
Restructuring and Unusual Charges
In 1993, the Company recorded restructuring and unusual charges of
$10,040,000 based on the Company's reevaluation of its solid waste operations.
As a result of this reevaluation, the Company decided to terminate certain
contracts, 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). The write-off
of property and equipment and accumulated permitting costs associated with
these facilities were included in these restructuring and unusual charges. In
addition, the Company also reevaluated its exposure related to litigation and
environmental matters and provided additional accruals for the costs to defend
or settle certain litigation and environmental matters. For further discussion
of the restructuring and unusual charges, see Note 10 of Notes to Consolidated
Financial Statements.
Interest and Other Income
Interest and other income increased to $2,361,000 for the three months
ended March 31, 1996 from $430,000 for the comparable period in 1995 and
increased to $5,715,000 in 1995 from $1,081,000 in 1994 due to the increase in
the Company's cash investments resulting from the proceeds from sales of Common
Stock. For further discussion of the sales of Common Stock, see Note 5 of
Notes to Audited Consolidated Financial Statements.
Interest Expense
Interest expense was $602,000 and $1,288,000 for the three months ended
March 31, 1996 and 1995, respectively. The decrease is due to repayment of a
substantial portion of the Company's borrowings during the latter half of 1995.
Interest expense was $6,117,000, $4,487,000 and $2,936,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The increases are
primarily due to higher average outstanding borrowings used to fund internal
growth. Substantially all of the Company's outstanding borrowings were repaid
during the latter half of 1995 and during the three months ended March 31,
1996.
Income Taxes
The Company's income tax provision for 1995 and 1994 was partially
offset by certain tax reserve adjustments resulting from tax planning
strategies employed by the Company, such as combining entities to reduce state
income taxes, claiming tax credits not previously claimed, recapturing taxes
previously paid by acquired companies and adjustments for the resolution of tax
matters in amounts more favorable than those originally estimated.
Additionally, the Company's 1994 income tax provision was offset by a decrease
in the valuation allowance related to the expected realization of deferred tax
assets generated as a result of restructuring and unusual charges incurred in
the fourth quarter of 1993. The valuation allowance was recorded in 1993 due
to the uncertainty surrounding the future utilization of such deferred tax
assets. For further discussion of income taxes, see Note 4 of Notes to Audited
Consolidated Financial Statements.
ENVIRONMENTAL AND LANDFILL MATTERS
The Company provides for accrued environmental and landfill costs
which 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 EPA'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.
The Company periodically reassesses its methods and assumptions used
to estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the
15
<PAGE> 18
effects of inflation, changes in operating climates in the regions in which the
Company's facilities are located and the expectations regarding costs of
securing environmental services.
DISCONTINUED OPERATIONS
In July 1994, the Company announced the contemplation of a plan to exit
the hazardous waste services segment of its solid waste business, and in
October 1994, the Board of Directors authorized management to pursue the plan,
subject to final approval from the Board of Directors and the resolution of
certain legal and financial requirements. The plan provided 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 the Company.
In February 1995, the Board of Directors approved the plan of
distribution, and on April 26, 1995, the Company's stockholders received one
share of RESI's common stock for every five shares (without giving effect to the
Stock Split) of Common Stock owned of record on April 21, 1995. 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 Consolidated
Financial Statements of the Company for 1994 and 1993 have been restated to
report separately the net assets and operating results of these discontinued
operations. For further discussion of the Distribution, see Note 9 of Notes to
Audited Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As previously discussed, the Company will continue to pursue
acquisitions in the solid waste, electronic security services and other
selected industries and anticipates financing acquisitions with the proceeds
from the equity transactions mentioned below as well as through the issuance of
Common Stock. Management believes that the Company currently has sufficient
cash and access to the financial markets to fund current operations and make
acquisitions. On May 20, 1996, the Company sold 9,878,400 shares of Common
Stock to certain institutional investors in a private placement transaction for
$20.25 per share resulting in net proceeds of approximately $197,500,000 after
deducting fees and commissions. Additionally, the Company replaced its
existing credit facility in December 1995 with a substantially larger credit
facility of $250,000,000. However, substantial additional capital may be
necessary to fully implement the Company's aggressive acquisition program and
to fund the potential development of AutoNation megastores. In May 1996, in
connection with the execution of the Merger Agreement which provides for the
acquisition of AutoNation, the Company and AutoNation also entered into a Loan
Agreement whereby the Company will provide a line of credit to AutoNation for
such development until consummation of the acquisition of AutoNation. There
can be no assurance that additional financing will be available on a timely
basis, if at all, or that it will be available in the amounts or terms
acceptable to the Company.
CASH FLOWS FROM OPERATING ACTIVITIES
The Company's net cash flow from operating activities increased during
the three months ended March 31, 1996 primarily as a result of expansion of the
Company's business through acquisitions and internal growth. The Company's net
cash flows from operating activities increased slightly during 1995 as a result
of an increase in operating cash generated by its ongoing business. The
Company used its operating cash flows during 1995 to repay existing
indebtedness and make capital expenditures. The Company has in the past made
capital expenditures from cash on hand and operating cash flows and anticipates
continuing to do so in 1996.
CASH FLOWS FROM INVESTING ACTIVITIES
The Company made capital expenditures of approximately $14,329,000
during the three months ended March 31, 1996 and approximately $52,915,000
during 1995 which included the purchase of new fixed assets, normal replacement
of older property and the expansion of landfill sites. The Company also made
expenditures of approximately $6,033,000 during the three months ended March
31, 1996 and approximately $15,980,000 during 1995 related to the expansion of
its electronic security services business through new installations and
acquisitions of subscriber accounts. The Company anticipates continuing to
make capital expenditures for new equipment, upgrading existing equipment and
facilities, the construction of new airspace at landfills, and the
installation of new security systems. The Company expects that these
expenditures may increase in the future as a result of acquisitions and
internal growth.
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<PAGE> 19
CASH FLOWS FROM FINANCING ACTIVITIES
In August 1995, the Company issued and sold an aggregate of 16,700,000
shares of Common Stock and warrants to purchase an additional 33,400,000 shares
of Common Stock to Mr. Huizenga, Westbury (Bermuda) Ltd. (a Bermuda corporation
controlled by Michael G. DeGroote), Harris W. Hudson, and certain of their
assigns for an aggregate purchase price of approximately $37,500,000. The
warrants are exercisable at prices ranging from $2.25 to $3.50 per share. In
August 1995, the Company issued and sold an additional 2,000,000 shares of
Common Stock each to Mr. Huizenga and John J. Melk, for $6.63 per share for
aggregate proceeds of approximately $26,500,000.
In July 1995, the Company sold 10,800,000 shares of Common Stock in a
private placement transaction for $6.63 per share resulting in net proceeds of
approximately $69,000,000 after deducting expenses, fees and commissions. In
September 1995, the Company sold 10,000,000 shares of Common Stock in an
additional private placement transaction for $10.13 per share resulting in net
proceeds of approximately $99,000,000.
As a result of these transactions, the Company received approximately
$232,000,000 in cash, a portion of which was used to repay all outstanding
borrowings resulting in no long-term debt outstanding at March 31, 1996.
FINANCIAL CONDITION
At March 31, 1996, the Company had $137,747,000 in cash, $250,000,000
of availability under its credit facility and no long-term debt. The Company
believes that its financial condition is strong and that it has the financial
resources necessary to meet its anticipated financing needs.
WORKING CAPITAL
Working capital at March 31, 1996 amounted to $118,154,000 as compared
to $140,816,000 at December 31, 1995. The decrease in working capital
primarily results from the repayment of long-term debt and notes payable of
acquired companies. Due to the private placement in May 1996, working capital
should increase during the three months ended June 30, 1996. However, the
Company believes working capital may decline during the remainder
of 1996 to lower levels as additional capital is used for the continued growth
and expansion of the Company's business.
Accounts receivable at March 31, 1996 were $47,510,000 as compared to
$37,789,000 at December 31, 1995 and $26,159,000 at December 31, 1994. The
increases are primarily attributed to various business acquisitions and
internal growth within the Company.
Accounts payable and accrued liabilities were $47,810,000 at March 31,
1996 as compared to $39,263,000 at December 31, 1995 and $24,464,000 at
December 31, 1994. The increases are primarily due to various business
acquisitions and expansion of the Company's business.
Deferred revenue consists primarily of proceeds from the factoring of
electronic security monitoring contracts by one of the Company's acquired
security businesses. The use of factoring was discontinued by the Company
subsequent to the date of acquisition. The current portion of deferred revenue
amounted to $25,555,000 at December 31, 1995 as compared to $13,892,000 at
December 31, 1994. The increase is primarily due to new installations of
electronic security devices and related monitoring contracts.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net amounted to $229,365,000 at March 31, 1996
as compared to $194,934,000 at December 31, 1995 and $141,126,000 at December
31, 1994. The increases are attributed primarily to the various business
acquisitions and increased capital expenditures resulting from internal growth
and expansion.
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<PAGE> 20
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET
Investment in subscriber accounts, net represents capitalized direct
labor and material costs associated with the installation of new electronic
security systems and the cost of acquired subscriber accounts. Investment in
subscriber accounts, net increased $7,760,000 during the three months ended
March 31, 1996 and $17,347,000 during 1995, respectively, due to growth in
electronic security system installations and acquisitions of subscriber
accounts.
INTANGIBLE ASSETS, NET
Intangible assets, net increased $48,989,000 during the three months
ended March 31, 1996 as a result of the acquisition of Mid-America Georgia and
other businesses. Intangible assets, net increased $85,131,000 during 1995 as
a result of the acquisition of HMC and other businesses.
NET ASSETS OF DISCONTINUED OPERATIONS
Net assets of discontinued operations decreased to zero at December
31, 1995 from $20,292,000 at December 31, 1994 due to the spin-off of the
hazardous waste services segment which was consummated in April 1995. For
further discussion of the spin-off, see Note 9 of Notes to Consolidated
Financial Statements.
LONG-TERM DEBT, INCLUDING CURRENT MATURITIES AND NOTES PAYABLE
Long-term debt, including current maturities and notes payable
decreased from $51,913,000 at December 31, 1994 to $5,878,000 at December 31,
1995 and zero at March 31, 1996 due to the payoff of debt from the cash
proceeds of sales of Common Stock.
STOCKHOLDERS' EQUITY
Stockholders' equity increased $67,793,000 during the three months
ended March 31, 1996 primarily due to the acquisition of Mid-American Georgia
and other businesses. Stockholders' equity increased $321,170,000 during 1995
primarily due to the sales of Common Stock and the acquisition of HMC and other
businesses.
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<PAGE> 21
BUSINESS
INTRODUCTION
The Company is a diversified services company, which, through its
subsidiaries, primarily provides integrated solid waste collection, disposal
and recycling services to public and private sector customers. As of May 15,
1996, the Company owns or operates fourteen solid waste landfills with five
located in Texas, two in California and one each in Florida, Georgia,
Michigan, North Carolina, South Carolina, Indiana and North Dakota with
approximately 1,544 permitted acres and total available permitted disposal
capacity of approximately 63.8 million in-place cubic yards. The Company also
currently provides collection service to over 870,000 residential, commercial
and industrial customers, primarily in areas surrounding its landfill sites
noted above and certain areas of Georgia, Maine, New Hampshire and Virginia and
throughout Florida. In addition, the Company provides related environmental
services including consulting and analysis, remediation and other technical
services.
The Company, through certain recent acquisitions, is also engaged
in the electronic security services business, which consists of the sale,
installation and maintenance of electronic security systems for commercial and
residential use as well as the continuous electronic monitoring of installed
security systems. Currently, the Company monitors over 127,000 businesses and
residences predominately in Florida and Colorado.
The Company's strategy is to grow as a diversified services company
by acquiring and integrating existing solid waste collection, disposal and
recycling businesses, and by expanding its electronic security services
business through internal growth and additional acquisitions. In addition, it
is currently anticipated that the Company will expand its operations outside
of solid waste management and electronic security services, through
acquisitions or otherwise.
ACQUISITIONS
ACQUISITION STRATEGY
The Company's growth strategy is (i) to expand its current operations
in the solid waste and electronic security services industries through internal
growth and additional acquisitions, and (ii) to diversify its operations by
acquiring or entering other lines of business. With respect to diversifying
its operations, the Company intends to focus on industries which are generally
capital intensive, fragmented and have potential for relatively high profit
margins or substantial growth opportunities. Upon entering any industry, the
Company will seek to grow through internal growth and through additional
acquisitions within such industry.
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<PAGE> 22
In expanding its solid waste operations, management anticipates
focusing on acquiring waste collection companies that are in markets which can
utilize the Company's existing landfill facilities, as well as in markets with
attractive third party disposal fees. The Company also may consider acquiring
landfills with significant permitted disposal capacity and certain levels of
contracted waste volume. In addition, the Company may focus on what it believes
will be the growing number of municipalities seeking to sell landfills, form
joint ventures or offer management contracts to operate landfills in response
to the growing technical and capital resources required by increasingly
stringent federal, state and local regulations.
The Company generally targets acquisitions in markets where it will
be, or will have favorable prospects of becoming, a significant provider of
integrated waste services in that market. The Company seeks to acquire
companies which have long-term contracts for solid waste collection and
hauling services in high growth markets. However, the Company is not limited
to these target market criteria, and as opportunities arise, the Company
may acquire solid waste operations throughout North America.
In expanding its electronic security operations, the Company's
primary goal is to grow its customer base in the residential segment of the
business. The Company will target markets where it will be, or will have
favorable prospects of becoming, a significant provider of electronic security
services. The Company seeks to acquire security companies in high growth
markets with strong recurring monthly revenues derived from monitoring
services. In addition, the Company will seek to achieve economies of scale
by acquiring security companies with accounts that can be monitored
through the Company's existing central monitoring stations. The Company intends
to retain local management and sales personnel, where appropriate.
The Company uses internal acquisition teams and its contacts in the
solid waste and electronic security services industries to identify, evaluate
and acquire waste management companies and electronic security services
businesses in attractive markets. Acquisition candidates are evaluated by the
Company's internal acquisition teams based on stringent criteria in a
comprehensive process which includes operational, legal and financial due
diligence reviews.
PENDING ACQUISITIONS
On May 8, 1996, after approval by a special committee of disinterested
members of the Company's Board of Directors, the Company entered into the Merger
Agreement which provides for the acquisition of AutoNation. In connection with
the execution of the Merger Agreement, the parties also entered into the Loan
Agreement whereby the Company will provide a line of credit to AutoNation until
consummation of the acquisition of AutoNation by the Company. AutoNation is a
privately-owned corporation developing a chain of megastores for the sale of
reconditioned-to-be-like-new vehicles in a customer friendly environment and is
partially owned by H. Wayne Huizenga, the Company's Chairman and Chief
Executive Officer, and certain other officers and directors of the Company. The
proposed transaction is subject to final approval by the stockholders of
Republic, and other customary closing conditions, including regulatory
approvals. It is contemplated that the Company will issue 17,467,248 shares of
Common Stock in connection with the transaction.
On May 20, 1996, the Company announced its intention to acquire
Continental in a merger transaction. Under the terms of the proposed
transaction, each share of common stock of Continental would be exchanged, on a
tax-free basis, for 4/5ths of a share of Common Stock (after giving effect to
the Stock Split). The proposed transaction, which will be accounted for as a
pooling of interests, is subject to the execution of a definitive agreement,
approval of Continental's stockholders, approval by the Boards of Directors of
Continental and the Company, and other customary closing conditions, including
regulatory approval. Continental's three largest stockholders, representing
approximately 25% of Continental's outstanding common stock have agreed to vote
their shares in favor of the transaction, which is expected to close during the
third quarter of 1996.
ACQUISITIONS COMPLETED DURING THE THREE MONTHS ENDED MARCH 31, 1996
In March 1996, the Company acquired substantially all of the assets of
Mid-American Georgia, for a purchase price of approximately $52,000,000. At
closing, the Company issued an aggregate of 3,400,000 shares of Common Stock
valued at approximately $46,750,000. The Company will pay the remaining balance
of the purchase price (after taking into account certin post-closing
adjustments) in cash or Common Stock within 180 days of the closing.
Mid-American Georgia owns and operates a landfill, provides solid waste
collection and recycling services to commercial, residential and industrial
customers, and operates two transfer stations in the Atlanta, Georgia
metropolitan area. The acquisition of Mid-American Georgia has been accounted
for under the purchase method of accounting.
In February 1996, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Schaubach. Schaubach provides
solid waste collection and recycling services to residential, commercial and
industrial customers in southeastern Virginia and eastern North Carolina and
provides transportation of medical waste throughout the Mid-Atlantic states.
In February 1996, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Denver Alarm. Denver Alarm
provides installation, monitoring and maintenance services to residential and
commercial customers in Denver, Fort Collins, Boulder, Colorado Springs and
Pueblo, Colorado.
The Company issued an aggregate of 5,828,904 shares of Common
Stock for Schaubach and Denver Alarm, both of which were accounted for as
pooling of interests business combinations.
ACQUISITIONS COMPLETED DURING THE YEAR ENDED DECEMBER 31, 1995
In November 1995, the Company acquired, in a merger transaction,
all of the outstanding shares of capital stock of Scott. Scott provides
electronic security monitoring and maintenance to residential accounts in
Jacksonville, Orlando and Tallahassee, Florida,
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<PAGE> 23
as well as other metropolitan areas in the southeastern United States,
including Charlotte, North Carolina, Savannah, Georgia and Nashville,
Tennessee.
In November 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Fennell. Fennell provides waste
collection, recycling and environmental services to commercial, industrial and
residential customers in and around Charleston and Greenville, South Carolina,
and also owns a landfill.
In November 1995, the Company acquired, in a merger transaction,
all of the outstanding shares of capital stock of GDS. GDS provides solid
waste collection and recycling services to commercial, residential and
industrial customers throughout western North Carolina.
In November 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Duncan. Duncan provides solid
waste collection and recycling services to residential, commercial and
industrial customers in the Dallas-Fort Worth metropolitan area and throughout
west Texas, and also operates two landfills.
In October 1995, the Company acquired, in a merger transaction, all
of the outstanding shares of capital stock of Southland. Southland, through
its subsidiaries, provides solid waste collection services to residential,
commercial and industrial customers in and around Jacksonville, Florida, owns
and operates a construction and demolition landfill and provides composting
and recycling services.
In October 1995, the Company acquired, in a merger transaction, all
of the outstanding shares of capital stock of United. United provides solid
waste collection, transfer and recycling services in the Atlanta, Georgia
metropolitan area and services both residential and commercial customers.
In August 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Kertz. Kertz provides
electronic security monitoring and maintenance to residential and commercial
customers predominantly in the South Florida, Tampa and Orlando areas.
The Company issued an aggregate of 36,255,968 shares of Common
Stock for the acquisitions of Scott, Fennell, GDS, Duncan, Southland, United
and Kertz, all of which were accounted for as pooling of interests business
combinations.
In August 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of HMC in exchange for an aggregate
of 16,000,000 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. The acquisition
of HMC has been accounted for under the purchase method of accounting.
OPERATIONS
CONTINUING OPERATIONS
Currently, the Company has organized its continuing operations into
two general industry segments: (1) solid waste services and (2) electronic
security services.
SOLID WASTE SERVICES
The Company's solid waste operations primarily consist of
collection, landfill, recycling and related environmental services.
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Collection. The Company's solid waste collection operations are of
two types: industrial and commercial/residential. The Company's strategy is to
acquire collection operations within the service areas of its landfills, such
that the operations can provide a steady stream of solid waste to its
landfills, and in areas with stable, attractive third party disposal fees. The
Company provides collection service to over 870,000 residential, commercial
and industrial customers.
In its industrial collection operations, the Company supplies its
customers with large waste containers known as "roll-off" containers. The
Company collects the roll-off containers on a set schedule and transports the
waste to a landfill. Services are provided to individual facilities on a
contractual basis with terms ranging from a single pickup to a one-year term.
The Company's commercial and residential collection operations
involve the curbside collection of refuse from small containers into collection
vehicles for transport to landfills. Commercial customers generally are
serviced pursuant to individual contracts which generally have multi-year
terms. Residences generally are serviced pursuant to contracts which the
companies have with municipal governments for collection services in the
municipality. The Company's contracts generally are secured by competitive
bids. See "--Competition". The Company currently provides commercial and
residential collection services in certain areas of California, Florida,
Georgia, Indiana, Maine, New Hampshire, North Carolina, North Dakota, South
Carolina, Virginia and Texas.
Landfills. The Company owns or operates fourteen solid waste
landfills with approximately 1,544 permitted acres and total available
permitted disposal capacity of approximately 63.8 million cubic in-place yards
as of May 15, 1996. The in-place capacity of the Company's landfills is
subject to change based on engineering factors and requirements of regulatory
authorities. Certain of the landfills accept nonhazardous special waste,
including utility ash, asbestos and contaminated soils. The majority of the
Company's landfill revenues are derived from long-term integrated disposal and
collection contracts with industrial customers and municipalities and disposal
contracts with certain third party collection companies. The following table
provides certain information regarding these landfills as of May 15, 1996:
<TABLE>
<CAPTION>
Unused
Total Permitted Permitted
Landfill Name Markets Served Acreage Acreage Acreage
------------- -------------- ------- ------- -------
<S> <C> <C> <C> <C>
Anderson . . . . . . . . . . . . . . . . . . . . Northern California 1,200 150 100
C&T Regional . . . . . . . . . . . . . . . . . . Rio Grande Valley, Texas 194 94 55
Cleveland Container . . . . . . . . . . . . . . . Southwest North Carolina 169 116 86
Republic/CSC . . . . . . . . . . . . . . . . . . North Central Texas 254 254 195
Republic/Imperial . . . . . . . . . . . . . . . . Southern California 160 120 89
Republic/Maloy . . . . . . . . . . . . . . . . . East Central Texas 389 270 204
Taymouth . . . . . . . . . . . . . . . . . . . . Central Michigan 138 43 19
Wabash Valley . . . . . . . . . . . . . . . . . . Northeast Indiana 103 56 16
St. John's . . . . . . . . . . . . . . . . . . . North Central North Dakota 150 40 33
Nine Mile Road . . . . . . . . . . . . . . . . . Northeast Florida 80 25 17
San Angelo . . . . . . . . . . . . . . . . . . . West Texas 283 283 133
Presidio . . . . . . . . . . . . . . . . . . . . West Texas 10 10 6
Oak Grove . . . . . . . . . . . . . . . . . . . . North Georgia 117 61 61
Pepperhill . . . . . . . . . . . . . . . . . . . Southeast South Carolina 80 22 22
----- ----- -----
3,327 1,544 1,036
===== ===== =====
</TABLE>
Each of the Company's existing landfill sites have the potential
for expanded disposal capacity beyond the currently permitted acreage. The
Company monitors the availability of permitted airspace at each of its
landfills and evaluates whether to pursue expansion at a given landfill based
on estimated future waste volumes, remaining capacity and likelihood of
obtaining expansion. Each of the Company's landfills currently has adequate
permitted capacity; however, the Company is currently seeking to expand
permitted capacity at its Wabash Valley and Nine Mile Road landfills in
connection with favorable design modifications.
Recycling. Management believes that recycling has become an
increasingly important component of most major markets' solid waste management
plans as a result of the public's increasing environmental
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awareness and expanding federal and state regulations pertaining to waste
recycling. The Company currently provides recycling services through most of
its collection subsidiaries and has six recycling facilities located in
Florida, Georgia, South Carolina and North Carolina. The services provided by
the Company's collection subsidiaries include the curbside collection of
recyclable waste, and the provision of a variety of recycling services,
including the segregated collection of cardboard boxes and construction debris
for resale to paper manufacturers and others. In Florida, Georgia, South
Carolina and North Carolina, the Company receives certain types of commercial
and industrial solid waste, which is sorted at its facilities into recyclable
materials and non-recyclable waste; the recyclable materials are repackaged and
sold to third parties and the non-recyclable waste is disposed of at landfills
or incinerators. The Company also recycles yard waste and timber by-products in
Dallas and Houston, Texas and Jacksonville, Florida by composting these
materials and selling the end product to nurseries, landscape architects and
homeowners for landscape and gardening mulch.
