<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NUMBER: 0-9787
REPUBLIC INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 73-1105145
(State of Incorporation) (IRS Employer Identification No.)
200 EAST LAS OLAS BOULEVARD
SUITE 1400
FT. LAUDERDALE, FLORIDA 33301
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 627-6000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
On May 9,1996, the registrant had 84,109,874 outstanding shares of common
stock, $.01 par value.
<PAGE> 2
REPUBLIC INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets
as of March 31, 1996 and December 31, 1995 (Restated)............................ 3
Unaudited Condensed Consolidated Statements
of Operations for the Three Months Ended
March 31, 1996 and 1995 (Restated)................................................ 4
Unaudited Condensed Consolidated Statement
of Stockholders' Equity for the Three Months
Ended March 31, 1996 (Restated).................................................... 5
Unaudited Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1996 and 1995 (Restated)................................................. 6
Notes to Unaudited Condensed Consolidated Financial
Statements......................................................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................................... 12
PART II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................................... 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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 ASSET
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; 500,000,000
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.
3
<PAGE> 4
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.
4
<PAGE> 5
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.
5
<PAGE> 6
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.
6
<PAGE> 7
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 in the Company's Form 8-K
dated May 15, 1996.
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 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.
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 60 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.
7
<PAGE> 8
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>
8
<PAGE> 9
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.
9
<PAGE> 10
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.
10
<PAGE> 11
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 issued pursuant to the stock split) 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.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto
included under Item 1. In addition, reference should be made to the audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's most recent Annual Report on Form 10-K.
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 by internal growth and by making additional
acquisitions in that industry. Further, 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"). 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. The Company makes its decision to acquire or invest in
businesses based on financial and strategic considerations.
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.
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 and will settle the remaining balance
within 60 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.
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 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.
RESULTS OF OPERATIONS
Continuing Operations
In 1994, the Company pursued a plan to exit the hazardous waste
services segment of the environmental industry. The plan provided for the
combination of the Company's hazardous waste services segment, Republic
Environmental Systems, Inc. ("RESI") and the distribution of the stock of RESI
to the Company's stockholders in 1995 (the "Distribution"). The
12
<PAGE> 13
following discussion excludes the operational activity and results of
the hazardous waste services segment of the Company, which have been included
in the accompanying 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 primary
industry segments for the three months ended March 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Solid waste services and other............................................... $84,184 $51,295
Electronic security services................................................. 15,453 11,799
------- -------
$99,637 $63,094
======= =======
</TABLE>
The increase in revenue from the solid waste services segment for the
three months ended March 31, 1996 is primarily a result of the acquisition of
Hudson Management Corporation and Envirocycle, Inc. ("HMC") in August 1995 and
other businesses, as well as internal growth and increased volume at existing
operations. The increase in revenue from the electronic security services
segment for the three months ended March 31, 1996 is principally a result of an
aggressive expansion plan targeted 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:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cost of operations......................................................... 65% 65%
Selling, general and administrative........................................ 18% 24%
</TABLE>
Cost of operations was $65,035,000 and $40,911,000 for the three months
ended March 31, 1996 and 1995, respectively. The increase is consistent with
the increase in revenue for such period.
Selling, general and administrative expenses were $18,255,000 and
$15,015,000 for the three months ended March 31, 1996 and 1995, respectively.
This increase primarily reflects the growth of the Company's business through
the acquisition of HMC and other businesses. The decrease in selling, general
and administrative expenses as a percentage of revenue for the three months
ended March 31, 1996 is largely due to the Company's continued commitment to
reduce and control such expenses by implementing efficiencies within the
Company's administrative functions.
13
<PAGE> 14
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 due to the
increase in the Company's cash investments resulting from the proceeds from
certain sales of Common Stock in 1995.
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 outstanding borrowings during the latter
half of 1995.
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 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 the environmental industry, 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 ten shares 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 in the
accompanying Unaudited Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As previously discussed, the Company will continue to pursue
acquisitions in the solid waste, electronic security services, automobile
retailing 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. 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 definitive agreement which provides for
the acquisition of AutoNation, the parties 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 by the Company.
There can be no assurance that any additional financing will be available to
the Company, or, in the event that it is, that it will be available in the
amounts or terms acceptable to the Company.
