<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 June 30, 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
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 August 8, 1996, the registrant had 190,776,692 outstanding shares of
common stock, par value $.01 per share.
<PAGE> 2
REPUBLIC INDUSTRIES, INC.
INDEX
Page
PART I. Financial Information
------------------------------
<TABLE>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets
as of June 30, 1996 and December 31, 1995................... 3
Unaudited Condensed Consolidated Statements
of Operations for the Three and Six Months Ended
June 30, 1996 and 1995...................................... 4
Unaudited Condensed Consolidated Statement
of Shareholders' Equity for the Six Months
Ended June 30, 1996......................................... 5
Unaudited Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
June 30, 1996 and 1995...................................... 6
Notes to Unaudited Condensed Consolidated Financial
Statements.................................................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................... 14
PART II. Other Information
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 20
</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
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $259,851 $161,248
Accounts receivable, less allowance for doubtful accounts.... 58,388 37,789
Prepaid expenses............................................. 6,796 3,429
Other current assets......................................... 52,968 11,805
-------- --------
Total current assets....................................... 378,003 214,271
Property and equipment, net.................................. 257,989 194,934
Investment in subscriber accounts, net....................... 70,940 42,240
Intangible assets, net....................................... 180,565 101,363
Other assets................................................. 9,222 5,246
-------- --------
Total assets............................................... $896,719 $558,054
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $ 18,788 $ 17,255
Accrued liabilities.......................................... 38,776 24,933
Current portion of deferred revenue.......................... 28,389 25,555
Current maturities of long-term debt......................... -- 2,087
Income taxes payable......................................... 11,269 3,625
-------- --------
Total current liabilities.................................. 97,222 73,455
Long-term debt, net of current maturities.................... -- 3,791
Deferred revenue, net of current portion..................... 12,371 18,012
Deferred income taxes........................................ 25,857 15,046
Other liabilities............................................ 14,399 11,362
-------- --------
Total liabilities.......................................... 149,849 121,666
-------- --------
Commitments and contingencies
Shareholders' 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; 185,297,664 and 157,941,870 shares
issued and outstanding, respectively........................ 1,853 1,579
Additional paid-in capital................................... 689,494 402,983
Retained earnings............................................ 55,523 31,826
-------- --------
Total shareholders' equity................................. 746,870 436,388
-------- --------
Total liabilities and shareholders' equity................. $896,719 $558,054
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue....................................... $138,715 $69,531 $238,352 $132,625
Expenses:
Cost of operations.......................... 91,826 45,320 156,861 86,231
Selling, general and administrative......... 22,381 15,701 40,636 30,716
-------- ------- -------- --------
Operating income.............................. 24,508 8,510 40,855 15,678
Interest and other income..................... 3,620 621 5,981 1,052
Interest expense.............................. (838) (1,710) (1,440) (2,999)
-------- ------- -------- --------
Income from continuing operations
before income taxes......................... 27,290 7,421 45,396 13,731
Provision for income taxes.................... 10,097 3,333 16,982 5,863
-------- ------- -------- --------
Income from continuing operations............. 17,193 4,088 28,414 7,868
Income from discontinued operations, net...... -- -- -- 508
-------- ------- -------- --------
Net income.................................... $ 17,193 $ 4,088 $ 28,414 $ 8,376
======== ======= ======== ========
Fully diluted earnings per common and common
equivalent share:
Continuing operations...................... $ .08 $ .04 $ .14 $ .08
Discontinued operations.................... -- -- -- --
-------- ------- -------- --------
Net income.................................... $ .08 $ .04 $ .14 $ .08
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings
------ ------- --------
<S> <C> <C> <C>
Balance at December 31, 1995................... $1,579 $402,983 $31,826
Sale of common stock......................... 99 197,484 --
Exercise of stock options and warrants....... 19 5,566 --
Distributions to former owners of pooled
companies................................... -- -- (4,826)
Stock issued in acquisitions................. 156 80,863 --
Other........................................ -- 2,598 109
Net income................................... -- -- 28,414
------ -------- -------
Balance at June 30, 1996....................... $1,853 $689,494 $55,523
====== ======== =======
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
REPUBLIC INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations............................... $ 28,414 $ 7,868
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Depreciation, depletion and amortization...................... 16,770 10,283