Environmental Services. The Company provides selected
environmental remediation services relating to the cleanup and containment of
actual or threatened releases of hazardous materials into the environment on
both a planned and emergency basis. The Company's solid waste division provides
these services through three subsidiaries, Environmental Specialists, Inc.
("ESI") in Kansas City, Missouri, Laughlin Environmental, Inc. ("Laughlin") in
Houston, Texas and Fenn-Vac, Inc. in North Charleston, South Carolina. ESI and
Fenn-Vac, Inc. are EPA-approved emergency response contractors and provide
hazardous spill cleanup and other special services on a contract basis.
Laughlin provides a broad range of environmental services including remediation
and other technical services.
ELECTRONIC SECURITY SERVICES
The Company, through certain recent acquisitions, is engaged in the
electronic security services business, which consists of the sale, installation
and maintenance of electronic security systems for commercial and residential
use, as well as the continuous electronic monitoring of installed security
systems. The Company sells and installs modern electronic devices in its
customers' businesses and residences to provide detection of events, such as
intrusion or fire. The Company purchases from various manufacturers the
components of the systems it sells, installs and maintains. The products and
services marketed in the electronic security services industry by the Company
and others range from basic residential systems that provide entry and fire
detection to sophisticated commercial systems incorporating closed circuit
television systems and access control. Detection systems may be continuously
monitored by centralized monitoring stations which are linked to the customer
through telephone lines. The Company operates two central monitoring stations
in Florida and one in Colorado, from which it monitors over 127,000 businesses
and residences predominantly in Florida and Colorado by local and long distance
telephone lines. Upon detecting an intrusion or other events at a customer's
business or residence, the central monitoring station calls the customer and,
if necessary, the local police, fire, ambulance or other authorities.
SALES AND MARKETING
For solid waste services, the Company's sales and marketing
strategy is to provide full service environmental management to its customers.
The Company targets potential customers of all sizes from small quantity
generators to large "Fortune 500" companies as well as municipalities.
In expanding its electronic security operations, the Company's
primary goal is to grow its customer base in the residential segment of the
business. The Company will target markets where it will be, or will have
favorable prospects of becoming, a significant provider of electronic security
services.
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The Company believes in providing quality services which will
enable it to maintain high levels of recurring revenue from its customers. The
Company derives its business from a broad customer base which the Company
believes will enable it to experience stable growth. Marketing efforts focus on
continuing and increasing business with existing customers as well as
attracting new customers.
CUSTOMERS
The Company's sales efforts are directed toward establishing and
maintaining business relationships with residences and businesses in areas in
which the Company operates, which have ongoing requirements for one or more of
the Company's services. As of May 1996, no one customer individually comprises
more than 10% of the total revenue of the Company.
REGULATIONS
The collection and disposal of solid waste, operation of landfills
and rendering of related environmental services are subject to federal, state
and local requirements which regulate health, safety, the environment, zoning
and land-use. Operating permits are generally required for landfills and
certain collection vehicles, and these permits are subject to revocation,
modification and renewal. Federal, state and local regulations vary, but
generally govern disposal activities and the location and use of facilities and
also impose restrictions to prohibit or minimize air and water pollution. In
addition, governmental authorities have the power to enforce compliance with
these regulations and to obtain injunctions or impose fines in the case of
violations, including criminal penalties. These regulations are administered by
the EPA and various other federal, state and local environmental, health and
safety agencies and authorities, including OSHA.
The Company strives to conduct its operations in compliance with
applicable laws and regulations, but believes that in the existing climate of
heightened legal, political and citizen awareness and concerns, companies in
the waste management and environmental services industry, including the
Company, may be faced with fines and penalties and the need to expend funds for
remedial work and related activities at landfills and other facilities. The
Company has established a reserve to cover any potential fines, penalties and
costs which it believes will be adequate. While such amounts expended
in the past or anticipated to be expended in the future have not had and are
not expected to have a materially adverse effect on the Company's financial
condition or operations, the possibility remains that technological, regulatory
or enforcement developments, the results of environmental studies or other
factors could materially alter this expectation.
The Company's operation of landfills subjects it to certain
operating, monitoring, site maintenance, closure and post-closure obligations.
In order to construct, expand and operate a landfill, one or more construction
or operating permits, as well as zoning approvals, must be obtained. These
operating permits and zoning approvals are difficult and time-consuming to
obtain, and the issuance of such permits and approvals is often opposed by
neighboring landowners and local and national citizens' groups. Once obtained,
the operating permits may be subject to periodic renewal and are subject to
modification and revocation by the issuing agency. In connection with the
Company's acquisition of existing landfills, it often may be necessary to
expend considerable time, effort and money to bring the acquired facilities
into compliance with applicable requirements and to obtain the permits and
approvals necessary to increase their capacity.
Governmental authorities have the power to enforce compliance with
regulations and permit conditions and to obtain injunctions or impose fines in
case of violations. Citizens' groups may also bring suit for alleged
violations. During the ordinary course of its operations, the Company may from
time to time receive citations or notices from such authorities that its
operations are not in compliance with applicable environmental or health or
safety regulations. Upon receipt of such citations or notices, the Company
will work with the authorities to attempt to resolve the issues raised. Failure
to correct the problems to the satisfaction of the authorities could lead to
monetary or criminal penalties, curtailed operations or facility closure.
Federal Regulation. The following summarizes the primary
environmental and safety-related federal statutes of the United States of
America affecting the business of the Company:
(1) SWDA. SWDA and its implementing regulations establish a
framework for regulating the
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handling, transportation, treatment and disposal of hazardous and
nonhazardous solid wastes. They also require states to develop
programs to ensure the safe disposal of solid wastes in sanitary
landfills.
Subtitle D of RCRA establishes a framework for regulating the
disposal of municipal solid wastes. In the past, the states were
largely responsible for the regulation of non-hazardous waste
storage, collection and disposal. In October 1991, however, the EPA
promulgated a final rule which imposes minimum federal
comprehensive solid waste management criteria and guidelines,
including location restrictions, facility design and operating
criteria, closure and post-closure requirements, financial
assurance standards, groundwater monitoring requirements and
corrective action standards, many of which have not commonly been
in effect or enforced in connection with municipal solid waste
landfills.
All Subtitle D regulations are now in effect, except for the
financial assurance requirements which the EPA has deferred to
April 1, 1997. All of the Company's planned landfill expansions or
new landfill development projects have been engineered to meet or
exceed Subtitle D requirements. Operating and design criteria for
existing operations have been modified to comply with these new
regulations. Compliance with the Subtitle D regulations has
resulted in increased costs and, may in the future, require
expenditures in addition to other costs normally associated with
the Company's waste management activities.
(2) CERCLA. CERCLA, among other things, provides for the
cleanup of sites from which there is a release or threatened
release of a hazardous substance into the environment. CERCLA
imposes liability for the costs of cleanup and for damages to
natural resources upon: (a) any person who currently owns or
operates a facility or site from which there is a release or
threatened release of hazardous substances; (b) any person who
owned or operated such a facility or site at the time hazardous
substances were disposed of; (c) any person who by contract,
agreement or otherwise, arranged for the disposal or treatment (or
for transport for disposal or treatment) of hazardous substances
owned or processed by such person at such facility or site; and (d)
any person who accepts or accepted hazardous substances for
transport for treatment or disposal at such a facility or site
selected by such person.
CERCLA also authorizes the federal government either to
remediate sites at which hazardous substances were disposed of and
have been or are threatened to be released into the environment, or
to order (or offer an opportunity to) persons potentially liable
for the cleanup of the hazardous substances to do so. In addition,
CERCLA requires the EPA to establish a National Priorities List
("NPL") of sites at which hazardous substances have been or are
threatened to be released and which require investigation or
cleanup.
Liability under CERCLA is not dependent upon the intentional
disposal of hazardous wastes. It can be founded upon the release
or threatened release, even as a result of unintentional and
non-negligent action, of thousands of hazardous substances,
including very small quantities of such substances. More than 20%
of the sites on the NPL are solid waste landfills which ostensibly
never received any hazardous wastes. Thus, even if the Company's
landfills have never received hazardous wastes as such, it is
possible that one or more hazardous substances may have come to be
located at its landfills. Because of the extremely broad definition
of hazardous substances, the same is true of other properties
which the Company may have owned or operated. If there is a
release or threatened release of hazardous substances from a
facility where the Company is an owner or operator, the Company
could be liable under CERCLA for the cost of cleaning up such
hazardous substances at the sites and for damages to natural
resources, even if those substances were deposited at the
Company's facilities before the Company acquired or operated them.
CERCLA liability may also attach to the Company with regard to
non-Company owned or operated facilities where the Company
arranged for disposal or treatment of hazardous substances at, or
transportation of hazardous substances to, such a facility, or
where the Company was the waste transporter who selected such
facility for treatment or disposal of hazardous substances. The
costs of a CERCLA cleanup can be very expensive. Given the
difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on the
Company's business and financial condition. For a further
discussion, see "--Liability Insurance and Bonding".
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<PAGE> 28
(3) The Federal Water Pollution Control Act of 1972 (the "Clean
Water Act"). The Clean Water Act establishes a framework for
regulating the discharge of pollutants from a variety of sources,
including solid waste disposal sites, into streams, rivers and
other waters. Whenever point source runoff from the Company's
landfills is to be discharged into surface waters, the Clean Water
Act requires the Company to apply for and obtain discharge permits,
conduct sampling and monitoring and, under certain circumstances,
reduce the quantity of pollutants in those discharges. In 1990, the
EPA published new storm water discharge regulations which require
landfills to apply for a storm water discharge permit unless they
are already covered under a storm water general permit promulgated
by the agency. The new storm water discharge regulations require a
permit for certain construction activities, which may affect the
Company's operations. If a landfill or transfer station discharges
wastewater through a sewage system to a publicly-owned treatment
works ("POTW"), the facility must comply with discharge limits
imposed by the POTW. In addition, states may adopt groundwater
protection programs under the Clean Water Act or Safe Drinking
Water Act that could affect solid waste landfills.
(4) The Clean Air Act. The Clean Air Act establishes a
framework for federal, state and local regulation of emission
of air pollutants. The Clean Air Act imposes limitations on
emissions from various sources, including landfills and motor
vehicles. On March 12, 1996, the EPA enacted a final rule
implementing standards of performance for new municipal solid waste
landfills and emission guidelines for existing municipal solid
waste landfills. The new rule was enacted to require certain
municipal solid waste landfills to control emissions to the level
achievable by the best demonstrated system of continuous emission
reduction. The new source performance standards established by the
final rule apply to municipal landfills that began construction or
modification, or first began to accept waste, on or after May 30,
1991. The enactment of this new rule will affect the Company's
existing landfill operations, and may result in increased costs at
these facilities.
(5) The Occupational Safety and Health Act of 1970 (the "OSH
Act"). The OSH Act authorizes OSHA to promulgate occupational
safety and health standards. Various of these standards, including
standards for notices of hazardous chemicals and the handling of
asbestos, apply to the Company's operations.
State Regulation. Each state in which the Company operates has its
own laws and regulations governing solid waste disposal, water and air
pollution and, in most cases, releases and cleanup of hazardous substances and
liability for such matters. The states also have adopted regulations governing
the design, operation, maintenance and closure of landfills and transfer
stations. The Company's facilities and operations are likely to be subject to
many, if not all, of these types of requirements. In addition, the Company's
collection and landfill operations may be affected by the trend in many states
toward requiring the development of waste reduction and recycling programs. For
example, several states have enacted laws that will require counties to adopt
comprehensive plans to reduce, through waste planning, composting, recycling or
other programs, the volume of solid waste deposited in landfills. Additionally,
laws and regulations restricting the disposal of yard waste in solid waste
landfills have recently been promulgated in several states. Legislative and
regulatory measures to mandate or encourage waste reduction at the source and
waste recycling also are under consideration by Congress and the EPA.
Finally, with regard to its transportation operations, the Company is
subject to the jurisdiction of the Interstate Commerce Commission and is
regulated by the Department of Transportation and by regulatory agencies in
each state. Various states have enacted, or are considering enacting, laws
that restrict the disposal within the state of solid or hazardous wastes
generated outside the state. In May 1994, the Supreme Court ruled that such
local flow control ordinances were an impermissible burden to interstate
commerce, and therefore, were unconstitutional. In response to the Supreme
Court's ruling, Congress is attempting to enact a national comprehensive flow
control bill. The national solid waste flow control bill, which was approved
by the Senate in May of 1995, is currently under consideration by the House
Commerce Committee. If the national solid waste flow control bill is enacted,
and state laws restricting the interstate disposal of solid waste are passed
and upheld, such legislation could adversely affect the Company's waste
collection, transportation and treatment and disposal operations.
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<PAGE> 29
COMPETITION
Competition in the Solid Waste Industry. The waste management
industry is highly competitive and requires substantial amounts of capital.
Entry into the industry and ongoing operations within the industry require
substantial technical, managerial and financial resources. The solid waste
industry in North America is currently dominated by three solid waste
companies: WMX Technologies, Inc., Browning-Ferris Industries, Inc. and Laidlaw
Inc. Competition in the solid waste industry also comes from a number of
second tier national companies as well as numerous regional solid waste
companies. Some of the Company's competitors have significantly larger
operations and greater resources than the Company. In each of its solid waste
market areas, the Company competes for landfill business on the basis of
disposal fees (commonly known as "tipping fees"), geographical location and
quality of operations. The Company's ability to obtain landfill business may
be limited by the fact that some major collection companies also own or
operate landfills to which they send their waste.
Further, alternatives to landfill disposal (such as recycling,
composting and waste-to-energy) are increasingly competing with landfills.
There also has been an increasing trend at the state and local levels to
mandate waste reduction at the source and to prohibit the disposal of certain
types of wastes, such as yard wastes, at landfills. This may result in the
volume of waste going to landfills being reduced in certain areas, which may
affect the Company's ability to operate its landfills at their full capacity
and/or affect the prices that can be charged for landfill disposal services. In
addition, most of the states in which the Company operates landfills have
adopted plans or requirements which set goals for specified percentages of
certain solid waste items to be recycled. To the extent these are not yet in
place, it is anticipated that these recycling goals will be phased in over the
next few years.
In its collection business, in addition to national and regional
firms and numerous local companies, the Company may compete with those
municipalities that maintain waste collection or disposal operations. These
municipalities may have financial advantages due to the availability of tax
revenues and tax-exempt financing. The Company competes for collection accounts
primarily on the basis of price and the quality of its services. From time to
time, competitors may reduce the price of their services in an effort to expand
market share or to win a competitively bid municipal contract.
Competition in the Electronic Security Services Industry. The
security alarm industry is highly competitive and highly fragmented. The
Company's electronic security services business competes with several large
national companies, as well as smaller regional and local companies, in all of
its operations. Certain of the Company's competitors have greater financial and
other resources than the Company. Furthermore, new competitors are continuing
to enter the industry and the Company may encounter additional competition from
such future industry entrants.
LIABILITY INSURANCE AND BONDING
The nature of the Company's solid waste management business exposes
it to a significant risk of liability for legal damages arising out of its
operations. Such potential liability could involve, for example, claims for
cleanup costs, personal injury, property damage or damage to the environment in
cases where the Company may be held responsible for the escape of harmful
materials; claims of employees, customers or third parties for personal injury
or property damage occurring in the course of the Company's operations; or
claims alleging negligence or professional errors or omissions in the planning
or performance of work. The Company could also be subject to fines and civil
and criminal penalties in connection with alleged violations of regulatory
requirements. Because of the nature and scope of the possible damages,
liabilities imposed in environmental litigation can be significant. Although
the Company strives to operate safely and prudently and has substantial
general and motor vehicle liability insurance coverage, no assurance
can be given that the Company will not be exposed to uninsured liabilities
which would have a material adverse effect on its financial condition. The
majority of the Company's solid waste operations have environmental liability
insurance subject to certain limitations and exclusions with limits in excess
of those required by permit regulations; however, there is no assurance that
such limits would be adequate in the event of a major loss, nor is there
assurance that the Company will continue to carry environmental liability
insurance should market conditions in the insurance industry make such coverage
cost prohibitive. The Company carries commercial general liability insurance,
motor vehicle liability insurance, workers' compensation and employer's
liability insurance and umbrella policies to provide excess limits of liability
over the underlying limits contained in the commercial general liability,
motor vehicle liability and employer's liability policies, as well as property
insurance.
In the normal course of business, the Company may be required to
post a performance bond or a bank letter of credit in connection with municipal
residential collection contracts, the operation, closure or post-closure of
landfills, certain remediation contracts and certain environmental permits.
Bonds issued by surety companies operate as a financial guarantee of the
Company's performance. To date, the Company has satisfied financial
responsibility requirements for regulatory agencies by making cash deposits,
obtaining bank letters of credit or by obtaining surety bonds.
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<PAGE> 30
EMPLOYEES
As of May 1996, the Company employed approximately 4,883
persons, 32 of whom were covered by collective bargaining agreements. The
management of the Company believes that it has good relations with its
employees.
SEASONALITY
The Company's solid waste operations can be adversely affected by
extended periods of inclement weather, such as rain or snow, which could delay
the collection and disposal of waste, reduce the volume of waste generated or
delay the expansion of the Company's landfill sites.
GEOGRAPHICAL CONCENTRATION
The existing subscriber base of the Company's electronic security
system business is geographically concentrated in certain metropolitan areas of
Florida and Colorado. Accordingly, their performance may be adversely
affected by regional or local economic conditions, regulation or other factors.
PROPERTIES
The Company's corporate headquarters are located at 200 East Las
Olas Boulevard, Suite 1400, Fort Lauderdale, Florida in leased premises.
Certain of the property and equipment of the Company and its subsidiaries are
subject to liens securing payment of portions of the Company's and its
subsidiaries' indebtedness. The Company and its subsidiaries also lease certain
of their offices and equipment.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
GENERAL CORPORATE PROCEEDINGS
On May 3, 1991, the Company filed an action against GI 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 between the Company and GI and that such 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
the Company in 1990 for the benefit of GI. In response to the Company's action,
GI filed a counterclaim alleging that the Company breached such merger
agreement and that it had suffered damages in excess of $16,000,000. In August
1993, the Court rendered a ruling that was favorable to the Company which GI
appealed. In March 1995, the United States Court of Appeals for the Ninth
Circuit at Pasadena, California (the "Court of Appeals") reversed in part
28
<PAGE> 31
and vacated in part the August 1993 decision and remanded the case for further
proceedings. The Court has commenced proceedings that may lead to a trial on
damages.
Subsequent to the commencement of the Company's litigation in this
matter, 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 it is owed from GI, plus interest and costs.
Western Waste Industries, Inc. ("Western") filed an action against
the Company and others on July 20, 1990 in the District Court of Harris
County, Texas alleging various causes of action including interference with
business relations and is seeking $24,000,000 in damages. The lawsuit stems
from Western's attempts to acquire Best Pak Disposal, Inc. The case was
scheduled for trial in May 1996, but by stipulation of the parties the trial
date has been postponed pending the outcome of settlement discussions.
The Company is also a party to various other general corporate
legal proceedings which have arisen in the ordinary course of its business.
While the results of these matters, as well as matters described above, cannot
be predicted with certainty, the Company believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's business.
ENVIRONMENTAL MATTERS
Imperial Landfill Filter Waste Issue. In 1992, the Company
received notices from Imperial County, California (the "County") and the
Department of Toxic Substances Control ("DTSC"), a department under the
California Environmental Protection Agency, alleging 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 because waste
associated with the production of geothermal energy is exempt from the federal
classification of hazardous waste under 40 CFR Part 261.4(b)(5).
The Company is currently conducting active discussions with all
appropriate California regulatory agencies in order to obtain a variance under
California regulations to reclassify the Filters as a special waste so that
such Filters may be left in the landfill. In the event that the variance is not
granted, remedial measures may be required 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.
The Company is currently unable to determine (i) whether the waste
will ultimately be classified as hazardous, (ii) if so, 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 in the United States
District Court for the Southern District of California against the known past
and present owners and operators of the geothermal power plants, the Ormesa I,
IE, IH and II plants in Holtville, California, for all losses, fines and
expenses the Company incurs associated with the resolution of this matter,
including loss of airspace at the landfill, alleging claims for (i) CERCLA
response costs recovery, (ii)
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<PAGE> 32
intentional misrepresentation, (iii) negligent misrepresentation, (iv)
negligence, (v) strict liability, (vi) continuing trespass, (vii) nuisance,
(viii) breach of contract and (ix) breach of implied covenant of good faith and
fair dealing. The Company seeks to recover actual expenses and punitive
damages. Discovery in this matter has been stayed until November 1996, at which
time the Company expects to be able to quantify more accurately the level of
damages it has suffered. The Company believes it will prevail, but no amounts
have been accrued for any recovery of damages.
Imperial Landfill Permit. The Imperial Landfill currently exceeds
its permitted daily tonnage capacity and is involved in negotiations with the
California Integrated Waste Management Board regarding expansion of its daily
tonnage capacity. Imperial Landfill received a notice of violation regarding
this issue in late 1989 and has since applied for a modification of its permit
to increase the allowed daily tonnage from 50 tons up to a maximum of 1,000
tons. Temporary written approval has been given by Imperial County, California
and the California Integrated Waste Management Board for the Company to
operate the landfill and for the landfill to receive in excess of 50 tons per
day while the permit modification is being reviewed.
The Company is also a party to various other environmental
proceedings related to its solid waste services operations which have arisen in
the ordinary course of its business. Although it is possible that losses
exceeding amounts already recorded may be incurred upon the ultimate resolution
of these matters, as well as the matters described above, management believes
that such losses, if any, will not have a material adverse effect on the
Company's business or consolidated financial position; however, unfavorable
resolution of each matter individually or in the aggregate could affect the
consolidated results of operations for the quarterly periods in which they are
resolved.
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<PAGE> 33
MANAGEMENT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth below certain information with respect to
those individuals who serve as members of the Board of Directors and executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------
<S> <C> <C>
H. Wayne Huizenga......................... 58 Chairman of the Board and Chief Executive
Officer
Michael G. DeGroote....................... 62 Vice Chairman of the Board
Harris W. Hudson.......................... 53 President and a Director
J.P. Bryan................................ 56 Director
Rick L. Burdick........................... 44 Director
John J. Melk.............................. 59 Director
George D. Johnson, Jr..................... 53 Director
Gregory K. Fairbanks...................... 42 Executive Vice President and Chief Financial
Officer
Donald E. Koogler......................... 46 Executive Vice President and Chief Operating
Officer
J. Ronald Castell......................... 58 Senior Vice President
Robert A. Guerin.......................... 52 Senior Vice President
Richard L. Handley........................ 49 Senior Vice President and General Counsel
Robert J. Henninger, Jr................... 47 Senior Vice President
</TABLE>
The Board of Directors currently consists of seven members. Directors are
elected to serve until the next annual meeting of the Company's stockholders, or
until their earlier death, resignation, or removal from office. Successors to
those directors whose terms have expired are required to be elected by
stockholder vote while vacancies in unexpired terms and any additional positions
created by board action are filled by action of the existing Board of Directors.
The executive officers named above were elected to serve in such capacities
until the next annual meeting of the Board of Directors, or until their
respective successors have been duly elected and have been qualified, or until
their earlier death, resignation, disqualification or removal from office. On
May 9, 1996, the Company announced that Mr. Fairbanks, Executive Vice President
and Chief Financial Officer of the Company, resigned his position citing
personal reasons. Mr. Fairbanks will remain in his position until July 1, 1996
in order to assist with the orderly transition of his responsibilities. Mr.
Hudson is married to Mr. Huizenga's sister. Otherwise, there is no family
relationship between any of the directors and executive officers of Republic.