Cash Flows From Operating Activities
The Company's net cash flows from operating activities increased during
the three months ended March 31, 1996 primarily as a result of expansion of the
Company's business through acquisition and internal growth. The Company used
its operating cash flows during the three months ended March 31, 1996 primarily
to make capital expenditures. The
14
<PAGE> 15
Company has in the past made capital expenditures from cash on hand and
operating cash flows and anticipates continuing to do so throughout the
remainder of 1996.
Cash Flows From Investing Activities
The Company made capital expenditures of approximately $14,329,000
during the three months ended March 31, 1996 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 related to the expansion of its
electronic security services business through new installations and
acquisitions of subscriber accounts. Management anticipates continuing to make
capital expenditures for new equipment, upgrading existing equipment and
facilities, the construction of new airspace and the installation of new
security systems. The Company expects that these expenditures may increase in
the future due to the internal growth of the Company and business combinations.
Cash Flows From Financing Activities
During the three months ended March 31, 1996, the Company utilized a
portion of the remaining cash proceeds from certain sales of Common Stock in
1995 to repay approximately $20,066,000 of long-term debt and notes payable of
acquired companies.
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 very 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 resulted from the repayment of long-term debt and notes payable of
acquired companies. The Company believes working capital may continue to
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. The increase is primarily attributed to
various business acquisitions and internal growth within the Company.
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. The increase is attributed
primarily to various business acquisitions and increased capital expenditures
resulting from internal growth and expansion.
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 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-American Georgia
and other businesses during the period.
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.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Merger Agreement, dated as of February 15, 1996, by and among
Republic Industries, Inc., RIDFRP, 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).
10.2 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 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).
27.1 Financial Data Schedule for the Three Months Ended March 31, 1996.
(For SEC use only).
27.2 Financial Data Schedule for the Three Months Ended March 31, 1995
(Restated) (For SEC use only).
(b) Reports on Form 8-K :
Form 8-K dated February 14, 1996 relating to the Company's Merger
Agreements and pending mergers with The Denver Fire Reporter and
Protective Co. and the Schaubach Companies.
Form 8-K/A dated February 27, 1996 reporting the consummation of the
mergers with The Denver Fire Reporter and Protective Co. and the
Schaubach Companies.
Form 8-K dated March 29, 1996 announcing the Company's intention to
acquire AutoNation Incorporated.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant, Republic Industries, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
REPUBLIC INDUSTRIES, INC.
Date: May 15, 1996 By: /s/ Gregory K. Fairbanks
----------------------------
Gregory K. Fairbanks
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 137,747
<SECURITIES> 0
<RECEIVABLES> 50,495
<ALLOWANCES> 2,985
<INVENTORY> 0
<CURRENT-ASSETS> 201,201
<PP&E> 327,034
<DEPRECIATION> 97,669
<TOTAL-ASSETS> 636,374
<CURRENT-LIABILITIES> 83,047
<BONDS> 0
0
0
<COMMON> 1,664
<OTHER-SE> 502,517
<TOTAL-LIABILITY-AND-EQUITY> 636,374
<SALES> 99,637
<TOTAL-REVENUES> 99,637
<CGS> 65,035
<TOTAL-COSTS> 65,035
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 602
<INCOME-PRETAX> 18,106
<INCOME-TAX> 6,885
<INCOME-CONTINUING> 11,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,221
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 161,248
<SECURITIES> 0
<RECEIVABLES> 40,348
<ALLOWANCES> 2,559
<INVENTORY> 0
<CURRENT-ASSETS> 214,271
<PP&E> 283,719
<DEPRECIATION> 88,785
<TOTAL-ASSETS> 558,054
<CURRENT-LIABILITIES> 73,455
<BONDS> 0
0
0
<COMMON> 1,579
<OTHER-SE> 434,809
<TOTAL-LIABILITY-AND-EQUITY> 558,054
<SALES> 63,094
<TOTAL-REVENUES> 63,094
<CGS> 40,911
<TOTAL-COSTS> 40,911
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,288
<INCOME-PRETAX> 6,310
<INCOME-TAX> 2,530
<INCOME-CONTINUING> 3,780
<DISCONTINUED> 508
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,288
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