Gain on the sale of property and equipment.................... (818) (214)
Changes in assets and liabilities, net of effects from
business combinations:
Accounts receivable........................................... (9,680) (2,981)
Prepaid expenses and other assets............................. (959) (2,357)
Accounts payable and accrued liabilities...................... (11,827) 4,917
Deferred and current income taxes payable..................... 15,738 5,290
Deferred revenue and other liabilities........................ (8,400) (3,822)
-------- --------
Net cash provided by continuing operations.................... 29,238 18,984
-------- --------
Cash used in discontinued operations.............................. -- (263)
-------- --------
Cash flows from investing activities:
Advances and loans ............................................. (40,600) --
Net cash used in business combinations.......................... (6,942) (3,313)
Purchases of property and equipment............................. (36,894) (19,092)
Investment in subscriber accounts............................... (16,013) (7,300)
Proceeds from the sale of property and equipment................ 1,800 826
-------- --------
Net cash used in investing activities......................... (98,649) (28,879)
-------- --------
Cash flows from financing activities:
Sale of common stock............................................ 197,583 --
Payments of long-term debt...................................... (32,350) (5,637)
Exercise of stock options and warrants.......................... 5,585 181
Distributions to former owners of pooled companies.............. (4,826) (3,241)
Proceeds from long-term debt.................................... 1,959 17,716
Other........................................................... 63 2,878
-------- ---------
Net cash provided by financing activities..................... 168,014 11,897
-------- ---------
Increase in cash and cash equivalents......................... 98,603 1,739
Cash and cash equivalents:
Beginning of period............................................. 161,248 11,485
-------- --------
End of period................................................... $259,851 $ 13,224
======== ========
</TABLE>
The accompanying notes are an integral part of these 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 subsidiaries (the
"Company") and have been prepared by the Company 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 material 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 Company's audited
consolidated financial statements and notes thereto.
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., now known as International Alliance
Services, Inc. ("IASI"), to the Company's shareholders. 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 IASI prior to the spin-off date.
All per share data and numbers of common shares for all periods
included in the financial statements and notes have been adjusted to reflect a
two-for-one stock split in the form of a 100% stock dividend that was effected
in June 1996, as more fully described in Note 10.
2. BUSINESS COMBINATIONS
Pending Acquisitions
In July 1996, the Company signed a definitive agreement and an amendment
thereto providing for the combination of the Company and ADT Limited ("ADT").
ADT is the largest single provider of electronic security services in North
America and the largest provider in the United Kingdom. ADT is also the second
largest provider of vehicle auction services in the United States. Under
the terms of the agreement, which has been approved by the Boards of
Directors of both companies, ADT shareholders will receive .92857 of a share
of the Company's common stock, par value $.01 per share ("Common Stock"), for
each share of ADT common stock and ADT will become a wholly-owned subsidiary of
the Company. As part of the agreement, ADT issued to the Company a warrant to
acquire 15,000,000 shares of ADT common stock at an exercise price of $20 per
share. The warrant is exercisable if the agreement is terminated for any
reason. The transaction is intended to be tax-free to ADT's shareholders and
will be accounted for under the pooling of interests method of accounting.
Completion of the transaction is subject to customary conditions, including
regulatory approvals and approval by shareholders of both companies. The
transaction is also subject to ADT's receipt of a fairness opinion by the date
of mailing of the joint proxy statement/prospectus relating to the transaction
to the Company's and ADT's shareholders. In connection with the transaction,
the Company anticipates issuing approximately 130,000,000 shares of Common
Stock and reserving an additional 38,000,000 shares of Common Stock for the
exercise of certain options, warrants and convertible securities of ADT.
In June 1996, the Company signed a definitive agreement to acquire
Continental Waste Industries, Inc. ("Continental") in a merger transaction.
Continental provides integrated solid waste management services to residential,
commercial and industrial customers primarily in the mid-south and eastern
United States. Under the terms of the agreement, each share of common
stock of Continental would be exchanged, on a tax-free basis, for .80 of a
share of the Company's Common Stock. As of June 30, 1996, Continental had
approximately 14,244,000 shares of common stock issued and outstanding. The
7
<PAGE> 8
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
transaction, which will be accounted for under the pooling of interests method
of accounting, is subject to approval of Continental's shareholders and other
customary closing conditions, including regulatory approvals. Continental's
three largest shareholders, representing approximately 25% of Continental's
outstanding common stock, have agreed to vote their shares in favor of the
transaction.
