<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 27, 1997
-----------------
REPUBLIC INDUSTRIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-9787 73-1105145
------ ----------
(Commission (IRS Employer
File Number) Identification No.)
450 East Las Olas Boulevard
Ft. Lauderdale, FL 33301
--------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 713-5200
--------------
N.A.
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The financial statements or combined financial statements of Taormina,
Wallace, Maroone, Kendall, AAA Disposal and York required by this Item
7(a) are incorporated by reference herein by reference to Exhibit 99
attached hereto.
(b) Pro Forma Financial Information.
The pro forma financial information of Taormina, Wallace, Maroone,
Kendall, AAA Disposal and York required by this Item 7(b) are incorporated
by reference to the audited supplemental consolidated financial statements
and the unaudited condensed consolidated pro forma financial statements
included in Exhibit 99 attached hereto.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REPUBLIC INDUSTRIES, INC.
By: /s/ Michael S. Karsner
----------------------------------
Michael S. Karsner
Senior Vice President
and Chief Financial Officer
Date: May 28, 1997
----------------
<PAGE> 4
REPUBLIC INDUSTRIES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number and
Description of Exhibit
- ----------------------
<S> <C>
1. None
2.1 Merger Agreement, dated as of February 3, 1997, among Republic
Industries, Inc., RI/T Merger Corp., Taormina Industries,
Inc., Taormina Revocable Inter Vivos Trust U/A/D July 26,
1983, Vincent Cosmo Taormina Revocable Inter Vivos Trust U/A/D
May 14, 1984, the C.V. Taormina Family Trust U/A/D September
16, 1980, William C. Taormina and Vincent C. Taormina**
2.2 Merger Agreement, dated as of February 4, 1997 among Republic
Industries, Inc., certain wholly-owned subsidiaries of
Republic Industries, Inc., AAA Disposal Service, Inc., AAA
Commercial, Inc., AAA Recycling, Inc., AAA Maintenance, Inc.
and AAA Land and Building Co., Inc., Larry E. Edwards, the
Jeffrey L. Edwards Trust U/T/A/D April 3, 1989, the Kevin S.
Edwards Trust U/T/A/D April 3, 1989, the Mitchell G. Edwards
Trust U/T/A/D April 3, 1989, the Troy L. Edwards Trust U/T/A/D
April 3, 1989, and the Samantha L. Edwards U/T/A/D April 3,
1989**
2.3 Merger and Reorganization Agreement, dated as of February 2,
1997 among Republic Industries, Inc., certain wholly-owned
subsidiaries of Republic Industries, Inc., Wallace Ford, Inc.,
Wallace Nissan, Inc., Wallace Dodge, Inc., Wallace Lincoln-
Mercury, Inc., Stuart Lincoln-Mercury, Inc., Bill Wallace
Enterprises, Inc. d/b/a Stuart Mitsubishi, Wallace Imports,
Inc., Mechanical Warranty Protection, Inc. and William L.
Wallace**
2.4 Merger and Acquisition Agreement, dated as of January 12, 1997
among Republic Industries, Inc., certain wholly-owned
subsidiaries of Republic Industries, Inc., Maroone Chevrolet,
Inc., Maroone Oldsmobile, Inc., Maroone Isuzu, Inc., Maroone
Dodge, Inc., Al Maroone Ford, Inc., Maroone Car & Truck Rental
Company, Empire Warranty Corporation, Empire Warranty Holding
Company, Empire Service Agency, Inc., Quantum Premium Finance
Corporation, Alkit Enterprises, Inc., Maroone Management
Services, Limited, Maroone Dodge Pompano, Limited, Maroone
Chevrolet Ft. Lauderdale, Limited, Albert E. Maroone, Michael
E. Maroone, Katherine C. Maroone, Kathleen Hoctor, Patricia
Damoorgian, Faisal Ahmed, Maroone Isuzu, Inc., Floyd Clements
and Curtis L. Rodman**
2.5 Merger Agreement, dated as of November 15, 1996 among Republic
Industries, Inc., RI/RB Merger Corp., RI/GFB Merger Corp., R&B
Holding Company d/b/a Kendall Toyota and Kendall KIA, G.F.B.