H. Wayne Huizenga has served as the Chairman of the Board and Chief
Executive Officer of the Company since August 3, 1995. Mr. Huizenga served as
the Vice Chairman of Viacom Inc. ("Viacom"), a diversified entertainment and
communications company, from September 1994 until October 1995. Mr. Huizenga
also served as the Chairman of the Board of the Blockbuster Entertainment Group,
a division of Viacom, from September 1994, at which time Viacom acquired
Blockbuster Entertainment Corporation ("Blockbuster") through a merger, until
October 1995. From April 1987 through September 1994, Mr. Huizenga served as the
Chairman of the Board and Chief Executive Officer of Blockbuster, during which
time he helped build Blockbuster into the world's largest video and music
retailer. Mr. Huizenga also served as the President of Blockbuster from April
1987 to June 1988. Mr. Huizenga also co-founded Waste Management, Inc., now
known as WMX Technologies, Inc. ("Waste Management"), the world's largest
integrated environmental services company, in 1971 and served in various
capacities, including the President, the Chief Operating Officer and a Director
from its inception until 1984. Mr. Huizenga also owns or controls the Miami
Dolphins, Florida Marlins and Florida Panthers professional sports franchises,
as well as Joe Robbie Stadium, in South Florida. In addition, Mr. Huizenga has
served as the Chairman of the Board of Extended Stay America, Inc., an economy
extended-stay lodging chain ("ESA"), since August 1995.
Michael G. DeGroote has served as the Vice Chairman of the Company since
August 3, 1995. Mr. DeGroote had served as the Chief Executive Officer of the
Company since May 1991, and had served as Senior Chairman of the Board of the
Company from May 1991 to August 1991. He served as Chairman of the Board and
President of the Company from August 1991 until August 3, 1995. Since April
1995,
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<PAGE> 34
Mr. DeGroote has served as Chairman of the Board, President and Chief Executive
Officer of RESI. Mr. DeGroote owned a controlling interest in Laidlaw Inc.
("Laidlaw"), a Canadian company, from 1959 until he sold his interest in 1988.
Laidlaw is the third largest waste service company in North America and the
largest operator of school buses with over 28,000 vehicles. Mr. DeGroote
served as the Chairman of the Board and Chief Executive Officer of Laidlaw
from 1959 until June 1990, when he resigned from those positions to pursue
personal business matters. Mr. DeGroote has served as a Director of Gulf
Canada Resources Ltd. ("Gulf Canada") since May 1995, and a Director of RESI
since April 1995.
Harris W. Hudson has served as the President and a Director of the Company
since August 3, 1995. From May 21, 1995 until August 3, 1995, Mr. Hudson had
served as a consultant to the Company. Mr. Hudson founded and since inception in
1983 has served as Chairman of the Board, Chief Executive Officer and President
of HMC, which was acquired by the Company on August 3, 1995. From 1964 to 1982,
Mr. Hudson served as Vice President of Waste Management of Florida, Inc., a
subsidiary of Waste Management, and its predecessor.
J.P. Bryan has served as a Director of the Company since May 1991 and also
was a Director of the Company from August 1990 until March 1991. Since January
1995, Mr. Bryan has served as President and Chief Executive Officer of Gulf
Canada, which is engaged in oil and gas exploration and production. Since 1981,
Mr. Bryan has served as the Chairman of the Board and Chief Executive Officer of
Torch Energy Advisors Inc., a subsidiary of Torchmark Corporation, engaged in
the management of institutional holdings in energy-related fields and has, since
March 1990, held the same positions with Nuevo Energy Company, a company
involved in the oil and gas industry. Mr. Bryan also currently serves on the
Board of Directors of Bellweather Exploration Company, an oil and gas
exploration company.
Rick L. Burdick has been a Director of the Company since May 1991. Since
June 1995, Mr. Burdick has served as a Director of J. Ray McDermott, S.A. Mr.
Burdick is the sole shareholder of a professional corporation which is a partner
in the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., a limited
liability partnership including professional corporations.
John J. Melk has served as a Director of the Company since August 3, 1995.
Mr. Melk has been Chairman and Chief Executive Officer of H20 Plus Inc., a bath
and skin care product manufacturer and retail distributor, since 1988. Mr. Melk
has been a private investor in various businesses since March 1984 and prior to
March 1984, he held various positions with Waste Management and its
subsidiaries, including President of Waste Management International, plc., a
subsidiary of Waste Management. Mr. Melk also serves as a Director of
Psychemedics Corporation. From February 1987 until March 1989 and from May 1993
until September 1994, Mr. Melk served as a Director of Blockbuster. He also
served as the Vice Chairman of Blockbuster from February 1987 until March 1989.
George D. Johnson, Jr., has served as a Director of the Company since
November 27, 1995. Mr. Johnson presently is President, Chief Executive Officer
and a Director of ESA. From 1993 until 1995, Mr. Johnson served in various
executive positions with Blockbuster Entertainment Group and, prior to its
merger with Viacom, with Blockbuster, including as President of the Consumer
Products Division, and also as a Director of Blockbuster. From 1987 until 1993,
Mr. Johnson was the managing general partner of WJB Video, becoming the largest
Blockbuster franchisee with over 200 video stores prior to a merger with
Blockbuster in 1993. He is also a Director of Duke Power Company and of Viacom.
Gregory K. Fairbanks has served as an Executive Vice President and the
Chief Financial Officer of the Company since August 3, 1995. From May 21, 1995
until August 3, 1995, Mr. Fairbanks served as a consultant to the Company. From
September 1994 to May 21, 1995, Mr. Fairbanks was a consultant to Blockbuster
Entertainment Group. Mr. Fairbanks served as a Senior Vice President and the
Chief Financial Officer of Blockbuster from June 1992 through September 1994. He
also served as the Treasurer of Blockbuster from March 1993 until September
1994. From October 1980 until he joined Blockbuster in June 1992, Mr. Fairbanks
served in a number of finance related capacities for Waste Management
International, plc., the latest as Chief Financial Officer (from 1987 through
1992) and Executive Vice President (from 1991 through 1992). Prior to October
1980, Mr. Fairbanks was employed by Arthur Andersen & Co., an international
public accounting firm, for approximately four years.
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<PAGE> 35
Donald E. Koogler has served as an Executive Vice President and the Chief
Operating Officer of the Company since May 1991. From May 1991 until August 3,
1995, Mr. Koogler also served as a Director of the Company. In September 1990,
Mr. Koogler founded K&K Investment and Consulting Services and served as its
President until May 1991. Mr. Koogler joined Laidlaw as a Vice President in 1985
and became an Executive Vice President in October 1987. Mr. Koogler also served
as Vice President of Waste Management from 1980 until 1985. Mr. Koogler has
been employed in the solid waste industry for over 25 years, in various
executive positions.
J. Ronald Castell joined the Company as a Vice President on August 3, 1995,
and was promoted to Senior Vice President on October 2, 1995. From September
1994 until joining the Company, he served as a consultant to Viacom. Prior to
that, Mr. Castell was Senior Vice President of Programming and Communications
for Blockbuster from August 1991 until September 1994 and was Senior Vice
President of Programming and Merchandising from February 1989 until August 1991.
From October 1985 to February 1989, he was Vice President of Marketing and
Merchandising at Erol's, then a chain of two hundred video stores headquartered
in the Washington, D.C. area.
Robert A. Guerin became Senior Vice President of the Company on August 3,
1995. From September 1994 until joining the Company, he served as a consultant
to Viacom. Prior to that, Mr. Guerin was Senior Vice President of Domestic
Franchising for Blockbuster from January 1992 until September 1994, was Senior
Vice President of Administration and Development for Blockbuster from October
1989 until December 1991, and was a Vice President of Blockbuster from March
1988 until October 1989. From March 1986 to March 1988, Mr. Guerin served as
Vice President and Region Manager of Waste Management of North America, Inc., a
subsidiary of Waste Management, where he was responsible for operations with
over 6,000 employees. From June 1982 to March 1986, he served as President of
Wells Fargo Armored Service Corp., a transporter of currency and valuables with
over 7,000 employees.
Richard L. Handley joined the Company on October 2, 1995 as a Senior Vice
President and the General Counsel. From June 1993 until joining the Company, he
was a principal of Randolph Management Group, Inc., a management consulting firm
specializing in the environmental industry. Prior to that, Mr. Handley was Vice
President, Secretary and General Counsel of The Brand Companies, Inc., an
environmental services company, from July 1990 until May 1993, Associate General
Counsel of Waste Management of North America, Inc. from January 1987 to June
1990, and legal counsel to Waste Management Energy Systems, Inc., a
waste-to-energy company, from September 1985 to January 1987, all of which
companies were affiliates or subsidiaries of Waste Management. Prior to
September 1985, Mr. Handley was a lawyer in private practice in Chicago,
Illinois.
Robert J. Henninger, Jr. has served as a Senior Vice President of the
Company since October 2, 1995. From September 1994 until joining the Company, he
served as a consultant to Viacom, and from July 1994 until September 1994, he
served as Senior Vice President and Chief Administrative Officer of Blockbuster.
Prior to July 1994, Mr. Henninger was employed by Arthur Andersen LLP, an
international public accounting firm, for 23 years, and had been Managing
Partner of the firm's Fort Lauderdale, Florida office since 1984.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established three committees, the Executive
Committee, the Audit Committee and the Compensation Committee. The Executive
Committee consisted of Messrs. DeGroote and Burdick until August 3, 1995, and
since that date has consisted of Messrs. Huizenga, Hudson and DeGroote. The
Executive Committee has full authority to exercise all the powers of the Board
of Directors between meetings of the Board of Directors, except as reserved by
the Board of Directors. The Executive Committee does not have the power to elect
or remove officers, approve a merger of the Company, recommend a sale of
substantially all of the Company's assets, recommend a dissolution of the
Company, amend the Company's By-laws or Certificate of Incorporation, declare
dividends on the Company's outstanding securities, or, except as expressly
authorized by the Board, issue any Common Stock or preferred stock. By action of
the Board of Directors on August 3, 1995, the Executive Committee has certain
limited authority to approve the issuance of Common Stock in connection with
certain types of mergers and acquisitions by the Company.
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<PAGE> 36
The Audit Committee consisted of Messrs. Koogler, Bryan and Burdick
until August 3, 1995, and from that date until May 10, 1996 has consisted of
Messrs. Bryan, Burdick and DeGroote. Since May 10, 1996, the Audit Committee
has consisted of Messrs. Bryan, Burdick and Melk. The Audit Committee has the
power to oversee the retention, performance and compensation of the independent
public accountants for the Company, and the establishment and oversight of such
systems of internal accounting and auditing control as it deems appropriate.
The Compensation Committee, which was established by the Board of Directors
in February 1993, consisted of Messrs. DeGroote and Burdick until August 3,
1995. From August 3, 1995 until February 12, 1996, the Compensation Committee
consisted of Messrs. Melk, DeGroote and Bryan and since that date has consisted
of Messrs. Melk, Johnson and Bryan. The Compensation Committee reviews the
Company's compensation philosophy and programs, exercises authority with
respect to the payment of salaries and incentive compensation to directors and
officers, and administers the Company's 1991 Stock Option Plan and 1995
Employee Stock Option Plan.
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<PAGE> 37
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was established by the Board of Directors in
February 1993 and Messrs. DeGroote and Burdick were appointed to the
Compensation Committee at that time. Mr. DeGroote was the Chairman of the Board,
President and Chief Executive Officer of the Company until August 3, 1995. On
August 3, 1995, the Board of Directors appointed Mr. DeGroote as its Vice
Chairman (a non-officer position), and appointed three of its non-employee
directors, Messrs. Melk, DeGroote and Bryan to the Compensation Committee.
Mr. DeGroote resigned from, and Mr. Johnson, also a non-employee director, was
appointed to, the Compensation Committee on February 12, 1996.
Mr. Burdick is the sole shareholder of a professional corporation which is
a partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. which
renders legal services to the Company.
COMPENSATION TABLES
The following tables set forth information with respect to those persons
who (i) served as the Chief Executive Officer during the year ended December
31, 1995, and (ii) were the most highly compensated executive officers of the
Company at December 31, 1995 whose total annual salary and bonus exceeded
$100,000 for the year (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL
--------------------------------------- WARRANTS/OPTIONS OTHER
OTHER ANNUAL TO PURCHASE COMMON COMPEN-
NAME AND PRINCIPAL POSITION(5) YEAR SALARY BONUS COMPENSATION STOCK(1) SATION
- ------------------------------------- ---- ---------- --------- ------------ ------------------ --------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Huizenga.................... 1995 -- -- -- 3,000,000 --
(Chairman and Chief Executive 1994 -- -- -- -- --
Officer)(2) 1993 -- -- -- -- --
Michael G. Degroote.................. 1995 -- -- -- 100,000 --
(Former Chairman, President and 1994 -- -- -- -- --
Chief Executive Officer)(3) 1993 -- -- -- -- --
Harris W. Hudson..................... 1995 $ 112,122 -- -- 802,020 --
(President)(4) 1994 -- -- -- -- --
1993 -- -- -- -- --
Donald E. Koogler.................... 1995 $ 232,967 -- -- 357,284 --
(Executive Vice President and 1994 $ 235,425(5) -- -- -- --
Chief Operating Officer) 1993 $ 228,752 -- -- 480,000 --
</TABLE>
- ---------------
(1) The securities underlying warrants/options to purchase Common Stock have
been adjusted to reflect the Stock Split.
(2) Mr. Huizenga's employment with the Company began August 3, 1995, and he is
not paid any cash salary or bonus.
(3) On August 3, 1995, Mr. DeGroote resigned his position of Chairman, President
and Chief Executive Officer and was appointed as Vice Chairman of the
Company. Mr. DeGroote did not receive any cash salary or bonus as an
officer of the Company.
(4) Mr. Hudson's employment with the Company began August 3, 1995.
(5) Mr. Koogler elected to defer the receipt of 1994 compensation totaling
$235,425 until January 1, 1997.
(6) Due to mid-year hirings and resignations, no other executive officer
received more than $100,000 in compensation in 1995.
35
<PAGE> 38
OPTION/WARRANT GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/WARRANTS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM
OPTIONS/WARRANTS EMPLOYEES IN EXERCISE EXPIRATION -------------------------
NAME GRANTED(1) FISCAL YEAR PRICE(2) DATE 5% 10%
- --------------------------------- ---------------- ---------------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Huizenga................ 2,000,000 18.2% $12.375 August 2004 $13,640,000 $33,650,000
(Chairman and Chief Executive 1,000,000 9.1% $10.125 October 2005 $ 6,365,000 $16,150,000
Officer)
Michael G. DeGroote.............. 100,000 0.9% $12.375 August 2005 $ 742,000 $ 1,974,500
(Former Chairman, President and
Chief Executive Officer)
Harris W. Hudson................. 300,000 2.3% $1.9375 May 2002 $ 236,627 $ 551,442
(President) 502,020 4.6% $12.375 August 2004 $ 3,423,776 $ 8,446,487
Donald E. Koogler................ 200,000 1.8% $1.9375 May 2002 $ 156,000 $ 370,000
(Executive Vice President and 157,284 1.4% $12.375 August 2004 $ 1,072,677 $ 2,646,303
Chief Operating Officer)
</TABLE>
- --------------
(1) The securities underlying warrants/options granted have been adjusted to
reflect the Stock Split.
(2) The exercise prices of warrants/options granted have been adjusted to
reflect the Stock Split.
AGGREGATED OPTION/WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/WARRANT VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS AT OPTIONS/WARRANTS AT DECEMBER
SHARES DECEMBER 31, 1995(1) 31, 1995
ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Huizenga....................... -- -- 3,000,000 -- $19,312,500 --
(Chairman and Chief Executive Officer)
Michael G. DeGroote..................... -- -- 1,700,000 400,000 $22,268,750 $ 5,425,000
(Former Chairman, President and
Chief Executive Officer)
Harris W. Hudson........................ -- -- -- 802,020 -- $ 7,692,739
(President)
Donald E. Koogler....................... -- -- 240,000 477,284 $ 3,855,000 $ 6,047,053
(Executive Vice President and
Chief Operating Officer)
</TABLE>
- --------------
(1) The securities underlying warrants/options granted have been adjusted to
reflect the Stock Split.
EXECUTIVE WARRANTS
In 1991, the Board of Directors approved the issuance of warrants to Mr.
Koogler for the purchase of shares of Common Stock at an exercise price based on
the market price of Common Stock on the date of issuance (the "Executive
Warrants") as compensation for his continued service as an officer of the
Company. Mr. Koogler was required to execute a non-competition agreement in
connection with the Executive Warrants. The Executive Warrants issued to Mr.
Koogler granted him the right to purchase 600,000 shares of Common Stock at an
exercise price of $4.50 per share. Mr. Koogler's warrants vested in increments
of 20% per year over a five year period with the first 20% (or 120,000 shares)
having vested May 31, 1992. In May 1993, the Company canceled the unvested
portion of Mr. Koogler's Executive Warrants (or 480,000 warrants) and
re-issued to Mr. Koogler Executive Warrants to purchase 480,000 shares of
Common Stock at an exercise price of $2.00 per share. The Executive Warrants
granted in 1993 to Mr. Koogler vest in increments of 25% per year over a four
year period commencing on May 31, 1993. The Executive Warrants are exercisable,
with respect to each portion vested, for a period of four years following such
vesting.
36
<PAGE> 39
1994 NON-EMPLOYEE DIRECTOR WARRANTS
In May 1994, the Board of Directors of the Company approved the issuance
of warrants to purchase 100,000 shares of Common Stock at an exercise price of
$1.345 per share to each of Messrs. Bryan and Burdick, each non-employee
directors of the Company, as compensation for continuing service on the Board
of Directors (the "Non-Employee Director Warrants"). The Non-Employee Director
Warrants vest over a five year period in increments of 20%, commencing on
May 31, 1995, are exercisable for a period of four years after vesting and
terminate on or about the termination of the non-employee director's service
as a director of the Company. On August 3, 1995, the Board of Directors
approved an amendment to the Non-Employee Director Warrants to accelerate the
vesting of all of the Non-Employee Director Warrants and make them immediately
exercisable in full. Such amendment to the Non-Employee Director Warrants
became effective upon approval of the Company's stockholders, which was
obtained on November 28, 1995.
CONSULTING AGREEMENTS
On May 21, 1995, the Company entered into Consulting Agreements with
Messrs. Hudson and Fairbanks pursuant to which such individuals provided
consulting services to the Company. In connection therewith, the Company granted
each of Messrs. Hudson and Fairbanks options to purchase 300,000 and 200,000
shares of Common Stock, respectively, at an exercise price of $1.9375 per share,
under the Company's 1991 Stock Option Plan. These options vest at a rate of
one-third per year over a three-year period from the date of grant. On August 3,
1995, upon being appointed as officers of the Company, the Board of Directors
terminated the Consulting Agreements and amended the stock option grants to
allow Messrs. Hudson and Fairbanks' options to continue to vest through their
tenure of service as employees of the Company.
CHIEF EXECUTIVE OFFICER OPTIONS
On August 3, 1995, the Compensation Committee of the Board of Directors
approved a grant of options under the Company's 1991 Stock Option Plan to
purchase 2,000,000 shares of Common Stock exercisable at a price of $12.375 per
share, and on October 27, 1995, the Compensation Committee approved an
additional grant of options under the Company's 1995 Stock Option Plan to
purchase 1,000,000 shares of Common Stock exercisable at $10.125 per share,
to Mr. Huizenga for his services to be performed as Chairman and Chief Executive
Officer of the Company (the "CEO Options"). The CEO Options vested immediately
and are presently exercisable in full. Mr. Huizenga will not be paid any cash
salary or bonuses for his services to the Company, given his substantial
ownership position in the Company. Accordingly, any benefit realized by Mr.
Huizenga from his compensation arrangement will be derived solely from increases
in the value of the Common Stock of the Company, giving him an additional
incentive in the success of the Company.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
On August 3, 1995, the Board of Directors approved amendments to the 1995
Non-Employee Director Stock Option Plan of the Company (the "Director Plan")
principally to provide for an automatic grant of an option to purchase 100,000
shares of Common Stock to each member of the Board of Directors who becomes or
joins the Board as a non-employee director, and to further provide an additional
automatic grant of an option to purchase 20,000 shares of Common Stock on the
first day of each fiscal year thereafter to each non-employee director
continuing to serve on the Board at such dates. All options granted under the
Director Plan,
37
<PAGE> 40
as amended, will be fully vested and immediately exercisable in full. Under the
Director Plan, as amended, each automatic grant of options to a non-employee
director remains exercisable so long as such Director remains a member of the
Board, and are exercisable at a price per share equal to the market value of a
share of Common Stock on Nasdaq as of the date it was automatically granted. In
accordance with the Director Plan, as amended, on August 3, 1995, Messrs.
DeGroote and Melk each received an automatic grant of options to purchase
100,000 shares of Common Stock at an exercise price of $12.375 per share, on
November 27, 1995, Mr. Johnson received an automatic grant of an option to
purchase 100,000 shares of Common Stock at an exercise price of $12.25 per
share, and on January 2, 1996, Messrs. Bryan, Burdick, DeGroote, Johnson and
Melk each received an automatic grant of options to purchase 20,000 shares of
Common Stock at an exercise price of $18.0625 per share. The amendment to the
Director Plan, and the automatic grants made thereunder to Messrs. DeGroote,
Melk and Johnson became effective upon approval of the Company's stockholders,
which was obtained on November 28, 1995.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of April 30, 1996, by (i) each person who is
known by the Company to own beneficially 5% or more of Common Stock, (ii) each
director of the Company, (iii) each executive officer of the Company named in
the Summary Compensation Table and (iv) all directors and executive officers of
the Company as a group. Share amounts and percentages shown for each entity,
individual or group in the table are adjusted to give effect to shares of Common
Stock that are not outstanding but may be acquired by a person upon exercise of
all options and warrants exercisable by such entity, individual or group within
60 days of April 30, 1996. However, such shares of Common Stock are not deemed
to be outstanding for the purpose of computing the percentage of outstanding
shares beneficially owned by any other person.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS ------------------------
OF BENEFICIAL OWNER NUMBER(1) PERCENT
- ---------------------------------------------------------------------- ---------- -------
<S> <C> <C>
H. Wayne Huizenga(2).................................................. 29,462,556 15.7%
200 South Andrews Avenue
Fort Lauderdale, Florida 33301
MGD Holdings Ltd.(3).................................................. 21,800,000 12.8%
Victoria Hall
11 Victoria Street
P.O. Box HM 1065
Hamilton, HMEX Bermuda
Westbury (Bermuda) Ltd.(4)............................................ 8,100,000 4.7%
Victoria Hall
11 Victoria Street
P.O. Box HM 1065
Hamilton, HMEX Bermuda
Michael G. DeGroote(5)................................................ 30,020,000 17.1%
Victoria Hall
11 Victoria Street
P.O. Box HM 1065
Hamilton, HMEX Bermuda
Harris W. Hudson(6)................................................... 19,700,000 11.5%
200 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
Gregory K. Fairbanks(7)............................................... 668,000 *
200 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS ------------------------
OF BENEFICIAL OWNER NUMBER(1) PERCENT
- ---------------------------------------------------------------------- ---------- -------
<S> <C> <C>
Donald E. Koogler(8).................................................. 428,000 *
200 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
J.P. Bryan(9)......................................................... 150,000 *
401 9th Avenue, S.W.
Calgary, Alberta, Canada T2P2H7
Rick L. Burdick(10)................................................... 120,000 *
1900 Pennzoil Place
711 Louisiana Street
Houston, Texas 77002
John J. Melk(11)...................................................... 3,840,000 2.3%
676 North Michigan Ave., Suite 4000
Chicago, Illinois 60611
George D. Johnson, Jr.(12)............................................ 920,000 *
500 East Broward Boulevard, Suite 950
Fort Lauderdale, Florida 33394
All directors and executive officers as a group (13 persons).......... 86,509,796 43.3%
</TABLE>
- ---------------
* Less than 1 percent
(1) The number of shares of Common Stock beneficially owned and the exercise
prices of options/warrants to purchase Common Stock have been adjusted to
reflect the Stock Split.