In June 1996, the Company signed a definitive agreement to acquire
Addington Resources, Inc. ("Addington") in a merger transaction. Addington
provides integrated solid waste disposal services including landfill,
collection and recycling services for cities and counties in the southeastern
United States. Under the terms of the agreement, each share of common stock
of Addington would be exchanged, on a tax-free basis, for .90 of a share of the
Company's Common Stock. As of June 30, 1996, Addington had approximately
15,189,000 shares of common stock issued and outstanding. The transaction,
which will be accounted for under the pooling of interests method of
accounting, is subject to approval by the shareholders of Addington and other
customary closing conditions, including regulatory approvals. Six of
Addington's shareholders, representing approximately 45% of Addington's
outstanding common stock, have agreed to vote their shares in favor of the
transaction and have granted the Company a proxy to vote all of their shares
in favor of the transaction.
In May 1996, after approval by a special committee of disinterested
members of the Company's Board of Directors, the Company signed a definitive
agreement to acquire AutoNation Incorporated ("AutoNation"). AutoNation is a
privately-owned company developing a chain of megastores for the sale of
new and used vehicles in a customer friendly environment and is partially owned
by the Company's Chairman and Chief Executive Officer, and certain other
officers and directors of the Company. The transaction, which will be accounted
for under the purchase method of accounting, is subject to final approval by
the shareholders of the Company and other customary closing conditions,
including regulatory approvals. It is contemplated that the Company will issue
approximately 17,467,000 shares of its Common Stock in connection with the
transaction.
Completed Acquisitions
Significant businesses acquired through June 30, 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 June 30, 1996 and
accounted for under the purchase method of accounting are included in the
financial statements from the date of acquisition.
In February 1996, the Company acquired all of the outstanding capital
stock of Denver Alarm. Denver Alarm is one of the oldest electronic security
alarm companies in the United States and provides installation, monitoring and
maintenance services to residential and commercial customers throughout
Colorado.
In February 1996, the Company acquired 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.
The Company issued an aggregate of 5,828,904 shares of Common Stock to
acquire Denver Alarm and Schaubach, both of which have been accounted for under
the pooling of interests method of accounting.
8
<PAGE> 9
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Details of the results of operations of the previously separate companies
for the period before the pooling of interests combinations were consummated
are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
----------------
<S> <C>
Revenue:
The Company..................... $115,074
Pooled Entities................. 17,551
--------
$132,625
========
Net income:
The Company..................... $ 8,219
Pooled Entities................. 157
--------
$ 8,376
========
</TABLE>
During the six months ended June 30, 1996, the Company also acquired 29
other businesses in the solid waste and electronic security industries which
were immaterial to the Company. The aggregate purchase price paid by the
Company related to immaterial acquisitions accounted for under the purchase
method of accounting was approximately $90,060,000 and consisted of
cash and 7,654,753 shares of Common Stock. With respect to immaterial
acquisitions accounted for under the pooling of interests method of accounting,
the Company issued 7,950,561 shares of Common Stock. These acquisitions
were not material in the aggregate and, consequently, prior period financial
statements were not restated.
The following summarizes the preliminary purchase price allocation for business
combinations (including historical accounts of immaterial acquisitions
accounted for under the pooling of interests method of accounting) consummated
during the six months ended June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Property and equipment.............................. $ 34,665 $ 4,931
Investment in subscriber accounts................... 16,343 --
Intangible assets................................... 77,417 4,737
Working capital deficiency, net of cash acquired.... (9,007) (3,216)
Long-term debt assumed.............................. (22,135) (2,880)
Other liabilities, net.............................. (9,322) --
Common stock issued................................. (81,019) (259)
-------- -------
Cash used in acquisitions......................... $ 6,942 $ 3,313
======== =======
</TABLE>
In August 1996, the Company acquired all of the assets of CarChoice,
Inc. ("CarChoice"). CarChoice, which commenced operations in January 1995, is a
developer and operator of used car superstores similar to those being developed
by AutoNation. The Company issued 3,878,760 shares of Common Stock to acquire
CarChoice which will be accounted under the pooling of interests method of
accounting. The Company's unaudited pro forma consolidated results of
operations, assuming the CarChoice acquisition had been consummated as of June
30, 1996 are as follows:
9
<PAGE> 10
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue................................................ $157,319 $69,531 $267,625 $132,625
======== ======= ======== ========
Net income............................................. $ 12,085 $ 3,663 $ 20,069 $ 6,936
======== ======= ======== ========
Fully diluted earnings per
common and common
equivalent share..................................... $ .05 $ .04 $ .09 $ .07
======== ======= ======== ========
</TABLE>
In August 1995, the Company acquired all of the outstanding shares of
common stock of Hudson Management Corporation and Envirocycle, Inc.