Enterprises, Inc. d/b/a Lexus of Kendall and Gerald F. Bean**
2.6 Merger Agreement, dated as of February 4, 1997 among Republic
Industries, Inc., Republic Waste Companies Holding Co., RI/YWD
Merger Corp., York Waste Disposal, Inc., Scott R. Wagner,
Robert A. Kinsley, Patrick A. Kinsley, Jonathan R. Kinsley,
Christopher A. Kinsley, Timothy J. Kinsley and Robert Anthony
Kinsley**
3. None
4. None
15. None
16. None
17. None
21. None
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Miller & Co.*
24. None
27. None
99. Financial Information*
</TABLE>
- ------------------
* Filed herewith
** Previously filed
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Forms S-8 (Registration Nos. 33-93742,
333-07623, 333-19453 and 333-20669).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 28, 1997.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Forms S-8 (Registration Nos. 33-93742,
333-07623, 333-19453 and 333-20669).
MILLER & CO.
York, Pennsylvania,
May 28, 1997.
<PAGE> 1
EXHIBIT 99
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Historical Financial Information
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES*
Report of Independent Certified Public Accountants........................................................ F-2
Supplemental Consolidated Balance Sheets as of December 31, 1996 and 1995................................. F-3
Supplemental Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994....................................................................... F-4
Supplemental Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994.................................................................. F-5
Supplemental Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994........................................................................ F-6
Notes to Supplemental Consolidated Financial Statements................................................... F-7
KENDALL AUTOMOTIVE GROUP*
Report of Independent Certified Public Accountants........................................................ F-28
Combined Balance Sheet as of October 31, 1996............................................................. F-29
Combined Statement of Income and Retained Earnings for the Ten-Month Period Ended October 31, 1996........ F-31
Combined Statement of Cash Flows for the Ten-Month Period Ended October 31, 1996.......................... F-32
Notes to Combined Financial Statements.................................................................... F-33
MAROONE AUTOMOTIVE GROUP*
Report of Independent Auditors............................................................................ F-39
Combined Statements of Income for the Years Ended December 31, 1996 and 1995.............................. F-40
Combined Balance Sheets as of December 31, 1996 and 1995.................................................. F-41
Combined Statements of Cash Flows for the Years Ended December 31, 1996 and 1995.......................... F-42
Combined Statements of Owners' Equity for the Years Ended December 31, 1996 and 1995...................... F-44
Notes to Combined Financial Statements.................................................................... F-45
THE WALLACE COMPANIES*
Independent Auditor's Report.............................................................................. F-60
Combined Balance Sheet as of December 31, 1996............................................................ F-61
Combined Statement of Income for the Year Ended December 31, 1996......................................... F-63
Combined Statement of Retained Earnings for the Year Ended December 31, 1996.............................. F-64
Combined Statement of Cash Flows for the Year Ended December 31, 1996..................................... F-65
Notes to Combined Financial Statements.................................................................... F-67
TAORMINA INDUSTRIES, INC.*
Independent Auditor's Report.............................................................................. F-78
Balance Sheets as of December 31, 1996 and 1995........................................................... F-79
Statements of Income for the Years Ended December 31, 1996 and 1995....................................... F-80
Statements of Retained Earnings for the Years Ended December 31, 1996 and 1995............................ F-81
Statements of Cash Flows for the Years Ended December 31, 1996 and 1995................................... F-82
Notes to Financial Statements............................................................................. F-84
AAA DISPOSAL
Report of Independent Certified Public Accountants........................................................ F-93
Combined Balance Sheet as of December 31, 1996............................................................ F-94
Combined Statement of Income for the Year Ended December 31, 1996......................................... F-95
Combined Statement of Stockholders' Equity for the Year Ended December 31, 1996........................... F-96
Combined Statement of Cash Flows for the Year Ended December 31, 1996..................................... F-97
Notes to Combined Financial Statements.................................................................... F-98
YORK WASTE DISPOSAL, INC.