(2) The aggregate amount of Common Stock beneficially owned by Mr. Huizenga
consists of (a) 8,997,440 shares owned directly by him, (b) 1,000,000
shares held by his wife, (c) presently exercisable warrants to purchase
8,000,000, 4,000,000 and 4,000,000 shares of Common Stock at exercise
prices of $2.25, $2.75 and $3.50 per share, respectively, and (d) vested
options to purchase 2,000,000, 1,000,000 and 465,116 shares of Common
Stock at exercise prices of $12.375, $10.125 and $16.125 per share,
respectively. Mr. Huizenga disclaims beneficial ownership of the shares
held by his wife.
(3) The aggregate amount of Common Stock beneficially owned by MGD Holdings, a
Bermuda corporation controlled by Mr. DeGroote, consists of 20,200,000
shares directly owned by MGD Holdings. MGD Holdings also owns presently
exercisable Management Warrants to purchase up to 1,600,000 shares of
Common Stock at an exercise price of $4.50 per share.
(4) The aggregate amount of Common Stock beneficially owned by Westbury
(Bermuda) Ltd., a Bermuda corporation controlled by Mr. DeGroote
("Westbury"), consists of 2,700,000 shares owned directly by it and
presently exercisable warrants to purchase 2,700,000, 1,350,000 and
1,350,000 shares of Common Stock at exercise prices of $2.25, $2.75 and
$3.50 per share, respectively.
(5) The aggregate amount of Common Stock beneficially owned by Mr. DeGroote
consists of the shares beneficially owned by MGD Holdings and Westbury, and
vested options to purchase 100,000 and 20,000 shares of Common Stock at
exercise prices of $12.375 and $18.0625 per share, respectively. Mr.
DeGroote is the sole stockholder, the President and a director of MGD
Holdings and Westbury.
(6) The aggregate amount of Common Stock beneficially owned by Mr. Hudson
consists of 17,200,000 shares owned directly by him and presently
exercisable warrants to purchase 1,200,000, 600,000 and 600,000 shares of
Common Stock at exercise prices of $2.25, $2.75 and $3.50 per share,
respectively and options exercisable within 60 days of April 30, 1996 to
purchase 100,000 shares of Common Stock at an exercise price of $1.9375
per share.
(7) The aggregate amount of Common Stock to be beneficially owned by Mr.
Fairbanks consists of 200,000 shares owned by Mr. Fairbanks and his wife as
tenants by the entireties, 400,000 shares owned by Mr. Fairbanks
individually and options exercisable within 60 days of April 30, 1996 to
purchase 68,000 shares of Common Stock at an exercise price of $1.9375 per
share.
(8) The aggregate amount of Common Stock beneficially owned by Mr. Koogler
consists of presently exercisable Executive Warrants to purchase 240,000
shares of Common Stock at an exercise price of $2.00 per share, Executive
Warrants exercisable within 60 days of April 30, 1996 to purchase 120,000
shares of Common Stock at an exercise price of $2.00 per share and options
exercisable within 60 days of April 30, 1996 to purchase 68,000 shares of
Common Stock at an exercise price of $1.9375 per share.
(9) The aggregate amount of Common Stock beneficially owned by Mr. Bryan
consists of presently exercisable warrants to purchase 80,000 shares of
Common Stock at an exercise price of $1.345 per share
39
<PAGE> 42
and vested options to purchase 20,000 and 50,000 shares of Common Stock at
exercise prices of $18.0625 and $5.125 per share, respectively.
(10) The aggregate amount of Common Stock beneficially owned by Mr. Burdick
consists of presently exercisable warrants to purchase 100,000 shares of
Common Stock at an exercise price of $1.345 per share, and vested options
to purchase 20,000 shares of Common Stock at an exercise price of $18.0625
per share.
(11) The aggregate amount of Common Stock beneficially owned by Mr. Melk
consists of (a) 1,600,002 shares owned by JJM Republic Limited Partnership,
of which Mr. Melk is the general partner and his three adult children are
limited partners, (b) 1,599,998 shares owned by JLM Republic Limited
Partnership, of which Mr. Melk's wife is the general partner and his three
adult children are limited partners, (c) vested warrants to purchase
200,000, 100,000 and 100,000 shares of Common Stock at exercise prices of
$2.25, $2.75 and $3.50 per share, respectively, (d) vested options to
purchase 100,000 and 20,000 shares of Common Stock at exercise prices of
$12.375 and $18.0625 per share, respectively, and (e) 120,000 shares owned
by his wife. Mr. Melk disclaims beneficial ownership of the 1,599,998
owned by JLM Republic Limited Partnership and of the 120,000 shares owned
by his wife.
(12) The aggregate amount of Common Stock beneficially owned by Mr. Johnson
consists of (a) 400,000 shares of Common Stock owned directly by him, (b)
presently exercisable warrants to purchase 200,000, 100,000 and 100,000
shares of Common Stock at exercise prices of $2.25, $2.75 and $3.50 per
share, respectively, and (c) vested options to purchase 100,000 and 20,000
shares of Common Stock at exercise prices of $12.25 and $18.0625 per share,
respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of certain agreements and transactions between
or among the Company and certain related parties. It is the Company's policy to
enter into transactions with related parties on terms that, on the whole, are no
less favorable than those that would be available from unaffiliated parties.
Based on, among other factors, the Company's experience in the waste industry
and the terms of its transactions with unaffiliated parties, it is the
Company's belief that all of the transactions described below involving the
Company met that standard at the time such transactions were effected.
MANAGEMENT AGREEMENT AND MANAGEMENT WARRANTS
In June 1991, the Company entered into a management agreement (the
"Management Agreement") with MGD Holdings in which MGD Holdings provides
executive, operational and management services to the Company. Warrants dated as
of June 7, 1991, to purchase 2,300,000 shares of Common Stock were issued by the
Company to MGD Holdings at an exercise price of $4.50 per share (the "Management
Warrants") for services to be rendered pursuant to the Management Agreement. In
1992, Management Warrants to purchase 300,000 shares of Common Stock were
assigned by MGD Holdings to a former employee of MGD Holdings who is currently
an unrelated third party. The Management Warrants vest at the rate of 20% per
year over a five year period. Currently, Management Warrants to purchase
1,600,000 shares of Common Stock have vested. The Management Warrants are
exercisable, with respect to each portion vested, for a period of four years
following such vesting. On March 11, 1996, MGD Holdings exercised certain of
such vested Management Warrants to purchase 400,000 shares of Common Stock.
The Management Agreement may be terminated by either party under certain
circumstances. Mr. Huizenga, the Company's Chairman and Chief Executive
Officer since August 3, 1995, has the authority to cause the Company to
terminate the Management Agreement. In the event of termination of the
Management Agreement by the Company, the holder will become vested in all
remaining Management Warrants; however, in the event of termination by MGD
Holdings, the holder will forfeit all remaining unvested Management Warrants.
The Management Warrants also fully vest in the event of the death or
incapacity of Mr. DeGroote, the President and sole stockholder of MGD Holdings,
or the loss of effective control of the Company by MGD Holdings.
TRANSACTIONS AND OTHER EVENTS
Until November 1, 1995, Mr. Hudson indirectly owned 5 parcels of real
property in various locations in Florida which were leased to various
subsidiaries of HMC, a subsidiary of the Company. Such leases were
40
<PAGE> 43
entered into several years prior to the August 3, 1995 acquisition of HMC by the
Company. Total lease payments aggregated approximately $27,000 per month. In
October 1995, the Company commissioned independent appraisals of each parcel. On
October 27, 1995, the Company's Board of Directors, absent Mr. Hudson, reviewed
the resulting appraisal reports and considered the alternatives available to the
Company, including purchasing one or more of the appraised parcels indirectly
from Mr. Hudson at their appraised value, continuing to lease one or more of
such parcels indirectly from Mr. Hudson or obtaining alternative parcels.
Following such review, the Board of Directors, absent Mr. Hudson, and with Mr.
Huizenga abstaining, approved the purchase of all 5 parcels for an aggregate
purchase price of $3.295 million, less debt assumed, which was the aggregate
appraised value of such parcels.
After August 3, 1995, the Company began making payments to Huizenga
Holdings, Inc. ("Holdings"), a corporation owned by Mr. Huizenga, for the
business use of certain aircraft owned by Holdings. In 1995, the Company made
payments to Holdings totaling $417,447 for the business use of such aircraft.
Also in 1995, Holdings made payments to the Company totaling $72,270 for the
business use of certain aircraft owned by the Company. The Company believes
that the terms of its use of the aircraft were more favorable to the Company
than it could have obtained from an unaffiliated party.
On May 8, 1996, the Company entered into the Merger Agreement which
provides for the acquisition of AutoNation by the Company in the Merger.
The Merger Agreement provides that the Company will issue 17,467,248 shares of
its Common Stock in exchange for all of the outstanding shares of common stock
of AutoNation. Concurrent with the execution of the Merger Agreement, the
Company and AutoNation also entered into the Loan Agreement pursuant to which
the Company will provide AutoNation a line of credit pending the closing of the
Merger. Mr. Huizenga is Chairman of the Board of AutoNation, and Messrs.
Huizenga, Hudson, Melk, Johnson, Fairbanks, Castell, Guerin and Henninger each
have an ownership interest in AutoNation. The Merger Agreement and the
transactions contemplated thereby have been approved by a special committee of
the Company's Board of Directors (comprised of disinterested outside
Directors), as well as by the Board of Directors and shareholders of
AutoNation. In connection with the Merger, the Company has received an opinion
from its financial advisor that the Merger is fair to the Company from a
financial point of view. Consumation of the Merger is subject to various
conditions, including, but not limited to, approval of the Merger by the
stockholders of the Company.
DESCRIPTION OF CAPITAL STOCK
The Second Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation"), authorizes capital stock
consisting of 500,000,000 shares of Common Stock, par value $.01 per share, and
5,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). There were 84,109,874 (before giving effect to the Stock Split)
shares of Common Stock, and no shares of Preferred Stock, issued and
outstanding as of May 9, 1996. The following summary description of the capital
stock of the Company is qualified in its entirety by reference to the
Certificate of Incorporation and Bylaws of the Company, copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus
is a part.
Common Stock. The holders of shares of Common Stock have equal pro rata
rights to dividends if, as and when declared by the Company's Board of
Directors; do not have any preemptive subscription or conversion rights; and
have one vote per share on all matters upon which the stockholders of the
Company may vote at all meetings of stockholders. There are no redemption or
sinking fund provisions applicable to the Common Stock. The holders of the
Common Stock of the Company do not have cumulative voting rights. As a result,
the holders of a majority of the shares voting for the election of directors can
elect all the members of the Board of Directors.
Preferred Stock. No shares of Preferred Stock are currently outstanding.
The Board of Directors is authorized to divide the Preferred Stock into series
and, with respect to each series, to determine the dividend rights, dividend
rate, conversion rights, voting rights, redemption rights and terms, liquidation
preferences, the number of shares constituting the series, the designation of
such series and such other rights, qualifications, limitations or restrictions
as the Board of Directors may determine. The Board of Directors could, without
shareholder approval, issue Preferred Stock with voting rights and other rights
that could adversely affect the voting power of holders of Common Stock and such
stock could be used to prevent a hostile takeover of the Company. The Company
has no present plans to issue any shares of Preferred Stock.
Certificate of Incorporation and Bylaws. The Certificate of Incorporation
was amended on November 28, 1995 to (i) change the Company's name to Republic
Industries, Inc., and (ii) to eliminate all provisions relating to
classification of the members of the Board of Directors. The directors of the
Company are elected each year at the annual meeting of the stockholders for
terms of one year and until their successors are elected and qualified; existing
directors may nominate and elect qualified persons to fill vacancies on the
Board of Directors. The Certificate of Incorporation was amended on May 15,
1996 to increase the number of authorized shares of Common Stock to 500,000,000
from 350,000,000. The Company's Bylaws provide that directors may be removed
for cause by vote of two-thirds of the other directors or by vote of a majority
of stockholders, and may be removed without cause by the vote of a majority of
stockholders at a meeting called for such purpose.
41
<PAGE> 44
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Common Stock is First Interstate Bank of Texas, N.A.
PLAN OF DISTRIBUTION
The 1,429,300 shares of Common Stock covered by this Prospectus are
available for use in future acquisitions of other businesses, properties or
equity and/or debt securities in business combination transactions, which may
relate to businesses similar or dissimilar to the Company's businesses. The
consideration offered by the Company in such acquisitions in addition to the
shares of Common Stock offered by this Prospectus may include cash, debt or
other securities (which may be convertible into shares of Common Stock covered
by this prospectus), or assumption by the Company of liabilities of the business
being acquired, or a combination thereof. It is contemplated that the terms of
each acquisition will be determined by negotiations between the Company and the
management or the owners of the businesses or properties to be acquired or the
owners of the securities (including newly issued securities) to be acquired,
with the Company taking into account the quality of management, the past and
potential earning power and growth of the businesses, properties or equity
and/or debt securities to be acquired, and other relevant factors. It is
anticipated that shares of Common Stock issued in acquisitions will be valued at
a price reasonably related to the market value of the Common Stock at the time
the basic terms of the acquisition are tentatively agreed upon or at or about
the time or times of delivery of the shares.
With the consent of the Company, this Prospectus may also be used by
persons or entities who have received or will receive from the Company Common
Stock covered by this Prospectus in connection with acquisitions of businesses,
properties or securities and who may wish to sell such stock under circumstances
requiring or making desirable its use and by certain donees of such persons or
entities. The Company's consent to such use may be conditioned upon such persons
or entities agreeing not to offer more than a specified number of shares
following amendments to this Prospectus, which the Company may agree to use its
best efforts to prepare and file at certain intervals. The Company may require
that any such offering be effected in an organized manner through securities
dealers.
Sales by means of this Prospectus by persons other than the Company may be
made from time to time privately at prices to be individually negotiated with
the purchasers, or publicly through transactions on Nasdaq (which may involve
crosses and block transactions), other exchanges or in the over-the-counter
market, at prices reasonably related to market prices at the time of sale or at
negotiated prices. Broker-dealers participating in such transactions may act as
agent or as principal and may receive commissions from the purchasers as well as
from the sellers. The Company may indemnify any broker-dealer participating in
such transactions against certain liabilities, including liabilities under the
Securities Act. Profits, commissions and discounts on sales by persons who may
be deemed to be underwriters within the meaning of the Securities Act may be
deemed underwriting compensation under the Securities Act.
Stockholders may also offer shares of stock issued in past and future
acquisitions or purchased from the Company by means of prospectuses under other
registration statements or pursuant to exemptions from the registration
requirements of the Securities Act, including sales which meet the requirements
of Rule 144 or 145(d) under the Securities Act, and stockholders should seek the
advice of their own counsel with respect to the legal requirements for such
sales.
LEGAL MATTERS AND EXPERTS
The validity of the Shares offered hereby will be passed upon for the
Company by Akerman, Senterfitt & Eidson, P.A., Miami, Florida. Attorneys
employed by Akerman, Senterfitt & Eidson, P.A. beneficially owned an aggregate
of 608,290 shares of Common Stock as of the date of this Prospectus.
The consolidated financial statements and schedule for the Company as
of December 31, 1995 and 1994, and the combined financial statements of HMC as
of September 30, 1994 and 1993, appearing in this Prospectus and in the
Registration Statement have been audited by Arthur Andersen LLP,
42
<PAGE> 45
independent certified public accountants, to the extent and for the periods as
indicated in their reports with respect thereto. The financial statements and
schedule referred to above have been included herein in reliance upon authority
of said firm as experts in accounting and auditing in giving said reports.
43
<PAGE> 46
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES ----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.............................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994 (Restated)......... F-4
Consolidated Statements of Operations for the Years Ended December 31, 1995,
1994 and 1993 (Restated)....................................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995, 1994 and 1993 (Restated)................................................. F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
1994 and 1993 (Restated)....................................................... F-7
Notes to Consolidated Financial Statements (Restated)........................... F-8
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995.............................................................. F-22
Unaudited Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995.................................................. F-23
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the
Three Months Ended March 31, 1996.............................................. F-24
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995.................................................. F-25
Notes to Unaudited Condensed Consolidated Financial Statements.................. F-26
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND
ENVIROCYCLE, INC.
Report of Independent Certified Public Accountants.............................. F-31
Combined Balance Sheets as of June 30, 1995 (unaudited) and September 30, 1994
and 1993...................................................................... F-32
Combined Statements of Income for the Nine Months Ended June 30, 1995 and 1994
(unaudited) and the Years Ended September 30, 1994, 1993 and 1992.............. F-33
Combined Statements of Stockholders' Equity for the Years Ended September 30,
1994, 1993 and 1992............................................................ F-34
Combined Statements of Cash Flows for the Nine Months Ended June 30, 1995 and
1994 (unaudited) and the Years Ended September 30, 1994, 1993 and 1992......... F-35
Notes to Combined Financial Statements.......................................... F-36
</TABLE>
F-1
<PAGE> 47
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENT
Unaudited Condensed Consolidated Pro Forma Financial Statement.................. F-44
Unaudited Condensed Consolidated Pro Forma Statement of Operations for the Year
Ended December 31, 1995........................................................ F-45
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statement......... F-46
</TABLE>
F-2
<PAGE> 48
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets of
Republic Industries, Inc. (a Delaware corporation, formerly Republic Waste
Industries, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows (restated) for each of the three years in the period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Industries, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 21, 1996.
F-3
<PAGE> 49
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (RESTATED)
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-----------------------------
ASSETS 1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 161,248 $ 11,485
Accounts receivable, less allowance for doubtful accounts of
$2,559 and $1,581, respectively . . . . . . . . . . . . . . . . . 37,789 26,159
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 3,429 2,735
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 11,805 6,493
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . 214,271 46,872
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 194,934 141,126
Investment in subscriber accounts, net of accumulated amortization
of $11,446 and $6,977, respectively . . . . . . . . . . . . . . . . . . . 41,540 24,193
Intangible assets, net of accumulated amortization of $7,561 and $3,212,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,736 15,605
Net assets of discontinued operations . . . . . . . . . . . . . . . . . . . . - 20,292
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,573 9,119
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 558,054 $ 257,207
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,255 $ 12,829
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 22,008 11,635
Current portion of deferred revenue . . . . . . . . . . . . . . . . 25,555 13,892
Current maturities of long-term debt and notes payable . . . . . . 2,087 11,210
Current portion of accrued environmental and landfill costs . . . . 2,925 1,404
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 3,625 1,281
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . 73,455 52,251
Long-term debt and notes payable, net of current maturities . . . . . . . . . 3,791 40,703
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . 18,012 20,353
Accrued environmental and landfill costs, net of current portion . . . . . . 8,386 8,244
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,046 11,597
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,976 8,841
---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 121,666 141,989
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
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 and
100,000,000 shares authorized, respectively; 157,941,870 and
96,456,334 issued, respectively . . . . . . . . . . . . . . . . . 1,579 965
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 402,983 109,301
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 31,826 5,625
Notes receivable arising from stock purchase agreements . . . . . . - (673)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 436,388 115,218
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . $ 558,054 $ 257,207
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE> 50
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 295,165 $ 218,173 $ 182,495
Expenses:
Cost of operations . . . . . . . . . . . . . . . . 192,213 143,375 121,640
Selling, general and administrative . . . . . . . 63,010 49,245 46,477
Restructuring and unusual charges . . . . . . . . - - 10,040
----------- ---------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . . 39,942 25,553 4,338
Interest and other income . . . . . . . . . . . . . . . . . 5,715 1,081 760
Interest expense . . . . . . . . . . . . . . . . . . . . . (6,117) (4,487) (2,936)
----------- ---------- ----------
Income from continuing operations before income taxes . . 39,540 22,147 2,162
Income tax provision . . . . . . . . . . . . . . . . . . . 16,166 5,298 2,493
----------- ---------- ----------
Income (loss) from continuing operations . . . . . . . . . 23,374 16,849 (331)
Discontinued operations:
Income (loss) from discontinued operations, net of
income tax benefit of $193, $0 and $210,
respectively . . . . . . . . . . . . . . . . . . . (293) 2,684 (14,579)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 23,081 $ 19,533 $ (14,910)
=========== ========== ==========
Primary earnings (loss) per common and common equivalent
share:
Continuing operations . . . . . . . . . . . . . . $ 0.18 $ 0.17 $ -
Discontinued operations . . . . . . . . . . . . . - 0.03 (0.15)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . $ 0.18 $ 0.20 $ (0.15)
=========== ========== ==========
Fully diluted earnings (loss) per common and common
equivalent share:
Continuing operations . . . . . . . . . . . . . . $ 0.17 $ 0.17 $ -
Discontinued operations . . . . . . . . . . . . . - 0.03 (0.15)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . $ 0.17 $ 0.20 $ (0.15)
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 51
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (RESTATED)
(In thousands)
<TABLE>
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, 1992 . . . . . . $ 968 $ 103,353 $ 17,423 $ (673)
Contributions to capital from pooled
entities . . . . . . . . . . . . . . - 4,167 - -
Distributions to former owners
of acquired companies . . . . . . - - (6,350) -
Other . . . . . . . . . . . . . . . . - (679) (418) -
Net loss . . . . . . . . . . . . . . . - - (14,910) -
------ ---------- ----------- --------
BALANCE AT DECEMBER 31, 1993 . . . . . . 968 106,841 (4,255) (673)
Distributions to former owners
of acquired companies . . . . . . . - - (9,671) -
Other . . . . . . . . . . . . . . . . (3) 2,460 18 -
Net income . . . . . . . . . . . . . . - - 19,533 -
------ ---------- ----------- --------
BALANCE AT DECEMBER 31, 1994 . . . . . . 965 109,301 5,625 (673)
Sales of common stock . . . . . . . . 415 231,616 - -
Stock issued in acquisitions . . . . 172 82,811 - -
Exercise of stock options and -
warrants, including tax benefit
of $4,068 . . . . . . . . . . . . . 28 13,346 -
Payments received on notes . . . . . . - - - 673
Reclassification of additional paid-in
capital to effect the spin-off . . . - (36,305) 36,305 -
Spin-off of Republic Environmental
Systems, Inc. . . . . . . . . . . . - - (23,579) -
Distributions to former owners
of acquired companies . . . . . . . - - (9,718) -
Other . . . . . . . . . . . . . . . . (1) 2,214 112 -
Net income . . . . . . . . . . . . . - - 23,081 -
------- ---------- ----------- --------
BALANCE AT DECEMBER 31, 1995 . . . . . $ 1,579 $ 402,983 $ 31,826 $ -
======= ========== =========== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 52
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Income (loss) from continuing operations . . . . . . . . $ 23,374 $ 16,849 $ (331)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing operations:
Restructuring and unusual charges . . . . . . . . . . - - 10,040
Depreciation, depletion and amortization . . . . . . . 22,673 19,525 15,591
Provision for doubtful accounts . . . . . . . . . . 1,505 858 936
Provision for accrued environmental and
landfill costs . . . . . . . . . . . . . . . . . . 400 377 215
Gain on the sale of equipment . . . . . . . . . . . . (311) (286) (143)
Changes in assets and liabilities, net of effects
from business acquisitions:
Accounts receivable . . . . . . . . . . . . . . . (6,654) (3,612) (3,006)
Prepaid expenses and other assets . . . . . . . . . (2,617) (708) (2,348)
Accounts payable and accrued liabilities . . . . . . 1,530 2,681 251
Income taxes payable . . . . . . . . . . . . . . . 4,932 2,171 534
Deferred revenue and other liabilities . . . . . . (13,356) (10,985) (2,928)
-------- -------- -------
Net cash provided by continuing operations . . . . . . 31,476 26,870 18,811
-------- -------- -------
CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . (261) (736) (4,360)
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired . . . . . . (7,304) (4,776) (5,664)
Purchases of property and equipment . . . . . . . . . . (52,915) (23,383) (13,317)
Investment in subscriber accounts . . . . . . . . . . . (15,980) (17,512) (9,569)
Other . . . . . . . . . . . . . . . . . . . . . . . . . 126 (901) (2,357)
-------- -------- --------
Net cash used in investing activities . . . . . . . . . (76,073) (46,572) (30,907)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock . . . . . . . . . . . . . . . . . . 232,031 - -
Exercise of stock options and warrants . . . . . . . . . 9,306 - -
Capital contribution to Republic Environmental
Systems, Inc. . . . . . . . . . . . . . . . . . . . . . (2,520) - -
Payments of long-term debt and notes payable . . . . . . . (86,667) (17,950) (16,035)
Proceeds from long-term debt and notes payable . . . . . . 29,784 21,717 23,201
Proceeds from financing arrangements . . . . . . . . . . 24,747 27,070 15,473
Distributions to former owners of acquired
companies . . . . . . . . . . . . . . . . . . . . . . . (7,434) (9,041) (6,044)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (4,626) (1,240) 615
--------- -------- --------
Net cash provided by financing activities . . . . . . . . 194,621 20,556 17,210
--------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 149,763 118 754
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . 11,485 11,367 10,613
--------- -------- --------
END OF PERIOD . . . . . . . . . . . . . . . . . . . . $ 161,248 $ 11,485 $ 11,367
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE> 53
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
(000'S OMITTED IN ALL TABLES EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying 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. Accordingly, as discussed
in Note 9, this segment has been accounted for as a discontinued operation
and the accompanying Consolidated Financial Statements presented herein
have been restated to report separately the net assets and operating
results of these discontinued operations.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously
reported financial statements in order to conform with the financial
statement presentation of the current period.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. The most significant estimates made in the
preparation of the accompanying Consolidated Financial
Statements are estimated future cost requirements for closure and
post-closure monitoring and maintenance for the Company's solid waste
facilities and estimated customer lives utilized in amortizing the
investment in subscriber accounts with respect to the Company's electronic
security services segment. Although the Company believes its estimates are
appropriate, changes in assumptions utilized in preparing such estimates
could cause these estimates to change in the near term.