(collectively, "HMC"). The purchase price paid by the Company was
approximately $72,800,000 and consisted of 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 the beginning of the
period presented is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
----------------
<S> <C>
Revenue............................................ $161,242
========
Income from continuing operations before
income taxes...................................... $ 16,182
========
Net income......................................... $ 9,388
========
Fully diluted earnings per common and common
equivalent share.................................. $ .08
========
</TABLE>
3. OTHER CURRENT ASSETS
Included in other current assets at June 30, 1996 are approximately
$40,600,000 in advances made to AutoNation during the three months ended
June 30, 1996. Such advances were made pursuant to a loan agreement whereby the
Company has agreed to provide advances at an interest rate of LIBOR plus 2% to
fund AutoNation's cash flow requirements until consummation of the acquisition
of AutoNation. Such advances mature on March 31, 1997 and are secured
primarily by the common stock of AutoNation's principal operating subsidiary,
all trademarks and other intellectual property of AutoNation and, until
consummation of the Company's merger with AutoNation, AutoNation's shareholder
subscription commitments.
10
<PAGE> 11
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. PROPERTY AND EQUIPMENT
A summary of property and equipment is shown below:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Land, landfills and improvements.............. $107,017 $ 92,983
Vehicles and equipment........................ 225,523 157,140
Buildings and improvements.................... 30,590 24,573
Furniture and fixtures........................ 11,535 9,023
--------- --------
374,665 283,719
Less: accumulated depreciation and
depletion.................................... (116,676) (88,785)
-------- --------
$257,989 $194,934
======== ========
</TABLE>
5. INVESTMENT IN SUBSCRIBER ACCOUNTS
Investment in subscriber accounts consists of certain capitalized
costs associated with new monitoring systems installed by the Company's
electronic security service business and the cost of acquired subscriber
accounts. These 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 June 30,
1996 and December 31, 1995 was $15,102,000 and $11,446,000, respectively.
6. 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 forty years on a
straight-line basis.
Accumulated amortization of intangible assets at June 30, 1996 and
December 31, 1995 was $14,611,000 and $9,026,000, respectively.
7. INCOME TAXES
Income taxes have been provided for based upon the Company's anticipated
annual effective income tax rate.
8. 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.
11
<PAGE> 12
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of stock option and warrant transactions for the six months ended
June 30, 1996 is as follows:
<TABLE>
<S> <C>
Options and warrants outstanding at beginning of period....... 48,534
Granted....................................................... 3,876
Exercised..................................................... (1,857)
Canceled...................................................... (19)
------
Options and warrants outstanding at June 30, 1996............. 50,534
======
Average price of options and warrants exercised............... $3.11
Prices of options and warrants outstanding at June 30, 1996... $1.05 to $30.75
Average price of options and warrants outstanding
at June 30, 1996............................................ $5.67
Vested options and warrants at June 30, 1996.................. 38,990
Options available for future grants at June 30, 1996.......... 12,486
</TABLE>
9. 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 utilizes the modified treasury stock
method.
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 Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares outstanding..................... 185,298 96,452 185,298 96,452
Common equivalent shares...................... 50,955 7,466 52,320 7,466
Weighted average treasury shares
purchased................................... (12,773) (3,452) (12,054) (3,452)
Effect of using weighted average
common and common equivalent
shares outstanding.......................... (7,374) (408) (15,253) (522)
------- ------- ------- ------
216,106 100,058 210,311 99,944
======= ======= ======= ======
</TABLE>
10. SHAREHOLDERS' EQUITY
In May 1996, the Company sold 9,878,400 shares of Common Stock in a
private placement transaction resulting in net proceeds of $197,583,000.
In May 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 shares outstanding at December 31, 1995) has been transferred from
additional paid-in capital to common stock.