Report of Independent Certified Public Accountants........................................................ F-103
Balance Sheets as of December 31, 1996 and 1995........................................................... F-104
Statements of Stockholders' Equity for the Years Ended December 31, 1996 and 1995......................... F-106
Statements of Earnings for the Years Ended December 31, 1996 and 1995..................................... F-107
Statements of Cash Flows for the Years Ended December 31, 1996 and 1995................................... F-108
Notes to Financial Statements............................................................................. F-111
(b) Pro Forma Financial Information
REPUBLIC INDUSTRIES, INC., AUTONATION INCORPORATED, ED MULLINAX, INC., GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE
GROUP, AAA DISPOSAL COMPANIES AND YORK WASTE DISPOSAL INC.
Unaudited Condensed Consolidated Pro Forma Financial Statements........................................... F-128
Unaudited Condensed Consolidated Pro Forma Statement of Operations for the
Three Months Ended March 31, 1997....................................................................... F-129
Unaudited Condensed Consolidated Pro Forma Statement of Operations for the
Year Ended December 31, 1996............................................................................ F-130
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.................................. F-131
</TABLE>
- -------------------
* Previously filed
F-1
<PAGE> 2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
AAA Disposal Service, Inc., AAA Commercial, Inc.,
AAA Recycling, Inc., AAA Maintenance, Inc.,
and AAA Land and Building Company, Inc.:
We have audited the accompanying combined balance sheet of AAA Disposal Service,
Inc., AAA Commercial, Inc., AAA Recycling, Inc., AAA Maintenance, Inc. and AAA
Land and Building Company, Inc. (collectively, "AAA Disposal") as of December
31, 1996, and the related combined statements of income, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AAA Disposal as of December 31,
1996, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 21, 1997.
F-93
<PAGE> 3
AAA DISPOSAL
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,649,806
Investments 783,680
Accounts receivable, net of allowance for doubtful accounts
of $156,914 at December 31, 1996 3,305,565
Current portion of note receivable from stockholder 1,283,333
Inventory 426,758
Prepaid expenses 117,481
Other current assets 63,325
-----------
Total current assets 7,629,948
PROPERTY and EQUIPMENT, net 12,541,986
NOTE RECEIVABLE FROM STOCKHOLDER, net of current portion 5,718,667
INTANGIBLE ASSETS, net 3,031,383
OTHER ASSETS 281,741
-----------
Total assets $29,203,725
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,646,239
Accrued liabilities 502,633
Current portion of long-term debt 2,358,989
Current portion of mortgage payable to stockholder 28,014
Deferred revenue 3,981,339
-----------
Total current liabilities 8,517,214
LONG-TERM DEBT, net of current portion 8,093,428
MORTGAGE PAYABLE TO STOCKHOLDER, net of current portion 2,648,645
-----------
Total liabilities 19,259,287
-----------
STOCKHOLDERS' EQUITY:
Common stock 30,110
Additional paid-in capital 1,817,451
Retained earnings 8,096,877
-----------
Total stockholders' equity 9,944,438
-----------
Total liabilities and stockholders' equity $29,203,725
===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this balance sheet.