The accompanying 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; United Waste Service, Inc. ("United")
and Southland Environmental Services, Inc. ("Southland"), with which the
Company merged 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"), with which the Company merged in November 1995; and The Denver
Fire Reporter & Protective Co. and affiliate ("Denver Alarm") and
Incendere, Inc. and affiliates ("Schaubach"), with which the Company merged
in February 1996. These transactions were accounted for under the pooling
of interests method of accounting and, accordingly, the Consolidated
Financial Statements have been restated as if the Company and Kertz,
United, Southland, Duncan, GDS, Fennell, Scott, Denver Alarm and Schaubach
(collectively, the "Pooled Entities") had operated as one entity since
inception. See Note 2 for further discussion of these transactions.
All per share data and number of common shares for all periods included
in the financial statements and notes thereto have been retroactively
adjusted to reflect a two-for-one stock split (the "Stock Split") in the
form of a 100% stock dividend declared in May 1996, as more fully described
in Note 13.
OTHER CURRENT ASSETS. Other current assets consist primarily of
short-term notes receivable and inventories. Inventories consist
principally of equipment parts, compost materials and supplies and are
valued under a method which approximates the lower of cost (first-in,
first-out) or market. At December 31, 1995 and 1994, other current assets
included inventories of $4,482,000 and $4,104,000, 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.
F-8
<PAGE> 54
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
The Company revises the estimated useful lives of property and
equipment acquired through its business acquisitions 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 and direct costs incurred to construct and develop the
site. These costs are depleted based on consumed airspace. No general
and administrative costs are capitalized as landfills and landfill
improvements.
A summary of property and equipment at December 31 is shown below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land, landfills and improvements . . . . . . . . . . $ 92,983 $ 84,864
Vehicles and equipment . . . . . . . . . . . . . . . 157,140 106,881
Buildings and improvements . . . . . . . . . . . . . 24,573 17,127
Furniture and fixtures . . . . . . . . . . . . . . . 9,023 8,128
--------- --------
283,719 217,000
Less accumulated depreciation, amortization
and depletion . . . . . . . . . . . . . . . . . . (88,785) (75,874)
--------- --------
$ 194,934 $141,126
========= ========
</TABLE>
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET. Investment in subscriber
accounts, net consists of capitalized direct labor and material costs
associated with new monitoring contracts installed by the Company's electronic
security services business and the cost of acquired subscriber accounts.
The costs are amortized over periods ranging from eight to twelve
years (based on the historical customer attrition rates) on a straight-line
basis.
INTANGIBLE ASSETS. Intangible assets consist primarily of the cost of
acquired businesses in excess of the fair value of net tangible assets
acquired. The cost in excess of the fair value of net tangible assets is
amortized over the lesser of the estimated life or forty years on a
straight-line basis. Amortization expense related to intangible assets was
$2,328,000, $1,333,000 and $973,000 in 1995, 1994 and 1993, respectively.
The Company continually evaluates 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. The Company uses an estimate of the
related undiscounted net income over the remaining life of the intangible
assets in measuring their recoverability.
DEFERRED REVENUE. Deferred revenue consists primarily of proceeds from
the factoring of electronic security monitoring contracts by one of the
Company's acquired security businesses. The use of factoring was discontinued
by the Company subsequent to the date of acquisition. Revenue is recognized
over the period services are provided.
F-9
<PAGE> 55
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
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. 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. Excluding existing accruals at the end of 1995,
approximately $7,871,000 of such costs are to be expensed over the remaining
lives of these facilities. 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.
The Company periodically reassesses its method and assumptions used to
estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the effects of inflation, changes in operating climates in the
regions in which the Company's facilities are located and the expectations
regarding costs of securing environmental services.
As discussed in Note 7, the Company is involved in litigation and is
subject to ongoing environmental investigations by certain regulatory agencies,
as well as other claims and disputes that could result in additional litigation
which are in the normal course of business.
REVENUE RECOGNITION. The Company recognizes revenue in the period
services are provided or products are sold.
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 2, and other non-cash transactions are
excluded from the Statements of Cash Flows.
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, 1995 and 1994.
In the normal course of business, the Company has letters of credit,
performance bonds and other guarantees which are not reflected in the
accompanying 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 in which the Company's services are provided, as well as their
dispersion across many different geographic areas. As a result, at December
31, 1995, the Company does not consider itself to have any significant
concentrations of credit risk.
FUTURE ACCOUNTING PRONOUNCEMENTS. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which requires adoption in 1996. SFAS
No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed. The Company believes the adoption of SFAS No. 121
will not have a material effect on the Company's financial condition or results
of operations. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based
F-10
<PAGE> 56
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
Compensation", which requires adoption in 1996. SFAS No. 123 requires that the
Company's financial statements include certain disclosures about stock-based
employee compensation arrangements and permits the adoption of a change in
accounting for such arrangements. Changes in accounting for stock-based
compensation are optional and the Company plans to adopt only the disclosure
requirements in 1996.
2. BUSINESS COMBINATIONS
In August 1995, the Company merged with Kertz, which provides
electronic security monitoring and maintenance predominantly in the South
Florida area. In October 1995, the Company merged with United and Southland.
United provides solid waste collection, transfer and recycling services in the
Atlanta, Georgia metropolitan area, and Southland provides solid waste
collection services in the Northeast Florida area. In November 1995, the
Company merged with Duncan, GDS, Fennell and Scott. Duncan provides solid
waste collection and recycling services in the Dallas-Fort Worth metropolitan
area and throughout west Texas and also operates two landfills. GDS provides
solid waste collection and recycling services throughout western North
Carolina. Fennell is a full-service solid waste management company, providing
services in and around Charleston and Greenville, South Carolina and also owns
a landfill. Scott is an electronic security alarm company, providing
installation, 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. In February 1996, the Company merged with Denver Alarm and
Schaubach. Denver Alarm is an electronic security alarm company providing
installation, monitoring and maintenance services throughout Colorado.
Schaubach 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. The Company issued an
aggregate of 42,084,872 shares of the Company's common stock, $.01 par value
per share, ("Common Stock") for the acquisitions of the Pooled Entities. These
acquisitions were accounted for under the pooling of interests method of
accounting and, accordingly, the accompanying Consolidated Financial Statements
have been restated as if the Company and the Pooled Entities had operated as
one entity since inception.
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>
Year Ended December 31,
---------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
The Company . . . . . . . . . . . . . . . . . . $ 87,167 $ 48,766 $ 41,095
Pooled Entities . . . . . . . . . . . . . . . . 207,998 169,407 141,400
--------- --------- ---------
$ 295,165 $ 218,173 $ 182,495
========= ========= =========
Net income (loss) :
The Company . . . . . . . . . . . . . . . . . . $ 8,794 $ 11,187 $ (18,484)
Pooled Entities . . . . . . . . . . . . . . . . 14,287 8,346 3,574
--------- --------- ---------
$ 23,081 $ 19,533 $ (14,910)
========= ========= =========
</TABLE>
In August 1995, the Company acquired all of the outstanding shares of
capital 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 16,000,000 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 from January 1, 1993 to December 31, 1995, have been
accounted for under the purchase method of accounting.
F-11
<PAGE> 57
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
The Company's unaudited pro forma consolidated results of operations
for the years ended December 31, assuming the acquisition of HMC had occurred
at the beginning of each of the periods presented are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . $ 328,366 $ 266,176
========== ==========
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . $ 40,914 $ 25,712
========== ==========
Net income from continuing operations . . . . . . . . $ 24,226 $ 19,059
========== ==========
Fully diluted earnings per common and common
equivalent share from continuing operations . . . . $ 0.17 $ 0.17
========== ==========
Weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . 146,780 112,920
========== ==========
</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, 1994.
The preliminary purchase price allocation for the HMC acquisition was
as follows:
<TABLE>
<S> <C>
Property and equipment . . . . . . . . . . . . . . . $ 16,910
Intangible assets . . . . . . . . . . . . . . . . . . 71,110
Working capital deficiency . . . . . . . . . . . . . (6,602)
Long-term debt assumed . . . . . . . . . . . . . . . (8,618)
---------
Common stock issued . . . . . . . . . . . . . . . . . $ 72,800
=========
</TABLE>
F-12
<PAGE> 58
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
In March 1996, the Company acquired substantially all of the assets of
Mid-American Waste Systems of Georgia, Inc. and affiliates ("Mid-American
Georgia") for a purchase price of approximately $52,000,000. At closing, the
Company issued an aggregate of 3,400,000 shares of Common Stock valued at
approximately $46,750,000 and will settle the remaining balance (after taking
into account closing adjustments) within 180 days using additional Common Stock
or cash. Mid-American Georgia owns and operates a landfill, provides solid
waste collection and recycling services to commercial, residential and
industrial customers, and operates two transfer stations, in certain areas of
the greater metropolitan Atlanta, Georgia area. The acquisition of
Mid-American Georgia will be accounted for under the purchase method of
accounting.
On May 8, 1996, after approval by a special committee of disinterested
members of the Company's Board of Directors, the Company entered into a
definitive agreement which provides for the acquisition of AutoNation
Incorporated ("AutoNation"). In connection with the execution of the definitive
agreement, the parties also entered into a loan agreement whereby the Company
will provide a line of credit to AutoNation until consummation of the
acquisition of AutoNation by the Company. AutoNation is a privately-owned
corporation developing a chain of megastores for the sale of
reconditioned-to-be-like-new vehicles in a customer friendly environment and is
partially owned by H. Wayne Huizenga, the Company's Chairman and Chief
Executive Officer, and certain other officers and directors of the Company. The
proposed transaction is subject to final approval by the shareholders of
Republic, and other customary closing conditions, including regulatory
approvals. It is contemplated that the Company will issue 17,467,248 shares of
its Common Stock in connection with the transaction.
On May 20, 1996, the Company announced its intention to acquire
Continental Waste Industries, Inc. ("Continental") in a merger transaction.
Under the terms of the proposed transaction, each share of common stock of
Continental would be exchanged, on a tax-free basis, for 4/5ths of a share of
Common Stock (after giving effect to the Stock Split). The proposed
transaction, which will be accounted for as a pooling of interests, is subject
to the execution of a definitive agreement, approval of Continental's
stockholders, approval by the Boards of Directors of Continental and the
Company, and other customary closing conditions, including regulatory approval.
Continental's three largest stockholders, representing approximately 25% of
Continental's outstanding common stock have agreed to vote their shares in
favor of the transaction, which is expected to close during the third quarter
of 1996.
3. LONG-TERM DEBT AND NOTES PAYABLE
In connection with the equity investment and private placement
transactions, as discussed in Note 5, the Company received approximately
$232,000,000 in cash, a portion of which was used to repay a portion of the
Company's outstanding borrowings.
Long-term debt and notes payable consisted of the following at
December 31:
<TABLE>
<CAPTION> 1995 1994
--------- ---------
<S> <C> <C>
Revolving credit facility, secured by the stock of the
Company's subsidiaries, interest at prime or
at a Eurodollar rate plus 1.5%, principal
repaid in 1995 . . . . . . . . . . . . . . . . . . . $ - $ 12,600
Notes to banks and financial institutions, secured by
equipment and other assets, interest ranging
from 7.2% to 13.0%, principal
due in 1996 - 2001 . . . . . . . . . . . . . . . . . 4,590 31,937
Other notes, secured by equipment and other assets,
interest ranging from 8.3% to 9.0% . . . . . . . . . 1,288 7,376
--------- ---------
$ 5,878 $ 51,913
Less current maturities . . . . . . . . . . . . . . . (2,087) (11,210)
--------- ---------
$ 3,791 $ 40,703
========= =========
</TABLE>
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. At December 31, 1995, the Company had standby letters of
credit of $5,386,000 which reduce availability under this facility. The Credit
Agreement requires, among other items, that the Company maintain certain
financial ratios and comply with certain financial
F-13
<PAGE> 59
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
covenants. Interest is payable monthly and generally determined using either a
competitive bid feature or a LIBOR based rate. As of December 31, 1995, the
Company was in compliance with all covenants under the Credit Agreement.
At December 31, 1995, aggregate maturities of long-term debt were as
follows:
<TABLE>
<S> <C>
1996.......................................... $2,087
1997.......................................... 1,193
1998.......................................... 1,001
1999.......................................... 726
2000.......................................... 735
Thereafter.................................... 136
------
$5,878
======
</TABLE>
The Company made interest payments of approximately $5,894,000,
$4,373,000 and $2,688,000 in 1995, 1994 and 1993, respectively.
4. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue 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.
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 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 for the years ended December 31 are shown below:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 9,778 $ 5,270 $ 2,815
State . . . . . . . . . . . . . . . . . . . . 1,038 751 405
-------- ------- -------
10,816 6,021 3,220
Federal deferred . . . . . . . . . . . . . . . . 6,187 2,482 (1,969)
Tax reserve adjustments . . . . . . . . . . . . (837) (1,963) -
Change in valuation allowance . . . . . . . . . - (1,242) 1,242
-------- ------- -------
Income tax provision . . . . . . . . . . . . . . $ 16,166 $ 5,298 $ 2,493
======== ======= =======
</TABLE>
Net operating loss 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.
F-14
<PAGE> 60
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
A reconciliation of the statutory federal income tax rate to the
Company's effective tax rate for the years ended December 31 is shown below:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate . . . . . . . 35.0% 34.0% 34.0%
Amortization of goodwill . . . . . . . . . . . 1.2 .4 3.6
State income taxes, net of federal benefit . . 2.5 3.0 14.4
Tax reserve adjustments . . . . . . . . . . . . (2.1) (8.9) -
Change in valuation allowance . . . . . . . . . - (5.1) 47.3
Other, net . . . . . . . . . . . . . . . . . . 4.3 .5 16.0
---- ---- -----
Effective tax rate . . . . . . . . . . . . . 40.9% 23.9% 115.3%
==== ==== =====
</TABLE>
Components of the net deferred income tax liability at December 31
are shown below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred income tax liabilities:
Book basis in property over tax basis . . . . . . . . . $25,507 $23,773
Deferred costs . . . . . . . . . . . . . . . . . . . . 8,067 8,954
------- -------
33,574 32,727
------- -------
Deferred income tax assets:
Net operating losses . . . . . . . . . . . . . . . . . (3,837) (5,186)
Deferred revenue . . . . . . . . . . . . . . . . . . . (10,353) (11,240)
Accrued environmental and landfill costs . . . . . . . (2,842) (2,761)
Accruals not currently deductible . . . . . . . . . . . (1,496) (1,943)
------- -------
(18,528) (21,130)
------- -------
Valuation allowance . . . . . . . . . . . . . . . . . . . . - -
------- -------
Net deferred income tax liability . . . . . . . . . . . . . $15,046 $11,597
======= =======
</TABLE>
At December 31, 1995, the Company had available federal net operating
loss carryforwards of approximately $11,000,000 which begin to expire in the
year 2006.
The Company made income tax payments of approximately $4,839,000,
$2,278,000 and $1,260,000 in 1995, 1994 and 1993, respectively.
5. STOCKHOLDERS' EQUITY
In August 1995, the Company sold an aggregate of 16,700,000 shares of
Common Stock and warrants to purchase an additional 33,400,000 shares of Common
Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (a Bermuda corporation
controlled by Michael G. DeGroote, former Chairman of the Board, President and
Chief Executive Officer of Republic), Harris W. Hudson, and certain of their
assigns for an aggregate purchase price of $37,500,000. Mr. Huizenga is the
Chairman of the Board and Chief Executive Officer of the Company; Mr. DeGroote
is the Vice Chairman of the Board of the Company and Mr. Hudson is President
and a Director of the Company. The warrants are exercisable at prices ranging
from $2.25 to $3.50 per share. In August 1995, the Company issued and sold an
additional 2,000,000 shares of Common Stock each to Mr. Huizenga and John J.
Melk (a Director of the Company) for $6.63 per share for aggregate proceeds
of approximately $26,500,000.
In July 1995, the Company sold 10,800,000 shares of Common Stock in a
private placement transaction for $6.63 per share, resulting in net proceeds
of approximately $69,000,000 after deducting expenses, fees and commissions.
In
F-15
<PAGE> 61
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
September 1995, the Company sold 10,000,000 shares of Common Stock in an
additional private placement transaction for $10.13 per share resulting in net
proceeds of approximately $99,000,000.
As a result of the transactions discussed above, the Company received
approximately $232,000,000 in cash proceeds. The Company used a portion of
these proceeds to repay all outstanding borrowings under its revolving line of
credit facility and a portion of the debt of the Pooled Entities.
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.
6. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans under which shares of
Common Stock may be granted to key employees and directors of the Company.
Options granted under the plans are non-qualified and are granted at a price
equal to the fair market value of the Common Stock at the date of grant.
A summary of stock option and warrant transactions for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C>
Options and warrants outstanding
at beginning of year . . . . . . . . 6,786 6,394 14,854
Granted . . . . . . . . . . . . . . . . . 44,874 752 2,034
Exercised . . . . . . . . . . . . . . . . (2,804) - -
Canceled . . . . . . . . . . . . . . . . (322) (360) (664)
Expired . . . . . . . . . . . . . . . . . - - (9,830)
------- ------ -------
Options and warrants outstanding at
end of year . . . . . . . . . . . . . 48,534 6,786 6,394
======= ====== =======
Average price of options and warrants
exercised . . . . . . . . . . . . . . $ 4.02 $ - $ -
Average price of options and warrants
outstanding at end of year . . . . . $ 4.77 $ 3.80 $ 3.99
Prices of options and warrants $ 1.25 to $ 1.25 to $ 1.25 to
outstanding at end of year . . . . . $ 15.50 $ 7.25 $ 7.25
Vested options and warrants at end of
year . . . . . . . . . . . . . . . . 39,038 3,656 2,800
Options available for future grants at
end of year . . . . . . . . . . . . . 4,344 5,698 5,690
</TABLE>
7. 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 the Company 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 favorable to the Company which
F-16
<PAGE> 62
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
GI appealed. In March 1995, the United States Court of Appeals
for the Ninth Circuit vacated the August 1993 decision and remanded the case
for further proceedings. The Court has commenced proceedings that may lead to
a trial on damages.
Subsequent to the commencement of the Company's litigation in this
matter, 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 it is owed from GI, plus interest and costs.
Western Waste Industries, Inc. ("Western") filed an action against the
Company and others on July 20, 1990 alleging 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 was scheduled for trial in May 1996, but by stipulation of the parties the
trial date has been postponed pending the outcome of settlement discussions.
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.
The Company is currently conducting active discussions with all
appropriate California regulatory agencies in order to obtain a variance under
California regulations to reclassify the Filters as a special waste so they
may 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 closed. In the event that the variance is not granted,
remedial measures may be required 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) if so, 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,
F-17
<PAGE> 63
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
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 in
this mattter has been stayed until November 1996, at which time the Company
expects to be able to quantify more accurately the level of damages it has
suffered. The Company believes it will prevail, but no amounts have been
accrued for any recovery of damages.
While the results of the legal and environmental 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 results of operations or consolidated financial
position. However, unfavorable resolution of each matter individually or in
the aggregate could affect the consolidated results of operations for the
quarterly periods in which they are resolved.
LEASE COMMITMENTS. The Company and its subsidiaries lease portions of
their premises and certain equipment under various operating lease agreements.
At December 31, 1995, total minimum rental commitments becoming payable under
all operating leases are as follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 1,940
1997 . . . . . . . . . . . . . . . . . . . . . . . $ 1,285
1998 . . . . . . . . . . . . . . . . . . . . . . . $ 733
1999 . . . . . . . . . . . . . . . . . . . . . . . $ 401
2000 . . . . . . . . . . . . . . . . . . . . . . . $ 119
Thereafter . . . . . . . . . . . . . . . . . . . . $ 94
</TABLE>
Total rental expense incurred under operating leases was $4,344,000, $3,672,000
and $2,688,000 in 1995, 1994 and 1993, respectively.
8. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are 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 years 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.
F-18
<PAGE> 64
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
The computations of weighted average common and common equivalent
shares used in the calculation of primary and fully diluted earnings per share
for the years ended December 31 are presented below:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Primary:
Common shares outstanding . . . . . . . . . . . . . . 157,942 96,458 96,782
Common equivalent shares . . . . . . . . . . . . . . . 53,104 164 320
Weighted average treasury shares purchased . . . . . . (14,202) 298 -
Effect of using weighted average common and common
equivalent shares outstanding . . . . . . . . . . (66,300) - -
------- ------ ------
130,544 96,920 97,102
======= ====== ======
Fully diluted:
Common shares outstanding . . . . . . . . . . . . . . 157,942 96,458 96,782
Common equivalent shares . . . . . . . . . . . . . . . 53,104 164 320
Weighted average treasury shares purchased . . . . . . (7,646) 298 -
Effect of using weighted average common and common
equivalent shares outstanding. . . . . . . . . . . (66,000) - -
------- ------ ------
137,400 96,920 97,102
======= ====== ======
</TABLE>
9. DISCONTINUED OPERATIONS
In 1994, the Company announced the contemplation of a plan to spin-off
RESI, its hazardous waste services segment. This segment of the Company's
business has been accounted for as a discontinued operation and, accordingly,
the Company restated its Consolidated Financial Statements presented prior to
that date to report separately the operating results of these discontinued
operations. In April 1995, Republic stockholders received one share of common
stock of RESI for every ten 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 Republic stockholders (the "Distribution"). Revenue
of the discontinued operations of RESI was $12,148,000, $46,599,000 and
$61,617,000 in 1995, 1994 and 1993, respectively. The net income (loss) of the
discontinued operations of RESI was ($293,000), $2,684,000 and ($14,579,000)
in 1995, 1994 and 1993, respectively.
In connection with the Distribution, the Company entered into a
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 RESI's
indebtedness and to provide working capital to RESI. Additionally, the Company
reclassified approximately $36,300,000 to retained earnings from additional
paid-in capital 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 $23,600,000.
10. RESTRUCTURING AND UNUSUAL CHARGES
In the fourth quarter of 1993, the Company recorded restructuring and
unusual charges of $10,040,000 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
F-19
<PAGE> 65
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
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.
11. OPERATIONS BY INDUSTRY SEGMENT
The Company is a diversified services company which primarily provides
integrated solid waste disposal, collection and recycling services to public
and private sector customers through residential, commercial and industrial
service. The Company also is engaged in the electronic security services
business, which consists of the sale, installation and maintenance of
electronic security systems for commercial and residential use as well as the
continuous electronic monitoring of installed security systems.