In May 1996, the Company's Certificate of Incorporation was amended
to increase the number of authorized shares of Common Stock from 350,000,000
shares to 500,000,000 shares.
12
<PAGE> 13
REPUBLIC INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. LEGAL MATTERS
The Company is subject to various lawsuits, claims and other legal matters
arising in the ordinary course of conducting its business. The Company
believes that such lawsuits, claims and other legal matters should not have a
material adverse effect on the Company's consolidated results of operations or
financial condition.
13
<PAGE> 14
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 Company's audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations.
BUSINESS COMBINATIONS
---------------------
The Company makes its decisions to acquire or invest in businesses based
on financial and strategic considerations.
PENDING ACQUISITIONS
In July 1996, the Company signed a definitive agreement and an amendment
thereto providing for the combination of the Company and ADT Limited ("ADT").
ADT is the largest single provider of electronic security services in North
America and the largest provider in the United Kingdom. ADT is also the
second largest provider of vehicle auction services in the United States.
Under the terms of the agreement, which has been approved by the Boards
of Directors of both companies, ADT shareholders will receive .92857 of a share
of the Company's common stock, par value $.01 per share ("Common Stock"), for
each share of ADT common stock and ADT will become a wholly-owned subsidiary of
the Company. As part of the agreement, ADT issued to the Company a warrant to
acquire 15,000,000 shares of ADT common stock at an exercise price of $20 per
share. The warrant is exercisable if the agreement is terminated for any
reason. The transaction is intended to be tax-free to ADT's shareholders and
will be accounted for under the pooling of interests method of accounting.
Completion of the transaction is subject to customary conditions, including
regulatory approvals and approval by shareholders of both companies. The
transaction is also subject to ADT's receipt of a fairness opinion by the date
of mailing of the joint proxy statement/prospectus relating to the transaction
to the Company's and ADT's shareholders. In connection with the transaction,
the Company anticipates issuing approximately 130,000,000 shares of Common
Stock and reserving an additional 38,000,000 shares of Common Stock for the
exercise of certain options, warrants and convertible securities of ADT.
In June 1996, the Company signed a definitive agreement to acquire
Continental Waste Industries, Inc. ("Continental") in a merger transaction.
Continental provides integrated solid waste management services to residential,
commercial and industrial customers primarily in the mid-south and eastern
United States. Under the terms of the agreement, each share of common
stock of Continental would be exchanged, on a tax-free basis, for .80 of a
share of the Company's Common Stock. As of June 30, 1996, Continental had
approximately 14,244,000 shares of common stock issued and outstanding. The
transaction, which will be accounted for under the pooling of interests method
of accounting, is subject to approval of Continental's shareholders and other
customary closing conditions, including regulatory approvals. Continental's
three largest shareholders, representing approximately 25% of Continental's
outstanding common stock, have agreed to vote their shares in favor of the
transaction.
In June 1996, the Company signed a definitive agreement to acquire
Addington Resources, Inc. ("Addington") in a merger transaction. Addington
provides integrated solid waste disposal services including landfill,
collection and recycling services for cities and counties in the southeastern
United States. Under the terms of the agreement, each share of common stock of
Addington would be exchanged, on a tax free basis, for .90 of a share of the
Company's Common Stock. As of June 30, 1996, Addington had approximately
15,189,000 shares of common stock issued and outstanding. The transaction,
which will be accounted for under the pooling of interests method of
accounting, is subject to approval by the shareholders of Addington and other
customary closing conditions, including regulatory approvals. Six of
Addington's shareholders, representing approximately 45% of Addington's
outstanding common stock, have agreed to vote their shares in favor of the
transaction and have granted the Company a proxy to vote all of their shares
in favor of the transaction.
In May 1996, after approval by a special committee of disinterested
members of the Company's Board of Directors, the Company signed a definitive
agreement to acquire AutoNation Incorporated ("AutoNation"). AutoNation is a
privately-owned company developing a chain of megastores for the sale of new
and used vehicles in a customer friendly environment and is partially owned by
the Company's Chairman and Chief Executive Officer, and certain other officers
and directors of the Company. The transaction, which will be accounted for
under the purchase method of accounting, is subject to final approval by the
shareholders of the Company and other customary closing conditions including
regulatory approvals. It is contemplated that the Company will issue
approximately 17,467,000 shares of its Common Stock in connection with the
transaction.