F-94
<PAGE> 4
AAA DISPOSAL
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES $32,418,572
COST OF OPERATIONS 23,670,946
-----------
Gross profit 8,747,626
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,142,336
-----------
Operating income 3,605,290
INTEREST EXPENSE (533,310)
OTHER INCOME, net 241,584
-----------
Net income $ 3,313,564
===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
F-95
<PAGE> 5
AAA DISPOSAL
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings
------- ---------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1995 $30,110 $1,817,451 $ 9,083,313
Net Income - - 3,313,564
Stockholder distributions - - (4,300,000)
------- ---------- -----------
BALANCE, December 31, 1996 $30,110 $1,817,451 $ 8,096,877
======= ========== ===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
F-96
<PAGE> 6
AAA DISPOSAL
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,313,564
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,633,748
Gain on sale of equipment (20,363)
Accretion of discount on installment payable 52,986
Changes in assets and liabilities:
(Increase) decrease in:
Investments (9,406)
Accounts receivable (294,121)
Inventory 6,044
Prepaid expenses 42,222
Other assets 64,586
Increase (decrease) in:
Accounts payable 93,320
Accrued liabilities 190,708
Deferred revenue 322,046
-----------
Net cash provided by operating activities 5,395,334
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable from stockholder (6,996,484)
Capital expenditures (1,491,495)
Cash used in business acquisitions (987,743)
Proceeds from sale of equipment 23,831
-----------
Net cash used in investing activities (9,451,891)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 8,587,853
Payments of long-term debt (1,169,076)
Payments of mortgage payable to stockholder (23,341)
Stockholder distributions (4,300,000)
-----------
Net cash provided by financing activities 3,095,436
-----------
Net decrease in cash and cash equivalents (961,121)
CASH AND CASH EQUIVALENTS, beginning of period 2,610,927
-----------
CASH AND CASH EQUIVALENTS, end of period $ 1,649,806
===========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest $ 323,952
===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of this statement.
F-97
<PAGE> 7
AAA DISPOSAL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) NATURE OF OPERATIONS:
AAA Disposal includes the accounts of AAA Disposal Service, Inc., AAA
Commercial, Inc., AAA Recycling, Inc., AAA Maintenance, Inc., and AAA Land and
Building Company, Inc., (together, the "Companies") which are affiliated through
common ownership. All significant intercompany accounts and transactions have
been eliminated. All of these companies are Virginia S corporations which
provide solid waste collection and recycling services to residential and
commercial customers in the Northern Virginia region, except for AAA Land and
Building Company, Inc. which is a C corporation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates-
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents-
Cash and cash equivalents include short-term investments purchased with a
maturity of three months or less.
Investments-
Investments consist of treasury notes and certificates of deposit with
maturities less than one year. All investments are classified as held to
maturity securities and are recorded at cost, which approximates market value.
Inventory-
Inventory consists of parts, tires and lubricants and is valued at the lower
of cost (first-in, first-out method) or market.
F-98
<PAGE> 8
Property and Equipment-
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, while minor replacements, maintenance and
repairs are charged to expense as incurred. The Companies provide for
depreciation using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Buildings and improvements 40 years
Vehicles 5-10 years
Furniture, fixtures and equipment 5-10 years
Containers and compactors 15 years
</TABLE>
Intangible Assets-
Intangible assets consist of the cost of acquired businesses in excess of the
fair value of net tangible assets acquired, the cost of certain franchise
service areas obtained as part of businesses acquired, and noncompete
agreements obtained from former owners and management of businesses acquired.
Intangible assets are amortized using the straight-line method over their
estimated useful lives and are
comprised of the following:
<TABLE>
<CAPTION>
December 31,
Useful Lives 1996
------------ -----------
<S> <C> <C>
Noncompete agreements 5-10 years $ 3,745,197
Customer lists 15 years 3,690,145
Goodwill 40 years 257,360
-----------
7,692,702
Less: accumulated amortization (4,661,319)
-----------
$ 3,031,383
===========
</TABLE>
Amortization expense related to intangible assets was $383,231 for the year
ended December 31, 1996.
The Companies continually evaluate whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be
evaluated for possible impairment. The Companies use an estimate of the
related undiscounted cash flows over the remaining life of the intangible
assets in measuring their recoverability.