The following tables present financial information regarding the
Company's different industry segments for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Solid waste services . . . . . . . . . . . . . $ 245,339 $ 176,260 $ 146,107
Electronic security services . . . . . . . . . 49,826 41,913 36,388
--------- --------- ---------
$ 295,165 $ 218,173 $ 182,495
========= ========= =========
Operating income:
Solid waste services . . . . . . . . . . . . . $ 31,687 $ 23,201 $ 4,224
Electronic security services . . . . . . . . . 8,255 2,352 114
--------- --------- ---------
$ 39,942 $ 25,553 $ 4,338
========= ========= =========
Depreciation, depletion and amortization:
Solid waste services . . . . . . . . . . . . . $ 17,727 $ 15,414 $ 13,238
Electronic security services . . . . . . . . . 4,946 4,111 2,353
--------- --------- ---------
$ 22,673 $ 19,525 $ 15,591
========= ========= =========
Capital expenditures and investment in subscriber accounts:
Solid waste services . . . . . . . . . . . . . $ 51,436 $ 22,620 $ 12,243
Electronic security services . . . . . . . . . 17,459 18,275 10,643
--------- --------- ---------
$ 68,895 $ 40,895 $ 22,886
========= ========= =========
Assets:
Solid waste services . . . . . . . . . . . . . $ 514,220 $ 202,468 $ 179,837
Electronic security services . . . . . . . . . 43,834 34,447 20,678
Net assets of discontinued operations . . . . . - 20,292 16,872
--------- --------- ---------
$ 558,054 $ 257,207 $ 217,387
========= ========= =========
</TABLE>
F-20
<PAGE> 66
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) - CONTINUED
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is an analysis of certain items in the
Consolidated Statements of Operations by quarter for 1995 and 1994.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue 1995 $ 63,094 $ 69,531 $ 78,054 $ 84,486
1994 $ 50,131 $ 54,088 $ 56,070 $ 57,884
Gross profit 1995 $ 22,183 $ 24,211 $ 24,133 $ 32,425
1994 $ 17,066 $ 17,593 $ 19,723 $ 20,416
Income from continuing 1995 $ 3,780 $ 4,088 $ 5,076 $ 10,430
operations 1994 $ 2,878 $ 4,261 $ 5,097 $ 4,613
Net income 1995 $ 4,288 $ 4,088 $ 5,076 $ 9,629
1994 $ 2,732 $ 5,088 $ 6,085 $ 5,628
Earnings per share from 1995 $ 0.04 $ 0.04 $ 0.03 $ 0.05
continuing operations 1994 $ 0.03 $ 0.04 $ 0.05 $ 0.05
</TABLE>
13. SUBSEQUENT EVENTS
On May 10, 1996, the Board of Directors declared a two-for-one split of
the Company's Common Stock in the form of a 100% stock dividend, payable June
8, 1996, to holders of record on May 28, 1996. As a result, $790,000 (par
value of the shares outstanding at December 31, 1995) has been transferred
from additional paid-in capital to common stock.
The Company's Certificate of Incorporation has been amended to increase
the number of authorized shares of Common Stock from 350,000,000 shares to
500,000,000 shares following approval by shareholders at the Company's annual
meeting which took place on May 10, 1996.
On May 20, 1996, the Company sold 9,878,400 shares of Common Stock in a
private placement transaction for $20.25 per share resulting in net proceeds of
approximately $197,500,000 after deducting fees and commissions.
F-21
<PAGE> 67
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(Restated)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................................................................. $137,747 $161,248
Accounts receivable, less allowance for doubtful accounts............................................. 47,510 37,789
Prepaid expenses...................................................................................... 5,453 3,429
Other current assets.................................................................................. 10,491 11,805
-------- --------
TOTAL CURRENT ASSETS.............................................................................. 201,201 214,271
Property and equipment, net........................................................................... 229,365 194,934
Investment in subscriber accounts, net................................................................ 50,000 42,240
Intangible assets, net................................................................................ 149,725 100,736
Other assets.......................................................................................... 6,083 5,873
-------- --------
TOTAL ASSETS...................................................................................... $636,374 $558,054
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable...................................................................................... $ 18,218 $ 17,255
Accrued liabilities................................................................................... 29,592 22,008
Current portion of deferred revenue................................................................... 26,327 25,555
Current maturities of long-term debt and notes payable................................................ -- 2,087
Current portion of accrued environmental and
landfill costs....................................................................................... 2,950 2,925
Income taxes payable.................................................................................. 5,960 3,625
-------- --------
TOTAL CURRENT LIABILITIES......................................................................... 83,047 73,455
Long-term debt, net of current maturities............................................................. -- 3,791
Deferred revenue, net of current portion.............................................................. 16,093 18,012
Accrued environmental and landfill costs, net of
current portion...................................................................................... 8,203 8,386
Deferred income taxes................................................................................. 19,904 15,046
Other liabilities..................................................................................... 4,946 2,976
-------- --------
TOTAL LIABILITIES................................................................................. 132,193 121,666
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; none issued............................................................................. -- --
Common stock, par value $.01 per share; 350,000,000
shares authorized; 166,448,412 and 157,941,870
issued, respectively................................................................................ 1,664 1,579
Additional paid-in capital............................................................................ 464,368 402,983
Retained earnings..................................................................................... 38,149 31,826
-------- --------
TOTAL STOCKHOLDERS' EQUITY........................................................................ 504,181 436,388
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................................ $636,374 $558,054
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-22
<PAGE> 68
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
---- ----
(Restated)
<S> <C> <C>
Revenue................................................................................................... $99,637 $63,094
Expenses:
Cost of operations...................................................................................... 65,035 40,911
Selling, general and administrative..................................................................... 18,255 15,015
------- -------
Operating income.......................................................................................... 16,347 7,168
Interest and other income............................................................................... 2,361 430
Interest expense........................................................................................ (602) (1,288)
------- -------
Income from continuing operations
before income taxes..................................................................................... 18,106 6,310
Income tax provision...................................................................................... 6,885 2,530
------- -------
Income from continuing operations......................................................................... 11,221 3,780
Income from discontinued operations, net
of income tax provision of $0 and $298,
respectively............................................................................................ -- 508
------- -------
Net income................................................................................................ $11,221 $ 4,288
======= =======
Fully diluted earnings per common and common
equivalent share:
Continuing operations................................................................................. $ 0.06 $ 0.04
Discontinued operations............................................................................... -- --
------- -------
Net income............................................................................................ $ 0.06 $ 0.04
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-23
<PAGE> 69
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------- -------- --------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 (RESTATED)............................................................ $1,579 $402,983 $31,826
Exercise of stock options and warrants........................................................... 14 4,275 --
Distributions to former owners of acquired
companies....................................................................................... -- -- (2,626)
Stock issued in acquisitions..................................................................... 53 53,003 --
Effect of immaterial poolings.................................................................... 18 2,071 (2,381)
Other............................................................................................ -- 2,036 109
Net income....................................................................................... -- -- 11,221
------ -------- -------
BALANCE AT MARCH 31, 1996.......................................................................... $1,664 $464,368 $38,149
====== ======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-24
<PAGE> 70
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
---- ----
(Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations...................................................................... $11,221 $ 3,780
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Depreciation, depletion and amortization........................................................... 6,701 4,299
Gain on the sale of property and equipment......................................................... (214) (122)
Changes in assets and liabilities, net of effects from
business combinations:
Accounts receivable................................................................................ (4,750) 166
Prepaid expenses and other assets.................................................................. 145 (1,603)
Accounts payable and accrued liabilities........................................................... (5,268) 2,781
Deferred and current income taxes payable.......................................................... 8,070 2,509
Deferred revenue and other liabilities............................................................. (1,399) (3,968)
------- -------
Net cash provided by continuing operations..................................................... 14,506 7,842
------- -------
CASH USED IN DISCONTINUED OPERATIONS..................................................................... -- (263)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in business combinations................................................................. (2,197) (2,622)
Purchases of property and equipment.................................................................... (14,329) (9,326)
Investment in subscriber accounts...................................................................... (6,033) (3,604)
Proceeds from the sale of property and equipment....................................................... 506 312
------- -------
Net cash used in investing activities.......................................................... (22,053) (15,240)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and warrants................................................................. 4,289 --
Distributions to former owners of acquired companies................................................... (2,626) (1,952)
Purchases of treasury stock............................................................................ -- (140)
Payments of long-term debt and notes payable........................................................... (20,066) (4,324)
Proceeds from long-term debt and notes payable......................................................... 2,449 8,768
Proceeds from financing arrangements................................................................... -- 5,172
------- -------
Net cash provided by (used in) financing activities............................................ (15,954) 7,524
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS................................................................... (23,501) (137)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD.................................................................................... 161,248 11,485
-------- -------
END OF PERIOD.......................................................................................... $137,747 $11,348
======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-25
<PAGE> 71
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(000's omitted in all tables except per share amounts)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
include the accounts of Republic Industries, Inc. and its wholly-owned
subsidiaries (the "Company") and have been prepared by the Company without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. All significant intercompany accounts and transactions have been
eliminated. Certain information related to the Company's organization,
significant accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited condensed
consolidated financial statements reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and the results of operations for the
periods presented and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim periods are
not necessarily indicative of the results that can be expected for a full year.
These interim financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto contained in the
Company's most recent Annual Report on Form 10-K and the restated consolidated
financial statements and notes thereto contained elsewhere in this Registration
Statement.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements in order to conform with the financial statement
presentation of the current period.
The accompanying financial statements also include the financial
position and results of operations of Incendere, Inc. and certain waste
companies (collectively, "Schaubach") controlled by Dwight C. Schaubach, and
Denver Burglar Alarm and affiliate ("Denver Alarm") (together, the "Pooled
Entities"), with which the Company merged in February 1996. These business
combinations have been accounted for under the pooling of interests method of
accounting and, accordingly, these financial statements and notes thereto have
been restated as if the companies had operated as one entity since inception.
See Note 2 for a further discussion of business combinations.
In April 1995, the Company spun-off its hazardous waste services
segment, Republic Environmental Systems, Inc. ("RESI"), to the Company's
stockholders. Accordingly, this segment has been accounted for as a
discontinued operation in the accompanying unaudited condensed consolidated
statements of operations to report separately the operating results of RESI
prior to the distribution date. Revenue of the discontinued operations of RESI
for the three months ended March 31, 1995 was $12,148,000.
All per share data and number of common shares for all periods
included in the financial statements and notes thereto have been retroactively
adjusted to reflect a two-for-one stock split (the "Stock Split") in the form
of a 100% stock dividend that was declared in May 1996 as more fully described
in Note 9.
2. BUSINESS COMBINATIONS
Significant businesses acquired through March 31, 1996 and accounted
for under the pooling of interests method of accounting have been included
retroactively in the financial statements as if the companies had operated as
one entity since inception. Businesses acquired through March 31, 1996 and
accounted for under the purchase method of accounting are included in the
financial statements from the date of acquisition.
On May 8, 1996, after approval by a special committee of disinterested
members of the Company's Board of Directors, the Company entered into a
definitive agreement which provides for the acquisition of AutoNation
Incorporated ("AutoNation"). In connection with the execution of the definitive
agreement, the parties also entered into a loan agreement whereby the Company
will provide a line of credit to AutoNation until consummation of the
acquisition of AutoNation by the Company. AutoNation is a privately-owned
corporation developing a chain of megastores for the sale of
reconditioned-to-be-like-new vehicles in a customer friendly environment and is
partially owned by H. Wayne Huizenga, the Company's Chairman and Chief
Executive Officer, and certain other officers and directors of the Company.
The proposed transaction is subject to final approval by the shareholders of
Republic, and other customary closing conditions, including regulatory
approvals. It is contemplated that the Company will issue 17,467,248 shares of
its common stock, $.01 par value per share ("Common Stock"), in connection with
the transaction.
On May 20, 1996, the Company announced its intention to acquire
Continental Waste Industries, Inc. ("Continental") in a merger transaction.
Under the terms of the proposed transaction, each share of common stock of
Continental would be exchanged, on a tax-free basis, for 4/5ths of a share of
Common Stock (after giving effect to the Stock Split). The proposed
transaction, which will be accounted for as a pooling of interests, is subject
to the execution of a definitive agreement, approval of Continental's
stockholders, approval by the Boards of Directors of Continental and the
Company, and other customary closing conditions, including regulatory approval.
Continental's three largest stockholders, representing approximately 25% of
Continental's outstanding common stock have agreed to vote their shares in
favor of the transaction, which is expected to close during the third quarter
of 1996.
In March 1996, the Company acquired substantially all of the assets of
Mid-American Waste Systems of Georgia, Inc. and affiliates ("Mid-American
Georgia") for a purchase price of approximately $52,000,000. At closing, the
Company issued an aggregate of 3,400,000 shares of Common Stock valued at
approximately $46,750,000 and will settle the remaining balance within 180 days
using additional Common Stock or cash. Mid-American Georgia owns and operates
a landfill, provides solid waste collection and recycling services to
commercial, residential and industrial customers, and operates two transfer
stations, in certain areas of the greater metropolitan Atlanta, Georgia area.
The acquisition of Mid-American Georgia has been accounted for under the
purchase method of accounting.
F-26
<PAGE> 72
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In February 1996, the Company acquired all of the outstanding capital
stock of Denver Alarm. Denver Alarm is the oldest independent electronic
security alarm company in the United States and provides installation,
monitoring and maintenance services to approximately 27,000 residential and
commercial accounts throughout Colorado.
In February 1996, the Company acquired Schaubach. Schaubach provides
solid waste collection and recycling services to more than 11,000 residential,
commercial, and industrial customers in southeastern Virginia and eastern North
Carolina and provides transportation of medical waste throughout the
Mid-Atlantic states for more than 7,000 customers.
The Company issued an aggregate of 5,828,904 shares of Common Stock to
acquire Schaubach and Denver Alarm, both of which have been accounted for as
pooling of interests business combinations.
Details of the results of operations of the previously separate
companies for the periods before the pooling of interests combinations were
consummated are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
------ ------
<S> <C> <C>
Revenue:
The Company.................................... $90,421 $54,481
Pooled Entities................................ 9,216 8,613
------- -------
$99,637 $63,094
======= =======
Net income (loss):
The Company.................................... $10,015 $ 4,302
Pooled Entities................................ 1,206 (14)
------- -------
$11,221 $ 4,288
======= =======
</TABLE>
During the three months ended March 31, 1996, the Company also acquired
21 other businesses in the solid waste, electronic security and out-of-home
advertising industries which were not significant in the aggregate. In
connection with these acquisitions, the Company issued an aggregate of
1,937,752 shares of Common Stock for 18 acquisitions accounted for under the
purchase method of accounting and 1,804,390 shares of Common Stock for 3
acquisitions accounted for under the pooling of interests method of accounting.
These acquisitions accounted for under the pooling of interests method of
accounting were not significant in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
The following summarizes the preliminary purchase price allocation for
business combinations (including historical accounts of insignificant
acquisitions accounted for under the pooling of interests method of accounting)
consummated during the three months ended March 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Property and equipment................................................................... $ 22,534 $ 444
Intangible assets........................................................................ 49,530 2,298
Investment in subscriber accounts........................................................ 3,282 --
Working capital (deficiency), net of cash acquired....................................... (7,990) 380
Long-term debt assumed................................................................... (11,739) (500)
Other liabilities, net................................................................... (656) --
Effect of immaterial poolings............................................................ 292 --
Common stock issued...................................................................... (53,056) --
-------- ------
Cash used in acquisitions.............................................................. $ 2,197 $2,622
======== ======
</TABLE>
F-27
<PAGE> 73
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 1995, the Company acquired all of the outstanding shares of
common stock of Hudson Management Corporation and Envirocycle, Inc.
(collectively, "HMC"), each of which was owned by Harris W. Hudson, President
of the Company. The purchase price paid by the Company was approximately
$72,800,000 and consisted of 16,000,000 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 has been accounted for under the purchase method
of accounting and, accordingly, is included in the Company's 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 January 1, 1995
is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
------------------
<S> <C>
Revenue.................................................................. $77,183
=======
Income from continuing operations before
income taxes........................................................... $ 8,025
=======
Net income............................................................... $ 4,843
=======
Fully diluted earnings per common and common
equivalent share....................................................... $ 0.04
=======
</TABLE>
3. PROPERTY AND EQUIPMENT
A summary of property and equipment is shown below:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Land, landfills and improvements................................................. $ 99,018 $ 92,983
Vehicles and equipment........................................................... 191,712 157,140
Buildings and improvements....................................................... 25,978 24,573
Furniture and fixtures........................................................... 10,326 9,023
-------- --------
327,034 283,719
Less accumulated depreciation and
depletion....................................................................... (97,669) (88,785)
-------- --------
$229,365 $194,934
======== ========
</TABLE>
4. INVESTMENT IN SUBSCRIBER ACCOUNTS
Investment in subscriber accounts consists of capitalized direct labor
and material costs associated with new monitoring contracts installed by the
Company's electronic security services business and the cost of acquired
subscriber accounts. The costs are amortized over periods ranging from eight
to twelve years (based on historical customer attrition rates) on a
straight-line basis.
Accumulated amortization of investment in subscriber accounts at March
31, 1996 and December 31, 1995 was $13,001,000 and $11,446,000, respectively.
F-28
<PAGE> 74
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INTANGIBLE ASSETS
Intangible assets consist primarily of the cost of acquired businesses
in excess of the fair value of net tangible assets acquired. The cost in
excess of the fair value of net tangible assets is amortized over the lesser of
the estimated life or forty years on a straight-line basis.
Accumulated amortization of intangible assets at March 31, 1996 and
December 31, 1995 was $8,667,000 and $7,788,000, respectively.
6. INCOME TAXES
Income taxes have been provided for based upon the Company's
anticipated annual effective income tax rate.
7. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans under which shares of Common
Stock may be granted to key employees and directors of the Company. Options
granted under the plans are non-qualified and are granted at a price equal to
the fair market value of the Common Stock at the date of grant.
A summary of stock option and warrant transactions for the three months
ended March 31, 1996 is as follows:
<TABLE>
<S> <C>
Options and warrants outstanding at beginning of year.................... 48,534
Granted.................................................................. 508
Exercised................................................................ (1,364)
Canceled................................................................. (2)
------
Options and warrants outstanding at March 31, 1996....................... 47,676
======
Average price of options and warrants exercised.......................... $3.41
Prices of options and warrants outstanding at March 31, 1996............. $1.25 to $18.06
Average price of options and warrants outstanding
at March 31, 1996...................................................... $4.92
Vested options and warrants at March 31, 1996............................ 37,814
Options available for future grants at March 31, 1996.................... 3,836
</TABLE>
8. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are 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.
F-29
<PAGE> 75
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The computation of weighted average common and common equivalent shares
used in the calculation of fully diluted earnings per share, which is
substantially the same as the computation used to calculate primary earnings
per share, is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Common shares outstanding............................................... 166,448 96,378
Common equivalent shares................................................ 48,928 260
Weighted average treasury shares
purchased............................................................. (16,474) 28
Effect of using weighted average
common and common equivalent
shares outstanding.................................................... (5,740) --
------- ------
193,162 96,666
======= ======
</TABLE>
9. SUBSEQUENT EVENTS
On May 10, 1996, the Board of Directors declared a two-for-one split of
the Company's Common Stock in the form of a 100% stock dividend, payable June
8, 1996, to holders of record on May 28, 1996. As a result, $832,000 (par
value of the shares outstanding at March 31, 1996) has been transferred from
additional paid-in capital to common stock.
The Company's Certificate of Incorporation has been amended to increase
the number of authorized shares of Common Stock from 350,000,000 shares to
500,000,000 shares following approval by shareholders at the Company's annual
meeting which took place on May 10, 1996.
On May 20, 1996, the Company sold 9,878,400 shares of Common Stock in a
private placement transaction for $20.25 per share resulting in net proceeds of
approximately $197,500,000 million after deducting fees and commissions.
F-30
<PAGE> 76
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Boards of Directors of
Hudson Management Corporation
and Envirocycle, Inc.:
We have audited the accompanying combined balance sheets of Hudson
Management Corporation and subsidiaries and Envirocycle, Inc. (a Florida
corporation and a Florida S-corporation, respectively, affiliated through common
ownership) as of September 30, 1994 and 1993, and the related combined
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1994. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hudson Management
Corporation and subsidiaries and Envirocycle, Inc. as of September 30, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1994 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 1, 1995 (except with respect to the
matter discussed in Note 10,
as to which the date is
August 3, 1995).
F-31
<PAGE> 77
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, -------------------
1995 1994 1993
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.................................................... $ 630 $ 538 $ 2,007
Accounts receivable, less allowance for doubtful
accounts of $510 (unaudited), $330 and $220,
respectively......................................... 5,765 5,371 4,400
Prepaid expenses and other.............................. 1,353 1,179 634
Deferred income taxes................................... 864 845 911
----------- ------- -------
Total current assets............................ 8,612 7,933 7,952
PROPERTY AND EQUIPMENT, net............................... 18,589 14,088 11,405
INTANGIBLE ASSETS, net.................................... 2,679 2,557 2,669
OTHER ASSETS.............................................. 51 58 50
----------- ------- -------
Total assets.................................... $29,931 $24,636 $22,076
=========== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................ $ 2,725 $ 2,556 $ 2,170
Current portion of long-term debt....................... 3,596 2,736 3,263
Deferred revenue and other credits...................... 2,316 1,930 1,702
Accrued liabilities..................................... 4,294 3,243 3,291
Customer deposits....................................... 135 145 135
----------- ------- -------
Total current liabilities....................... 13,066 10,610 10,561
DEFERRED INCOME TAXES..................................... 1,320 1,471 1,369
LONG-TERM DEBT, less current portion...................... 8,937 7,022 4,570
----------- ------- -------
Total liabilities............................... 23,323 19,103 16,500
----------- ------- -------
COMMITMENTS AND CONTINGENCIES
(Notes 5, 6, 7 and 10)
STOCKHOLDERS' EQUITY:
Capital stock........................................... -- -- --
Additional paid-in capital.............................. 73 73 73
Retained earnings....................................... 6,535 5,460 5,503
----------- ------- -------
Total stockholders' equity...................... 6,608 5,533 5,576
----------- ------- -------
Total liabilities and stockholders' equity...... $29,931 $24,636 $22,076
=========== ======= =======
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-32
<PAGE> 78
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED SEPTEMBER 30,
----------------- ---------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE.......................................... $41,439 $34,055 $48,003 $45,582 $38,788
OPERATING EXPENSES:
Cost of operations............................. 29,957 24,154 35,048 32,025 27,738
Selling, general and administrative............ 7,328 7,377 9,444 8,573 8,305
INTEREST EXPENSE................................. 474 329 505 552 737
------- ------- ------- ------- -------
37,759 31,860 44,997 41,150 36,780
------- ------- ------- ------- -------
Income before income taxes............. 3,680 2,195 3,006 4,432 2,008
INCOME TAX PROVISION............................. 455 254 377 901 874
------- ------- ------- ------- -------
Net income............................. 3,225 1,941 2,629 3,531 1,134
UNAUDITED PRO FORMA ADJUSTMENT TO REFLECT INCOME
TAXES FOR ENVIROCYCLE, INC. (Note 1)........... 1,014 608 892 952 54
------- ------- ------- ------- -------
Unaudited pro forma net income (Note
1)................................... $ 2,211 $ 1,333 $ 1,737 $ 2,579 $ 1,080
======= ======= ======= ======= =======
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-33
<PAGE> 79
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
CAPITAL PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------- ---------- --------
<S> <C> <C> <C>
BALANCE, September 30, 1991................................ $ -- $ 73 $ 1,893
Net income............................................... -- -- 1,134
Stockholder distributions................................ -- -- (220)
------- --- --------
BALANCE, September 30, 1992................................ -- 73 2,807
Net income............................................... -- -- 3,531
Stockholder distributions................................ -- -- (835)
------- --- --------
BALANCE, September 30, 1993................................ -- 73 5,503
Net income............................................... -- -- 2,629
Stockholder distributions................................ -- -- (2,672)
------- --- --------
BALANCE, September 30, 1994................................ $ -- $ 73 $ 5,460
====== ========= ========
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-34
<PAGE> 80
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS FOR THE YEARS
ENDED JUNE 30, ENDED SEPTEMBER 30,
----------------- ---------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 3,225 $ 1,941 $ 2,629 $ 3,531 $ 1,134
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization............... 2,013 1,950 2,614 2,495 2,642
Deferred income tax provision (benefit)..... (170) 134 168 (156) 115
Gain on disposition of property and
equipment................................. (8) -- (82) (2) --
Changes in assets and liabilities --
(Increase) decrease in:
Accounts receivable.................... (686) (583) (971) (488) (563)
Prepaid expenses and other............. (180) (1,282) (545) (15) (11)
Other assets........................... 7 (3) (8) 42 58
Increase (decrease) in:
Accounts payable....................... 542 (250) 386 (447) 930
Deferred revenue and other credits..... 446 185 228 59 529
Accrued liabilities.................... 1,025 960 (48) 44 867
Customer deposits...................... (7) 4 10 2 2
------- ------- ------- ------- -------
Total adjustments...................... 2,982 1,115 1,752 1,534 4,569
------- ------- ------- ------- -------
Net cash provided by operating
activities........................... 6,207 3,056 4,381 5,065 5,703
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the disposition of
property and equipment...................... $ 6 $ 294 $ 327 $ 35 $ --
Purchases of property and equipment............ (6,502) (4,625) (5,380) (2,759) (4,303)
Purchases of intangible assets................. (201) (50) (50) -- (11)
------- ------- ------- ------- -------
Net cash used in investing
activities........................... (6,697) (4,381) (5,103) (2,724) (4,314)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt............................. 5,386 5,917 6,441 2,396 3,261
Principal repayments on debt................... (2,626) (4,353) (4,516) (4,262) (3,216)
Stockholder distributions...................... (2,922) (1,230) (2,672) (835) (220)
------- ------- ------- ------- -------
Net cash used in financing
activities........................... (162) 334 (747) (2,701) (175)
------- ------- ------- ------- -------
EFFECT OF ENVIROCYCLE, INC. CHANGE IN CASH FOR
THE PERIOD OCTOBER 1 - DECEMBER 31 (Note 1).... 744 (109) -- -- --
------- ------- ------- ------- -------
Net increase (decrease) in cash........ 92 (1,100) (1,469) (360) 1,214
CASH, beginning of period........................ 538 2,007 2,007 2,367 1,153
------- ------- ------- ------- -------
CASH, end of period.............................. $ 630 $ 907 $ 538 $ 2,007 $ 2,367
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF
CASH PAID FOR:
Interest....................................... $ 575 $ 420 $ 591 $ 658 $ 804
Income taxes................................... $ 58 $ 404 $ 730 $ 948 $ 824
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-35
<PAGE> 81
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE JUNE 30, 1995 AND
1994 PERIODS IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination --
The combined financial statements include the accounts of Hudson Management
Corporation and its wholly-owned subsidiaries and Envirocycle, Inc. (together,
the "Companies"), which are affiliated through common ownership. All material
intercompany transactions between Hudson Management Corporation, its
subsidiaries and Envirocycle, Inc. have been eliminated.