COMPLETED ACQUISITIONS
Significant businesses acquired through June 30, 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 June 30, 1996 and
accounted for under the purchase method of accounting are included in the
financial statements from the date of acquisition.
14
<PAGE> 15
In August 1996, the Company acquired all of the assets of CarChoice,
Inc. ("CarChoice"). CarChoice, which commenced operations in January 1995, is
a developer and operator of used car superstores similar to those being
developed by AutoNation. The Company issued 3,878,760 shares of Common Stock to
acquire CarChoice which will be accounted for under the pooling of interests
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 throughout 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
under the pooling of interests method of accounting.
During the six months ended June 30, 1996, the Company also acquired 29
other businesses in the solid waste and electronic security industries which
were immaterial to the Company. The aggregate purchase price paid by the
Company related to immaterial acquisitions accounted for under the
purchase method of accounting was approximately $90,060,000 and consisted of
cash and 7,654,753 shares of Common Stock. With respect to immaterial
acquisitions accounted for under the pooling of interests method of accounting,
the Company issued 7,950,561 shares of Common Stock. These acquisitions were
not material in the aggregate and, consequently, prior period financial
statements were not restated.
RESULTS OF 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 service business
is primarily derived from monitoring contracts for security systems and fees
charged for the sale and installation of such systems.
15
<PAGE> 16
The following table presents revenue data from the Company's industry
segments for the following periods:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Solid waste services.......................................... $116,579 $57,173 $200,763 $108,467
Electronic security services.................................. 22,136 12,358 37,589 24,158
-------- ------- -------- --------
$138,715 $69,531 $238,352 $132,625
======== ======= ======== ========
</TABLE>
The increases in revenue from the solid waste services segment for the
three and six months ended June 30, 1996 are primarily a result of the
acquisition of Hudson Management Corporation and Envirocycle, Inc.
(collectively, "HMC") in August 1995 and other businesses during the periods,
as well as the expansion of the Company's existing businesses. The increases
in revenue from the electronic security services segment for the three and six
months ended June 30, 1996 are principally a result of the addition of new
monitoring accounts during the periods.
OPERATING COSTS AND EXPENSES
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 following periods:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of operations...................................... 66% 65% 66% 65%
Selling, general and administrative..................... 16% 23% 17% 23%
</TABLE>
Cost of Operations
Cost of operations for the Company's collection operations 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 site 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.
Cost of operations was $91,826,000 and $156,861,000 for the three and six
month periods ended June 30, 1996, respectively, as compared to $45,320,000 and
$86,231,000 for the same periods of the prior year. These increases reflect the
Company's expanded operations through acquisitions of new businesses and
growth of its existing businesses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $22,381,000 and
$40,636,000 for the three and six month periods ended June 30, 1996,
respectively, as compared to $15,701,000 and $30,716,000 for the same periods
of the prior year. These increases primarily reflect the growth of the
Company's business through the acquisitions of HMC and other businesses. The
decreases in selling, general and administrative expenses as percentages of
revenue for the three and six months ended June 30, 1996 are primarily due to
the reduction of administrative expenses for acquired businesses.
INTEREST AND OTHER INCOME
Interest and other income increased to $3,620,000 and $5,981,000 for the
three and six month periods ended June 30, 1996, respectively, from $621,000
and $1,052,000 for the comparable periods in 1995 due to the increase in the
Company's cash investments resulting from the proceeds from sales of
Common Stock in 1996 and 1995.
16
<PAGE> 17
INTEREST EXPENSE
Interest expense was $838,000 and $1,440,000 for the three and six month
periods ended June 30, 1996, respectively, as compared to $1,710,000 and
$2,999,000 for the comparable periods in 1995. The decreases are due to
a reduction in average borrowings outstanding during the periods.
LANDFILL AND ENVIRONMENTAL MATTERS
The Company provides for accrued landfill and environmental costs
which include landfill site closure and post-closure costs. Landfill site
closure and post-closure costs include estimated costs to be incurred for final
closure of the landfills and estimated 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 period such liabilities become probable and reasonably
estimatable.
The Company periodically reassesses its methods and assumptions used to
estimate such accruals for landfill and environmental 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 April 1995, the Company spun-off its hazardous waste services segment,
Republic Environmental Systems, Inc., now known as International Alliance
Services, Inc. ("IASI"), to the Company's shareholders. The Company has
had no direct ownership interest in IASI since the spin-off. 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.
FINANCIAL CONDITION
-------------------
At June 30, 1996, the Company had $259,851,000 in cash, $250,000,000 of
availability under its credit facility and no long term debt. In addition, in
connection with the Company's pending merger with ADT, in June 1996, the
Company obtained a commitment from one of its lenders to advance an additional
$500,000,000 under substantially the same terms as the Company's existing
credit facility. 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 June 30, 1996 amounted to $280,781,000 as compared to
$140,816,000 at December 31, 1995. The increase in working capital primarily
results from the May 1996 sale of 9,878,400 shares of Common Stock in a private
placement transaction resulting in net proceeds of $197,583,000. The Company
believes working capital may decline during the remainder of 1996 to lower
levels as additional capital is used for the continued expansion of the
Company's existing businesses.
Accounts receivable at June 30, 1996 were $58,388,000 as compared to
$37,789,000 at December 31, 1995. The increase is primarily attributed to
various business acquisitions and expansion of the Company's existing
businesses.
Other current assets at June 30, 1996 were $52,968,000 as compared to
$11,805,000 at December 31, 1995. The increase is primarily due to
approximately $40,600,000 in advances made to AutoNation during the three
months ended June 30, 1996. 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 (the "AutoNation Loan Agreement")
whereby the Company will provide a line-of-credit to AutoNation for the
development of new and used car megastores until consummation of the
acquisition of AutoNation. Advances under the AutoNation Loan Agreement bear
interest at LIBOR plus 2% and mature March 31, 1997. Additionally, advances
are secured by the common stock of AutoNation's principal operating subsidiary,
all trademarks and intellectual property of AutoNation and, until consummation
of the Company's merger with AutoNation, AutoNation's shareholder subscription
commitments.
Accrued liabilities at June 30, 1996 were $38,776,000 as compared to
$24,933,000 at December 31, 1995. The increase is primarily attributed to
various business acquisitions and expansion of the Company's existing
businesses.
PROPERTY AND EQUIPMENT
Property and equipment increased to $374,665,000 at June 30, 1996
from $283,719,000 at December 31, 1995. The increase is attributed primarily
to various business acquisitions and increased capital expenditures resulting
from expansion of the Company's existing businesses.
17
<PAGE> 18
INVESTMENT IN SUBSCRIBER ACCOUNTS
Investment in subscriber accounts represents certain capitalized costs
associated with the installation of new electronic security systems and the
cost of acquired subscriber accounts. Investment in subscriber accounts
increased $32,356,000 during the six months ended June 30, 1996 due to
growth in electronic security system installations and acquisitions of
subscriber accounts.
INTANGIBLE ASSETS
Intangible assets increased $84,787,000 during the six months ended
June 30, 1996 as a result of the acquisition of various businesses accounted
for under the purchase method of accounting during the period.
SHAREHOLDERS' EQUITY
Shareholders' equity increased $310,482,000 during the six months ended
June 30, 1996 primarily due to the May 1996 sale of Common Stock and the
acquisition of various businesses during the period.
CASH FLOWS
----------
Cash and cash equivalents increased by $98,603,000 during the six months
ended June 30, 1996. The major components of this change are discussed below.
CASH FLOWS FROM OPERATING ACTIVITIES
The Company's net cash flows from operating activities increased during
the six months ended June 30, 1996 primarily as a result of various business
acquisitions and expansion of the Company's existing businesses.
CASH FLOWS FROM INVESTING ACTIVITIES
The Company made capital expenditures of approximately $36,894,000
during the six months ended June 30, 1996 which included the purchase of
equipment, normal replacement of older equipment and expansion of landfill
sites. The Company also made capital expenditures of approximately $16,013,000
during the six months ended June 30, 1996 related to the expansion of its
electronic security services business through installations of new monitoring
systems and acquisitions of subscriber accounts.
In addition, during the three months ended June 30, 1996, the Company
advanced $40,600,000 to AutoNation under the AutoNation Loan Agreement as
previously discussed.