The accounts of Envirocycle, Inc. have been combined on the basis of a
calendar year and include the years ended December 31, 1994 and 1993 and the
period from commencement of operations (March 23, 1992) through December 31,
1992. For comparative purposes, the unaudited combined statements of income and
cash flows for the nine month periods ended June 30, 1995 and 1994 include the
accounts of Envirocycle, Inc. for the periods from October 1 through June 30.
In the opinion of management, the unaudited combined financial statements
contain all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the combined financial position of the Companies at
June 30, 1995, and the combined results of their operations and cash flows for
the nine months ended June 30, 1995 and 1994.
Revenue Recognition --
Collection services may be billed up to four months in advance. Revenue on
such advance billings is deferred until services are performed. Such amounts are
included in deferred revenue and other credits in the accompanying combined
balance sheets.
Property and Equipment --
The Companies provide for depreciation using the straight-line method over
the following estimated useful lives:
<TABLE>
<S> <C>
Vehicles...................................................... 5-7 years
Containers and compactors..................................... 10 years
Equipment..................................................... 5-7 years
Leasehold improvements........................................ 5-7 years
Buildings..................................................... 31.5-40 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
years ended September 30, 1994, 1993 and 1992 was $2,452,000, $2,216,000 and
$2,039,000, respectively.
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
franchise service areas obtained as part of businesses acquired, and noncompete
agreements obtained from former owners and management of businesses acquired.
F-36
<PAGE> 82
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Intangible assets are amortized using the straight-line method over their
estimated useful lives and are comprised of the following as of September 30,
1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
USEFUL LIVES 1994 1993
------------ ------ ------
<S> <C> <C> <C>
Goodwill............................................ 40 years $2,585 $2,585
Franchise agreements................................ 4-16 years 666 674
Customer lists...................................... 5 years 10 10
Noncompete agreements............................... 5-15 years 51 311
------ ------
3,312 3,580
Less accumulated amortization....................... (755) (911)
------ ------
$2,557 $2,669
====== ======
</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. The Companies use an estimate of the related
undiscounted net income over the remaining life of intangible assets in
measuring whether the intangible assets are recoverable.
Amortization expense for intangible assets was $162,000, $279,000 and
$603,000 in 1994, 1993 and 1992, respectively.
Accrued Liabilities --
The Companies accrue estimated insurance claims for the self-funded portion
of their workers' compensation and health insurance plans. At September 30, 1994
and 1993, insurance claim reserves of $2,101,000 and $2,199,000, respectively,
were included in accrued liabilities.
Income Taxes --
Hudson Management Corporation accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Accordingly, deferred income taxes have been provided for the
effect of temporary differences between the income tax bases of assets and
liabilities and their reported amounts in the combined financial statements.
For the nine months ended June 30, 1995 and 1994, income taxes have been
provided based upon Hudson Management Corporation's anticipated effective annual
income tax rate.
Envirocycle, Inc. has elected S-corporation status for income tax reporting
purposes since its inception in 1992. Therefore, since that date, 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 Envirocycle, Inc.
Upon closing of the merger transactions described in Note 10, Envirocycle,
Inc. will no longer be eligible for S-corporation status. At that time, deferred
income taxes will be recorded in accordance with SFAS No. 109 and an adjustment
to record Envirocycle, Inc. retained earnings as a capital contribution will be
recorded. Although the ultimate amount is not presently determinable, if
deferred taxes were recorded at June 30, 1995, retained earnings would be
decreased by approximately $46,000 (unaudited). In addition, $1,453,000
(unaudited) of retained earnings at June 30, 1995 would have been reclassified
to additional paid-in capital.
F-37
<PAGE> 83
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The unaudited pro forma effect of converting Envirocycle, Inc. from
S-corporation status is as follows (in thousands):
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- --------
<S> <C> <C> <C>
BALANCE, June 30, 1995 (unaudited)................ $ -- $ 73 $ 6,535
Recording of deferred tax liability............... -- -- (46)
Reclassification of retained earnings to
additional paid-in capital...................... -- 1,453 (1,453)
------ ---------- --------
$ -- $1,526 $ 5,036
======== ========= ========
</TABLE>
The unaudited pro forma adjustment to reflect income taxes for Envirocycle,
Inc. included in the accompanying combined statements of income is for
informational purposes only. Income taxes have been provided at an estimated
effective tax rate of 40%.
Environmental Costs --
The Companies are subject to environmental laws and regulations that have
been enacted in response to technological advances and increased concern over
environmental issues. These regulations are administered by the Environmental
Protection Agency and various other federal, state and local environmental,
transportation, health and safety agencies. The Companies have not incurred any
material environmental costs nor experienced any significant regulatory problems
in the past and believe that they are in substantial compliance with all
applicable rules and regulations. Future environmental liabilities, if any,
would be recorded in the period in which they become probable and can be
reasonably estimated.
Concentrations of Credit Risk --
The Companies provide solid waste collection and recycling services to
commercial, industrial and residential customers located in the State of Florida
primarily through franchise agreements with municipalities. Depending on the
terms of the franchise agreements, the Companies either bill services to the
municipality or directly to the customer. Deposits are generally received from
residential customers billed directly by the Companies. As of September 30, 1994
and 1993, approximately 33% and 44% of outstanding accounts receivable,
respectively, were due directly from municipalities while the remainder was due
directly from individual customers. The Companies continually evaluate the
collectibility of accounts receivable and maintain allowances for potential
credit losses. Overall, the Companies believe their credit exposure is minimal
given the creditworthiness of municipal customers and the wide dispersion of
non-municipal bill customers.
Additionally, the Companies provide services to a major municipality
customer which comprised 25%, 23% and 26% of combined revenues in 1994, 1993 and
1992, respectively.
F-38
<PAGE> 84
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(2) PROPERTY AND EQUIPMENT:
A summary of property and equipment is shown below (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Land................................................... $ 505 $ 510
Vehicles............................................... 13,328 12,337
Containers and compactors.............................. 8,495 7,006
Equipment.............................................. 1,546 1,189
Leasehold improvements................................. 1,109 938
Buildings.............................................. 1,268 1,183
-------- --------
26,251 23,163
Less accumulated depreciation and amortization......... (12,163) (11,758)
-------- --------
$ 14,088 $ 11,405
======== ========
</TABLE>
(3) LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks, interest adjusts based on fluctuations
in the banks' prime lending rate (7.75% at September 30,
1994), due 1994-2000, collateralized by substantially all
property and equipment and other assets, publicly traded
common stock owned by the Companies' stockholders and the
personal guarantee of a stockholder.......................... $ 7,642 $ 6,813
Mortgage note payable monthly at $3,350 principal plus interest
at 10% through January 1999, at which time the remaining
principal balance is due. This note is collateralized by the
Company's real property with a net book value of
approximately $1,161,000 and $1,091,000 as of September 30,
1994 and 1993, respectively.................................. 566 606
Note payable to stockholder, unsecured, interest only at 9%
payable semi-annually, principal balance due December 1997... 1,154 --
Note payable to stockholder, unsecured, payable at $1,478 per
month principal plus interest at the prime lending rate
(7.75% at September 30, 1994) through February 1997, at which
time the remaining principal balance is due.................. 216 234
Other notes payable............................................ 180 180
------- -------
9,758 7,833
Less current portion of long-term debt......................... (2,736) (3,263)
------- -------
$ 7,022 $ 4,570
======= =======
</TABLE>
The Companies had a $2.0 million working capital line of credit with a bank
which expired February 28, 1995. Borrowings under the line of credit were
immediately converted to term notes payable. At September 30, 1994, the
Companies had approximately $380,000 available under the line of credit. Upon
expiration of
F-39
<PAGE> 85
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the line of credit on February 28, 1995, the Companies obtained a $1.5 million
line of credit expiring February 28, 1996.
The following are estimated aggregate future debt principal payments as of
September 30, 1994 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
------------------------------------------------------------------
<S> <C>
1995............................................................ $2,736
1996............................................................ 1,936
1997............................................................ 2,102
1998............................................................ 2,197
1999............................................................ 787
------
$9,758
======
</TABLE>
(4) RELATED PARTY TRANSACTIONS:
The Companies lease various office and garage space and land from a
stockholder. The operating leases expire at various dates through September 1998
and provide for monthly rentals of approximately $30,000 with a provision for a
rental increase each year based on the consumer price index.
During the years presented, there were funds advanced to and received from
a stockholder. At September 30, 1994 and 1993, there were notes payable to such
stockholder totaling $1,370,000 and $234,000, respectively (see Note 3).
Hudson Management Corporation has utilized the personal guarantee and
certain assets of a stockholder as well as certain assets of a person related to
the Companies' stockholders as additional collateral on a significant portion of
their debt (see Notes 3 and 10).
(5) LEASES:
In addition to the related party leases discussed above, the Companies
lease corporate office space at a base rental amount of $4,300 per month through
September 1995. Also, the Companies must pay their share of the operating
expenses for the building which were estimated to be $1,300 per month through
September 1995. Subsequent to September 30, 1994, this lease was renewed (and
additional space was obtained) for a base rental amount of $4,700 per month
through January 2000, plus a share of building operating expenses estimated to
be $2,900 per month. Total rent expense for the years ended September 30, 1994,
1993 and 1992 was approximately $482,000, $384,000 and $372,000, respectively
(including related party leases of approximately $350,000, $317,000 and
$304,000, respectively).
F-40
<PAGE> 86
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The approximate future minimum lease payments (including related party
leases and the lease renewal described above) are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
------------------------------------------------------------------
<S> <C>
1995............................................................ $ 436
1996............................................................ 304
1997............................................................ 304
1998............................................................ 304
1999............................................................ 91
Thereafter...................................................... 30
------
$1,469
======
</TABLE>
(6) INCOME TAXES:
The components of the income tax provision are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1994 1993 1992
---- ------ ----
<S> <C> <C> <C>
Current:
Federal................................................... $182 $ 945 $677
State..................................................... 27 112 82
---- ------ ----
209 1,057 759
---- ------ ----
Deferred:
Federal................................................... 143 (139) 14
State..................................................... 25 (17) 101
---- ------ ----
168 (156) 115
---- ------ ----
$377 $ 901 $874
==== ====== ====
</TABLE>
A reconciliation of the statutory federal income tax rate to the Companies'
actual and pro forma effective tax rates as reported in the accompanying
combined statements of income is shown below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
ACTUAL PRO FORMA (UNAUDITED)
--------------------------- -------------------------
1994 1993 1992 1994 1993 1992
------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax
rate......................... 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%
Amortization of goodwill....... 0.8 0.6 1.0 0.8 0.6 1.0
State income taxes, net of
federal benefit.............. 1.1 1.4 6.0 4.1 3.5 6.1
Nondeductible expenses......... 2.0 1.4 3.0 2.0 1.4 3.0
Envirocycle, Inc. earnings
(S-corporation).............. (25.2) (18.3) (2.3) -- -- --
Other, net..................... (0.2) 1.2 1.8 1.3 2.3 2.1
------ ------ ----- ----- ----- -----
Effective tax rate........... 12.5% 20.3% 43.5% 42.2% 41.8% 46.2%
====== ====== ===== ===== ===== =====
</TABLE>
F-41
<PAGE> 87
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In 1993, Hudson Management Corporation adopted SFAS No. 109 with no
material impact. 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 bases of assets and
liabilities.
Components of the net deferred income tax liability are shown below (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1993
------- -------
<S> <C> <C>
Deferred income tax liability:
Book basis in property over tax basis.................. $(1,471) $(1,369)
------- -------
Deferred income tax assets:
Non-deductible self insurance reserves................. 779 816
Non-deductible allowance for doubtful accounts......... 57 83
Other, net............................................. 9 12
------- -------
845 911
------- -------
Net deferred income tax liability...................... $ (626) $ (458)
======= =======
</TABLE>
Prepaid expenses and other as of September 30, 1994 include current income
taxes receivable totaling approximately $464,000.
The Companies' federal income tax returns for 1993 are currently under
examination by the Internal Revenue Service. In the opinion of the Companies'
management, the outcome of such examination will not have a material impact on
the combined financial position and results of operations of the Companies.
(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
September 2002 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 $65 per employee each
month to a third party administrator. This payment is used to purchase stop loss
insurance, group life insurance, and pay the fees of the third party
administrator, who processes all claims. The Companies are then responsible for
paying all claims up to the stop loss limits which are $30,000 per year per
individual or an aggregate amount equal to a maximum premium amount per
employee, per year. The Companies have accrued their estimate of the claims
liability under the plan which management believes is adequate to cover claims
incurred as of September 30, 1994 and 1993.
The Companies participate in a workers' compensation employers' self
insurance plan. The Companies' maximum liability under the self insurance plan
is limited to a percentage of the standard premium, as defined. Reserves are
estimated for both reported and unreported claims using industry loss
development factors. Revisions to estimated reserves are recorded in the period
in which they become known. The estimated workers' compensation reserves as of
September 30, 1994 and 1993 totaling $2,071,000 and $2,169,000, respectively,
represent management's best estimate, and in the opinion of the Companies'
management, any future adjustments to estimated reserves will not have a
material impact on the combined financial statements.
F-42
<PAGE> 88
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES
AND ENVIROCYCLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
At September 30, 1994, the Companies had a $2.0 million letter of credit
line with a bank of which $1.0 million has been used to guarantee the payment of
claims under the Companies' workers' compensation self insurance plan.
In the normal course of business, the Companies have 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 $5.3 million at September 30, 1994. 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.
(8) 401(K) SAVINGS PLAN:
Employees of the Companies may participate in a Section 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.
Effective January 1, 1995, the Companies elected to provide an employer matching
contribution of 10% of each employee's contribution for fiscal 1995. The
Companies made no matching contribution to the plan in 1994, 1993 or 1992.
(9) STOCKHOLDERS' EQUITY:
Capital stock consists of the following authorized, issued and outstanding
shares as of September 30, 1994 and 1993:
<TABLE>
<CAPTION>
SHARES SHARES ISSUED PAR
AUTHORIZED AND OUTSTANDING VALUE AMOUNT
---------- --------------- ----- ------
<S> <C> <C> <C> <C>
Hudson Management Corporation..... 500 200 $ 1 $200
Envirocycle, Inc.................. 1,000 100 1 100
------
$300
=======
</TABLE>
(10) SUBSEQUENT EVENT:
On May 21, 1995, the Companies entered into merger agreements with Republic
Industries, Inc. ("Republic") whereby Republic would acquire all of the
outstanding capital stock of the Companies for eight million shares of Republic
common stock. The merger agreements were consummated on August 3, 1995 upon
approval by Republic's stockholders and regulatory agencies and completion of
other customary closing conditions.
F-43
<PAGE> 89
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENT
REPUBLIC INDUSTRIES, INC., AND SUBSIDIARIES AND
HUDSON MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
The following Unaudited Condensed Consolidated Pro Forma Financial
Statement includes the consolidated financial statements of Republic
Industries, Inc. and subsidiaries (the "Company") which include the results of
operations of the Denver Fire Reporter & Protective Co. and Affiliate ("Denver
Alarm") 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
consolidated financial statements have been restated as if the Company, Denver
Alarm and Incendere had operated as one entity since inception.
The following Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the year ended December 31, 1995, presents 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 period presented. The
statement of operations also contains pro forma 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 period presented. This unaudited pro forma condensed
consolidated financial statement should be read in conjunction with the
respective historical consolidated financial statements and notes thereto of
the Company and HMC.
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. In
computing the unaudited pro forma income from continuing operations per
common and common equivalent share, the Company utilizes the modified treasury
stock method.
The Unaudited Condensed Consolidated Pro Forma Financial Statement was
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 statement reflects 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.
F-44
<PAGE> 90
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, 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............................ $295,165 $33,201 $328,366 $ 328,366
Expenses:
Cost of operations............... 192,213 21,772 213,985 $1,004(a) $ 289(b) 214,700
Selling, general and
administrative................ 63,010 9,298 72,308 447(c) 71,861
Other (income) expense:
Interest and other income........ (5,715) -- (5,715) (5,715)
Interest expense................. 6,117 489 6,606 6,606(d) --
-------- ------- -------- ------ ------ ---------
255,625 31,559 287,184 1,004 7,342 280,846
-------- ------- -------- ------ ------ ---------
Income from continuing operations
before income taxes.............. 39,540 1,642 41,182 1,004 7,342 47,520
Income tax provision............... 16,166 657 16,823 2,376(e) 19,199
-------- ------- -------- ------ ------ ---------
Income from continuing
operations....................... $ 23,374 $ 985 $ 24,359 $3,380 $7,342 $ 28,321
======== ======= ======== ====== ====== ========
Primary:
Earnings per share from
continuing operations......... $ 0.18 $ 0.17
======== ========
Weighted average common and
common equivalent shares
outstanding................... 130,544 164,020
======== ========
Fully Diluted:
Earnings per share from
continuing operations......... $ 0.17 $ 0.16
======== ========
Weighted average common and
common equivalent shares
outstanding................... 137,400 175,312
======== ========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-45
<PAGE> 91
REPUBLIC INDUSTRIES, INC., AND SUBSIDIARIES AND HUDSON
MANAGEMENT CORPORATION AND SUBSIDIARIES AND ENVIROCYCLE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENT
(a) Represents a net adjustment related to the elimination of the historical
amortization of intangible assets and the recording of amortization, on a
straight-line basis, on the intangible assets resulting from the preliminary
purchase price allocation of 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.
F-46
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by the
Registrant in connection with the filing of this Post-Effective Amendment No. 3
to this Registration Statement. All of such expenses are estimates.
<TABLE>
<S> <C>
Printing and Engraving Expenses.................................................... $30,000
Legal Fees and Expenses............................................................ 20,000
Accounting Fees and Expenses....................................................... 30,000
Blue Sky Fees and Expenses......................................................... 1,000
-------
Total.................................................................... $81,000
=======
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
All transactions listed below involved the issuance of shares of Common
Stock and other securities of the Company prior to the commencement of the
offering of shares of Common Stock described in the foregoing Prospectus. All
share and per share data has been retroactively adjusted to reflect the Stock
Split. Unless otherwise indicated, all securities were issued by the Company in
reliance upon Section 4(2) of the Securities Act of 1933, as amended.
On May 20, 1996, the Company issued and sold 9,878,400 shares of Common
Stock in a private placement transaction for $20.25 per share resulting in net
proceeds of approximately $197,500,000 after deducting fees and commissions.
On May 16, 1996, in connection with the merger of certain companies doing
business as Rapidway Disposal and Recycling Services ("Rapidway"), the Company
issued 1,529,640 shares of Common Stock to the shareholders of Rapidway in
exchange for all of the issued and outstanding capital stock of Rapidway.
On March 1, 1996, in connection with the merger of A.J. Panzarella and
Co., Inc. ("Panzarella"), the Company issued 332,792 shares of Common Stock to
the sole shareholder of Panzarella in exchange for all of the issued and
outstanding capital stock of Panzarella.
On February 29, 1996, in connection with the merger of Schaubach, the
Company issued 2,565,400 shares of Common Stock to the shareholders of
Schaubach in exchange for all of the issued and outstanding capital stock of
Schaubach.
On February 27, 1996, in connection with the merger of Denver Alarm,
the Company issued 3,263,504 shares of Common Stock to the sole shareholder of
Denver Alarm in exchange for all of the issued and outstanding capital stock of
Denver Alarm.
On January 30, 1996, in connection with the merger of Charleston Disposal
Systems, Inc. and its affiliates ("CDS"), the Company issued 600,000 shares of
Common Stock to the shareholders of CDS in exchange for all of the issued and
outstanding capital stock of CDS.
On November 30, 1995, in connection with the merger of Duncan, the Company
issued 10,512,110 shares of Common Stock to the shareholders of Duncan in
exchange for all of the issued and outstanding capital stock of Duncan.
On November 30, 1995, in connection with the merger of GDS, the Company
issued 6,006,000 shares of Common Stock to the shareholders of GDS in exchange
for all of the issued and outstanding capital stock of GDS.
On November 30, 1995, in connection with the merger of Fennell, the Company
issued 6,222,222 shares of Common Stock to the shareholders of Fennell in
exchange for all of the issued and outstanding capital stock of Fennell.
On November 30, 1995, in connection with the merger of Scott, the Company
issued 3,175,636 shares of Common Stock to the shareholders of Scott in exchange
for all of the issued and outstanding capital stock of Scott.
On October 17, 1995, in connection with the merger of Southland, the
Company issued 5,200,000 shares of Common Stock to the shareholders of Southland
in exchange for all of the issued and outstanding capital stock of Southland.
On October 11, 1995, in connection with the merger of United, the Company
issued 3,000,000 shares of Common Stock to the shareholders of United in
exchange for all of the issued and outstanding capital stock of United.