Management anticipates continuing to make capital expenditures for
equipment, upgrading existing equipment and facilities, the construction of new
airspace at landfill sites and the installation of new security systems. In
addition, the Company expects capital expenditures and advances to AutoNation
to increase during the remainder of 1996 and in the foreseeable future due to
continued internal growth of its existing businesses as well as pending
acquisitions and the development of AutoNation megastores.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities for the six months ended June 30, 1996
primarily consist of $197,583,000 in net cash proceeds from the May 1996
sale of Common Stock. Proceeds from this sale as well as remaining proceeds
from 1995 sales of Common Stock were used to repay indebtedness acquired in
business combinations resulting in no long-term debt outstanding at June 30,
1996.
18
<PAGE> 19
PART II. OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders on May 10, 1996, the
shareholders voted upon and elected the following directors and approved the
following proposals:
<TABLE>
<CAPTION>
Votes Cast For Votes Withheld
-------------- --------------
<S> <C> <C>
(a) H. Wayne Huizenga 113,275,436 159,934
Michael G. DeGroote 113,158,296 277,074
Harris W. Hudson 112,978,472 456,898
J.P. Bryan 113,265,236 170,134
Rick L. Burdick 112,956,072 479,298
George D. Johnson, Jr. 113,287,036 148,334
John J. Melk 113,280,772 154,598
</TABLE>
(b) To adopt an amendment to the Company's First Amended and Restated
Certificate of Incorporation, as amended, to increase the number of
authorized shares of Common Stock of the Company from 350,000,000
shares to 500,000,000 shares (108,017,048 votes were cast for this
matter, 5,391,044 votes were cast against this matter and there were
27,278 abstentions and broker non-votes).
(c) To adopt an amendment to the Company's 1995 Stock Option Plan to
increase the number of shares of Common Stock of the Company eligible
for issuance thereunder from 8,000,000 shares to 20,000,000 shares
(105,201,754 votes were cast for this matter, 8,198,374 votes were cast
against this matter and there were 35,242 abstentions and broker
non-votes).
(d) To ratify, confirm and approve previously granted Executive
Warrants, to ensure that the Company obtains certain favorable tax
deductions associated with the exercise of such Warrants (111,808,228
votes were cast for this matter, 1,562,572 votes were cast against this
matter and there were 64,570 abstentions and broker non-votes).
(e) To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for 1996 (113,377,258 votes were cast
for this matter, 42,350 votes were cast against this matter and there
were 15,762 abstentions and broker non-votes).
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K:
Form 8-K dated May 8, 1996 reporting the signing of the
definitive agreement to acquire AutoNation Incorporated.
Form 8-K, as amended by Form 8-K/A, dated May 9, 1996 reporting
the resignation of Gregory K. Fairbanks and the Company's two-for-one
stock split.
Form 8-K dated May 15, 1996 reporting certain financial
information (re: Denver Alarm and Schaubach acquisitions).
Form 8-K dated May 20, 1996 reporting the private placement and
the Company's intent to acquire Continental Waste Industries, Inc.
Form 8-K dated May 31, 1996 reporting the Company's intent to
acquire Addington Resources, Inc.
Form 8-K dated June 12, 1996 reporting the signing of the
definitive agreement to acquire CarChoice, Inc.
Form 8-K dated June 25, 1996 reporting the signing of the
definitive agreement with Addington Resources, Inc.
Form 8-K dated June 27, 1996 reporting the signing of the
definitive agreement with Continental Waste Industries, Inc.
20
<PAGE> 21
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: August 14, 1996 By: /s/ Michael R. Carpenter
----------------------------
Michael R. Carpenter
Vice President and
Corporate Controller
(Principal Financial Officer)
21
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 259,851
<SECURITIES> 0
<RECEIVABLES> 62,273
<ALLOWANCES> 3,885
<INVENTORY> 0
<CURRENT-ASSETS> 378,003
<PP&E> 374,665
<DEPRECIATION> 116,676
<TOTAL-ASSETS> 896,719
<CURRENT-LIABILITIES> 97,222
<BONDS> 0
0
0
<COMMON> 1,853
<OTHER-SE> 745,017
<TOTAL-LIABILITY-AND-EQUITY> 896,719
<SALES> 238,352
<TOTAL-REVENUES> 238,352
<CGS> 156,861
<TOTAL-COSTS> 156,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,440
<INCOME-PRETAX> 45,396
<INCOME-TAX> 16,982
<INCOME-CONTINUING> 28,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,414
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