On October 2, 1995, in connection with the merger of Reliable
Sanitation, Inc., a Florida corporation ("Reliable"), the Company issued
276,900 shares of Common Stock to the sole shareholder of Reliable in exchange
for all of the issued and outstanding capital stock of Reliable.
On September 7, 1995, the Company issued and sold 10,000,000 shares of
Common Stock in a private placement transaction for $10.13 per share resulting
in net proceeds of approximately $99,000,000 after deducting fees and
commissions.
On August 28, 1995, in connection with the merger of Kertz, the Company
issued 2,180,000 shares of Common Stock to the shareholders of Kertz in
exchange for all of the issued and outstanding capital stock of Kertz.
On August 3, 1995, the Company issued and sold an aggregate of 16,700,000
shares of Common Stock and warrants to purchase an additional 33,400,000 shares
of Common Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd (a Bermuda
corporation owned by Michael G. DeGroote), Harris W. Hudson, and certain of
their assignees, for an aggregate purchase price of approximately $37,500,000.
The warrants are exercisable at prices ranging from $2.25 to $3.50 per share. On
August 3, 1995, the Company issued and sold an additional 2,000,000 shares of
Common Stock each to Mr. Huizenga and John J. Melk, for $6.63 per share
resulting in aggregate proceeds of approximately $26,500,000.
On August 3, 1995, in connection with the merger of HMC, the Company issued
16,000,000 shares of Common Stock to the sole shareholder of HMC in exchange
for all of the issued and outstanding capital stock of HMC.
On July 24, 1995, the Company issued and sold 10,800,000 shares of
Common Stock in a private placement transaction for $6.63 per share resulting in
net proceeds of approximately $69,000,000 after deducting fees and commissions.
II-1
<PAGE> 93
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) A list of the exhibits filed as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits.
(b) Financial Statement Schedule
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants on Schedule....................... II-3
Schedule II -- Valuation and Qualifying Accounts and Reserves........................ II-4
</TABLE>
II-2
<PAGE> 94
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholders and Board of Directors of Republic Industries, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Republic Industries, Inc. included in
this Registration Statement and have issued our report thereon dated May 21,
1996. Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in
Item 16(b) hereof is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 21, 1996.
II-3
<PAGE> 95
REPUBLIC INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN THOUSANDS)
=============================================================================
<TABLE>
<CAPTION>
Balance Balance
at Additions Accounts at End
Beginning Charged to Written of
Classifications of Year Income Off Other(1) Year
--------------- -------------- ------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
1995 . . . . . . . . . . $ 1,581 $ 1,505 $ (1,148) $ 621 $ 2,559
1994 . . . . . . . . . . $ 1,555 $ 858 $ (836) $ 4 $ 1,581
1993 . . . . . . . . . . $ 1,382 $ 936 $ (846) $ 83 $ 1,555
</TABLE>
- ---------
(1) Allowance of acquired businesses.
II-4
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Post-Effective Amendment to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Ft.
Lauderdale, State of Florida, on May 21, 1996.
REPUBLIC INDUSTRIES, INC.
By: /s/ H. WAYNE HUIZENGA
------------------------------------
H. Wayne Huizenga
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ------------------
<S> <C> <C>
/s/ H. Wayne Huizenga Chairman of the Board and May 21, 1996
- --------------------------------------------- Chief Executive Officer
H. Wayne Huizenga (Principal Executive
Officer)
/s/ Harris W. Hudson President and Director May 21, 1996
- ---------------------------------------------
Harris W. Hudson
/s/ Gregory K. Fairbanks Executive Vice President and May 21, 1996
- --------------------------------------------- Chief Financial Officer
Gregory K. Fairbanks (Principal Financial
Officer)
/s/ Michael R. Carpenter Vice President and Controller May 21, 1996
- --------------------------------------------- (Principal Accounting
Michael R. Carpenter Officer)
/s/ Michael G. DeGroote Vice Chairman of the Board May 21, 1996
- ---------------------------------------------
Michael G. DeGroote
/s/ J.P. Bryan Director May 21, 1996
- ---------------------------------------------
J.P. Bryan
Director May 21, 1996
- ---------------------------------------------
Rick L. Burdick
/s/ George D. Johnson, Jr. Director May 21, 1996
- ---------------------------------------------
George D. Johnson, Jr.
/s/ John J. Melk Director May 21, 1996
- ---------------------------------------------
John J. Melk
</TABLE>
II-5
<PAGE> 97
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
2.1 Agreement and Plan of Merger and Reorganization, dated May 30, 1991,
by and between Republic Waste Industries, Inc., an Oklahoma
corporation, and Republic Waste Industries, Inc., a Delaware
corporation (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991).
3.1* Second Amended and Restated Certificate of Incorporation of Republic
Industries, Inc.
3.2 Bylaws of Republic Industries, Inc., as amended to date (incorporated
by reference to Exhibit 3.2 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995).
5.1** Opinion of Akerman, Senterfitt & Eidson, P.A. as to the validity of
the Shares.
10.1 Republic Waste Industries, Inc. 1990 Stock Option and Stock Purchase
Plan (incorporated by reference to Exhibit 10.1(a) to the Registrant's
Registration Statement on Form S-1, No. 33-37191).
10.2 Form of Stock Option Agreement (incorporated by reference to Exhibit
10.1(b) to the Registrant's Registration Statement on Form S-1, No.
33-37191).
10.3 Letter Agreement, dated March 18, 1991, by and among MGD Holdings
Ltd., Republic Waste Industries, Inc., Tom J. Fatjo, Jr., Republic
Investors, Ltd., Investors, Inc., Robert Alpert, First Financial
Environmental Investors, Pete Boyas, James D. Lee, Richard K. Reiling,
William M. DeArman, Frank C. Payton, David C. Payton and Richard
Morton. (incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990).
10.4 Warrant to Purchase 1,150,000 Shares of Republic Waste Industries,
Inc. Common Stock issued to MGD Holdings Ltd. (incorporated by
reference to Exhibit 10.18 to the Registrant's Registration Statement
on Form S-1, No. 33-42530).
10.5 Stock Exchange Agreement between Republic Waste Industries, Inc. and
MGD Holdings Ltd. (incorporated by reference to Exhibit 10.22 to the
Registrant's Registration Statement on Form S-1, No. 33-42530).
10.6 Republic Waste Industries, Inc. 1991 Stock Option Plan (incorporated
by reference to Exhibit 10.42 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992).
10.7 Form of Stock Option Agreement (incorporated by reference to Exhibit
10.43 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.8 Form of Warrant to purchase 300,000 shares of Republic Waste
Industries, Inc. Common Stock, issued to Donald E. Koogler
(incorporated by reference to Exhibit 10.54 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992).
10.9 Agreement of Settlement and Mutual Release by and among Republic Waste
Industries, Inc. and Michael G. DeGroote, Donald E. Koogler, Gary W.
DeGroote, Kevin J. Comeau, Rick L. Burdick, Douglas R. Gowland, Lance
R. Ruud, August C. Schultes, III, Mark S. Alsentzer, Gary J. Ziegler,
Eugene J. Kerins, Edward A. Schultes, Richard J. Schultes, Peter
Schultes, Barbara Schultes ITF Elizabeth Schultes (Minor), Barbara
Schultes ITF Deborah Schultes (Minor) and August C. Schultes, IV,
dated as of January 29, 1994 (incorporated by reference to Exhibit
10.46 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993).
II-6
<PAGE> 98
10.10 Form of Warrant to purchase 100,000 shares of Republic Waste
Industries, Inc. Common Stock issued to MGD Holdings Ltd.
(incorporated by reference to Exhibit 10.33 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.11 Form of Warrant to purchase 50,000 shares of Republic Waste
Industries, Inc. Common Stock issued to J.P. Bryan (incorporated by
reference to Exhibit 10.34 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
10.12 Form of Warrant to purchase 50,000 shares of Republic Waste
Industries, Inc. Common Stock issued to Rick L. Burdick (incorporated
by reference to Exhibit 10.35 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.13 Distribution Agreement, dated February 14, 1995, by and between
Republic Waste Industries, Inc. and Republic Environmental Systems,
Inc. (incorporated by reference to Exhibit 10.36 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.14 Stock Purchase Agreement, dated May 21, 1995, by and between H. Wayne
Huizenga and Republic Waste Industries, Inc. (incorporated by
reference to Exhibit (c)(1) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.15 Agreement and Plan of Merger, dated May 21, 1995, by and among
Republic Waste Industries, Inc., Republic Hudson Acquisition
Corporation, Hudson Management Corporation and Harris W. Hudson and
Bonnie J. Hudson (incorporated by reference to Exhibit (c)(2) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.16 Agreement and Plan of Merger, dated May 21, 1995, by and among
Republic Waste Industries, Inc., Republic Hudson Acquisition
Corporation, Envirocycle, Inc. and Harris W. Hudson and Bonnie J.
Hudson (incorporated by reference to Exhibit (c)(3) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.17 Stock Purchase Agreement, dated May 21, 1995, by and between Harris W.
Hudson and Republic Waste Industries, Inc. (incorporated by reference
to Exhibit (c)(4) to the Registrant's Current Report on Form 8-K/A,
dated July 17, 1995).
10.18 Stock Purchase Agreement, dated May 21, 1995, by and between Westbury
(Bermuda) Ltd. and Republic Waste Industries, Inc. (incorporated by
reference to Exhibit (c)(5) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.19 Proxy, dated as of May 21, 1995, by MGD Holdings Ltd., in favor of H.
Wayne Huizenga (incorporated by reference to Exhibit (c)(6) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.20 Stockholder Stock Option Agreement, dated as of May 21, 1995, by MGD
Holdings Ltd., in favor of H. Wayne Huizenga (incorporated by
reference to Exhibit (c)(7) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.21 First Amendment to Stock Purchase Agreement, dated July 17, 1995, by
and between Republic Waste Industries, Inc. and H. Wayne Huizenga
(incorporated by reference to Exhibit (c)(8) to the Registrant's
Current Report on Form 8-K/A, dated July 17, 1995).
10.22 Republic Industries, Inc. 1995 Amended and Restated Employee
Stock Option Plan (incorporated by reference to Appendix B to the
Registrant's Proxy Statement for the 1996 Annual Meeting of
Stockholders).
10.23 Republic Industries, Inc. Amended and Restated 1995 Non-employee
Director Stock Option Plan (incorporated by reference to Exhibit B to
the Registrant's Information Statement dated November 8, 1995).
II-7
<PAGE> 99
10.24 Merger Agreement, dated August 24, 1995, by and among Republic Waste
Industries, Inc., RS Mergersub, Inc., Southland Environmental
Services, Inc., Felix A. Crawford, Individually and as Trustee of the
Felix A. Crawford Revocable Living Trust, and CFP, Ltd. (incorporated
by reference to Exhibit (c)(1) to the Registrant's Current Report on
Form 8-K, dated August 24, 1995).
10.25 Merger Agreement, dated as of August 24, 1995, by and among Republic
Waste Industries, Inc., RKSA, Inc., RKSA II, Inc., Kertz Security
Systems, Inc., Kertz Security System II, Inc., Leon W. Brauser,
Michael Brauser, Robert Brauser and Joel Brauser (incorporated by
reference to Exhibit (c)(2.1) to the Registrant's Current Report on
Form 8-K, dated August 28, 1995).
10.26 First Amendment to Merger Agreement, dated as of October 17, 1995, to
the Merger Agreement, dated August 24, 1995, by and among Republic
Waste Industries, Inc., RS Mergersub, Inc., Southland Environmental
Services, Inc., Felix A. Crawford, Individually and as Trustee of the
Felix A. Crawford Revocable Living Trust, and CFP, Ltd. (incorporated
by reference to Exhibit 2.2 to the Registrant's Current Report on Form
8-K, dated October 17, 1995).
10.27 Merger Agreement, dated as of October 31, 1995, by and among Republic
Waste Industries, Inc., RWI/GDS Mergersub, Inc., Garbage Disposal
Service, Inc., Lee G. Brown and Mina Brown McLean (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on Form
8-K, dated October 31, 1995).
10.28 Merger Agreement, dated as of November 11, 1995, by and among
Republic Waste Industries, Inc., RWI/JCD Inc., RWI/Grand Inc.,
RWI/Trashaway Inc., RWI/Tos-It Inc., RWI/WestTex Inc., RWI Pantego I
Inc., RWI/Pantego II Inc., J.C. Duncan Company, Inc., Arlington
Disposal Company, Inc., Grand Prairie Disposal Company, Inc.,
Trashaway Services, Inc., Tos-It Service Company, Inc., Wes Tex Waste
Services, Inc., Pantego Service Company, Pantego I, Inc., Pantego II,
Inc., E & E Truck Leasing, Ltd., EETL I, Inc., EETL II, Inc., Robert
C. Duncan, Janette T. Duncan, Dan R. Duncan, Debra A. Duncan, DeeDee
Duncan Elliot, George Martin Duncan, Melinda Duncan Vince and Robert
C. Duncan as Trustee of the Robert C. Duncan Annuity Trusts Nos. One,
Two, Three and Four (incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K, dated October 31, 1995).
10.29 Merger Agreement, dated as of November 13, 1995, by and among Republic
Waste Industries, Inc., RI/FCC Mergersub, Inc., RI/FWS Mergersub,
Inc., RI/FV Mergersub, Inc., RI/PD Mergersub, Inc., RI Investment Co.,
Inc., Fennell Waste Systems, Inc., Fennell Container Co., Inc.,
Fenn-Vac, Inc., Pepperhill Development Co., Inc., GF/WWF, Inc., George
W. Fennell, Robert N. Shepard, G. Scott Fennell, S. Allison Fennell,
Debra A. Haschker, James R. Bland, John H. Chapman, Jeffrey A.
Forslund and Leo J. Zolnierowicz (incorporated by reference to Exhibit
2.3 to the Registrant's Current Report on Form 8-K, dated October 31,
1995).
10.30 Merger Agreement, dated as of February 15, 1996, by and among Republic
Industries, Inc., RI/DFRP, Inc., RI/GS Merger Corp., The Denver
Fire Reporter & Protective Co., Guardian Security Services, Inc., and
John Stewart Jackson (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated February 14, 1996).
10.31 Reorganization Agreement, dated as of February 14, 1996, by and among
Republic Industries, Inc., RI/Area, Inc., RI/Smith, Inc., Incendere,
Inc., Area Container Services, Inc., Smithton Sanitation Service,
Inc., Dwight C. Schaubach, James D. Schaubach, Emmett K. Moore, Charles
F. Moore and R.D. Cuthrell (incorporated by reference to Exhibit 2.2
to the Registrant's Current Report on Form 8-K, dated February 14,
1996).
10.32 Credit Facilities and Reimbursement Agreement, dated December 19,
1995, by and among Republic Industries, Inc., as Borrower, NationsBank
of Florida, National Association, The First National Bank of Boston,
The Bank of Nova Scotia, The First National Bank of Chicago, SunTrust
Bank, South Florida, National Association, United States National Bank
of Oregon, ABN AMRO Bank, N.V., The Bank of New York, Barnett Bank of
Broward County, N.A., Credit Lyonnais New York Branch, Credit Lyonnais
Cayman Island Branch, and LTCB Trust
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<PAGE> 100
Company, as Lenders and NationsBank of Florida, National Association,
as Agent and The First National Bank of Boston, as Co-Agent
(incorporated by reference to Exhibit 10.32 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995).
10.33 Merger Agreement, dated as of May 8, 1996, by and among Republic
Industries, Inc., RI/ANI Merger Corp., AutoNation Incorporated, H.
Wayne Huizenga, Steven R. Berrard and JM Family Enterprises, Inc.
(incorporated by reference to Exhibit 99.1 to the Registrant's Current
Report on Form 8-K, dated May 8, 1996).
10.34 Loan Agreement, dated May 8, 1996, by and between AutoNation
Incorporated and Republic Industries, Inc. (incorporated by reference
to Exhibit 99.2 to the Registrant's Current Report on Form 8-K, dated
May 8, 1996).
21.1 Subsidiaries of Republic Industries, Inc. as of March 26, 1996
(incorporated by reference to Exhibit 21.1 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995).
23.1* Consent of Independent Certified Public Accountants.
23.2 Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1 above).
- -------------
* Filed herewith.
** Previously filed.
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EXHIBIT 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REPUBLIC INDUSTRIES, INC.
Republic Industries, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify as
follows:
(a) The name of the Corporation is Republic Industries, Inc. and the
original Certificate of Incorporation of the Corporation was originally filed
with the office of the Secretary of State of the State of Delaware on May 30,
1991, under the name Republic Waste Industries, Inc.
(b) This Second Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware (the "Act") and restates,
integrates and amends the provisions of the Certificate of Incorporation, as
amended to date, of the Corporation.
(c) The text of the Certificate of Incorporation of the Corporation, as
heretofore amended or supplemented, is hereby amended and restated to read in
its entirety as follows:
FIRST: The name of the Corporation is:
Republic Industries, Inc.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the businesses or purposes to be conducted or promoted
is:
To conduct any lawful business, to exercise any lawful purpose and
power, and to engage in any lawful act or activity for which corporations
may be organized under the Act or by any other law of Delaware or by this
Certificate of Incorporation together with any powers incidental thereto,
so far as such powers and privileges are necessary or convenient to the
conduct, promotion or attainment of the businesses or purposes of the
Corporation.
FOURTH: The total number of shares of all classes of stock which this
Corporation shall have authority to issue is 505,000,000 shares, consisting of
500,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000
shares of Preferred Stock, par value $0.01 per share. The aggregate par value of
all the shares of all classes of stock which this Corporation has the authority
to issue is $5,050,000.
A. COMMON STOCK. The shares of Common Stock shall have no preemptive or
preferential rights of subscription concerning further issuance or authorization
of any securities of the Corporation. Each share of Common Stock shall entitle
the holder thereof to one vote, in person or by proxy. The holders of the Common
Stock shall be entitled to receive dividends if, as and when declared by the
Board of Directors. The Common Stock may be issued from time to time in one or
more series and shall have such other relative, participant, optional or special
rights, qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions providing for the issuance of
such Common Stock from time to time adopted by the Board of Directors pursuant
to authority so to adopt which is hereby vested in the Board of Directors.
B. PREFERRED STOCK. The Preferred Stock may be issued from time to time in one
or more series and (a) may have such voting powers, full or limited, or may be
without voting powers; (b) may be subject to redemption at such time or times
and at such prices; (c) may be entitled to receive dividends (which may be
cumulative or noncumulative) at such rate or rates, on such conditions, and at
such times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or series of stock;
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(d) may have such rights upon the dissolution of, or upon any distribution of
the assets of, the Corporation; (e) may be made convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation, at such
price or prices or at such rates of exchange, and with such adjustments; and (f)
shall have such other relative, participating, optional or special rights,
qualifications, limitations or restrictions thereof, as shall hereafter be
stated and expressed in the resolution or resolutions providing for the issuance
of such Preferred Stock from time to time adopted by the Board of Directors
pursuant to authority so to do which is hereby vested in the Board of Directors.
At any time and from time to time when authorized by resolution of the
Board of Directors and without any action by its stockholders, the Corporation
may issue or sell any shares of its stock of any class or series, whether out of
the unissued shares thereof authorized by the Certificate of Incorporation, as
amended, or out of shares of its stock acquired by it after the issue thereof,
and whether or not the shares thereof so issued or sold shall confer upon the
holders thereof the right to exchange or convert such shares for or into other
shares of stock of the Corporation of any class or classes or any series
thereof. When similarly authorized, but without any action by its stockholders,
the Corporation may issue or grant rights, warrants or options, in bearer or
registered or such other form as the Board of Directors may determine, for the
purchase of shares of the stock of any class or series of the Corporation within
such period of time, or without limit as to time, of such aggregate number of
shares, and at such price per share, as the Board of Directors may determine.
Such rights, warrants or options may be issued or granted separately or in
connection with the issue of any bonds, debentures, notes, obligations or other
evidences of indebtedness or shares of the stock of any class or series of the
Corporation and for such consideration and on such terms and conditions as the
Board of Directors, in its sole discretion, may determine. In each case, the
consideration to be received by the Corporation for any such shares so issued or
sold shall be fixed from time to time by the Board of Directors.
FIFTH: Except as may otherwise be provided in this Certificate or in the
Bylaws of the Corporation, as the same may be amended from time to time, the
Board of Directors shall have all powers and authority which may be granted to a
board of directors of a corporation under the Act, including but not limited to
the following:
(a) to adopt, amend or repeal the Bylaws of the Corporation;
(b) to authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation;
(c) to set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created;
(d) to designate one or more committees;
(e) to sell, lease or exchange all or substantially all of the
property and assets of the Corporation, including its good will and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or property
including shares of stock in, and/or other securities of, any other
corporation or corporations, as the Board of Directors shall deem expedient
and for the best interest of the Corporation, when and as authorized by the
shareholders entitled to vote thereon;
(f) to provide indemnification for directors, officers, employees,
and/or agents of the Corporation to the fullest extent permitted by law,
subject however, to the rules against limitation on liability of directors
as set forth in Section 102 of the Act, as amended from time to time; and
(g) to determine from time to time whether and to what extent, and at
what times and places and under what conditions and regulations, the
accounts and books of the Corporation or any of them, shall be opened to
the inspection of the stockholders, and no stockholder shall have any right
to inspect any account or book or document of the Corporation, except as
conferred by the Act or authorized by the Board of Directors, or by a
resolution of the stockholders.
SIXTH: The Board of Directors shall consist of one or more members. The
number of directors shall be fixed by, or in the manner provided in, the Bylaws.
At the annual meeting of stockholders in 1996 and at each
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annual meeting of stockholders thereafter, the respective terms of all of the
directors then serving in office shall expire at the meeting, and successors to
the directors shall be elected to hold office until the next succeeding annual
meeting. Existing directors may be nominated for election each year for a
successive term, in the manner provided in the Bylaws. Each director shall hold
office for the term for which he is elected and qualified or until his successor
shall have been elected and qualified or until his earlier resignation, removal
from office or death.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
Corporation or of any creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of the Act or on the application of trustees in dissolution or of
any receiver or receivers appointed for this Corporation under the provisions of
Section 279 of the Act, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the court directs. If a majority
in number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the compromise or arrangement and the reorganization shall, if
sanctioned by the court to which the application has been made, be binding on
all the creditors or class of creditors and/or on all the stockholders or class
of stockholders of this Corporation, as the case may be, and also on this
Corporation.
EIGHTH: To the extent permitted by law, no contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purposes, if:
(a) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved by vote of the stockholders; or
(c) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
NINTH: The Corporation reserves the right to amend or repeal any provision
contained herein, add any additional provisions hereto, increase or decrease the
number of authorized shares of stock, or restate this Certificate of
Incorporation in its entirety in the manner now or hereafter prescribed by the
Act.
TENTH: Except as otherwise required by law or as otherwise provided in this
Certificate of Incorporation or in the Bylaws of the Corporation, any matter
properly submitted to a vote of the stockholders at a meeting of stockholders
duly convened at which there is a quorum present shall be deemed approved upon
an affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present at the meeting, in person or by proxy. No holders of any
class of stock other than Common Stock shall be entitled to vote upon any
matter, except as may be required by law, this Certificate of Incorporation, or
the Bylaws of the Corporation. Written ballots shall not be required for the
election of directors.
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ELEVENTH: In addition to any other indemnification granted to directors of
the Corporation contained in this Certificate of Incorporation, the Bylaws of
the Corporation, or adopted by resolution of the stockholders or directors of
the Corporation, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided however, that this indemnification shall not
eliminate or limit the liability of a director for any breach of the director's
duty of loyalty to the Corporation or its stockholders, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, or payment of any unlawful dividend or for any unlawful stock purchase
or redemption, or for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, the undesigned has caused this Second Amended and
Restated Certificate of Incorporation to be executed this 15th day of May, 1996.
Republic Industries, Inc.
By: /s/ H. Wayne Huizenga
----------------------------------
H. Wayne Huizenga
Chairman of the Board and
Chief Executive Officer
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EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our reports (and to all references to our firm) included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 21, 1996.