Revenue Recognition-
Collection services are billed up to three months in advance. Revenue on such
advance billings is deferred until services are performed. Such amounts are
included in deferred revenue in the accompanying combined balance sheets.
F-99
<PAGE> 9
Income Taxes-
The Companies have elected S-corporation status for income tax reporting
purposes. Therefore, net income and the related differences that arise in the
recording of income and expense items for financial reporting and income tax
reporting purposes are included in the individual tax returns of the
stockholders of the Companies. As a result, no provision, deferred tax asset
or liability for federal and state income taxes has been included in the
combined financial statements.
Upon closing of the merger transactions described in Note 8, the Companies will
no longer be eligible for S-corporation status. At that time, deferred income
taxes will be recorded in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
Fair Value of Financial Instruments-
The carrying amount of cash and cash equivalents, investments, accounts
receivable, accounts payable, accrued liabilities and cash surrender value of
life insurance included in other assets approximates fair value because of the
short maturity of these instruments. The fair value of the Companies' note
receivable from stockholder, long-term debt and mortgage payable to stockholder
is estimated based on current rates for instruments of similar terms and
maturities. Under this method, the Companies' fair value of these instruments
was not significantly different than the stated value at December 31, 1996.
(3) PROPERTY AND EQUIPMENT:
A summary of property and equipment at December 31, 1996 is as follows:
<TABLE>
<S> <C>
Land and improvements $ 1,243,060
Buildings and improvements 2,782,575
Vehicles 7,402,054
Furniture, fixtures and equipment 3,645,438
Containers and compactors 3,540,576
-----------
18,613,703
Less: accumulated depreciation and amortization (6,071,717)
-----------
$12,541,986
===========
</TABLE>
Depreciation and amortization expense related to property and equipment was
$1,250,517 for the year ended December 31, 1996.
F-100
<PAGE> 10
(4) INDEBTEDNESS:
Long-term debt consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Notes payable to banks, fixed interest rates ranging from
7% to 9.5%, maturing through 2002, secured by property,
vehicles and containers $ 9,107,680
Installment agreement payables, unsecured, non-interest
bearing, maturing through 2003, net of unamortized
discount of $160,813 imputed at 7% 1,344,737
-----------
10,452,417
Less: current portion of long-term debt (2,358,989)
-----------
$ 8,093,428
===========
</TABLE>
Mortgage payable to stockholder consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Mortgage note payable to stockholder, interest at 10%,
monthly payments of $24,535 due through December
2005, at which time remaining principal balance and
unpaid interest is due. $2,676,659
Less: current portion of mortgage payable (28,014)
----------
$2,648,645
==========
</TABLE>
At December 31, 1996, aggregate maturities of long-term debt and mortgage
payable to stockholder were as follows:
<TABLE>
<CAPTION>
Mortgage
Long-Term Payable to
Debt Stockholder
----------- -----------
<S> <C> <C>
1997 $ 2,358,989 $ 28,014
1998 2,485,357 30,947
1999 1,875,511 34,188
2000 1,821,011 37,768
2001 1,787,647 41,723
Thereafter 123,902 2,504,019
----------- ----------
$10,452,417 $2,676,659
=========== ==========
</TABLE>
(5) NOTE RECEIVABLE FROM STOCKHOLDER:
At December 31, 1996, the Companies had a note receivable due from the majority
stockholder totaling $7,002,000, bearing interest at 7.75%. Monthly principal
and interest payments of $141,099 are due through January 1, 2002, at which
time any remaining principal balance and unpaid interest must be paid.
F-101
<PAGE> 11
(6) 401(k) SAVINGS PLAN:
Employees of the Companies may participate in a 401(k) Savings Plan (the
"Plan"), whereby they may elect to make contributions pursuant to a salary
reduction agreement upon meeting certain age and length-of-service requirements.
Pursuant to the Plan, the Companies are required to match the employee
contributions dollar-for-dollar up to a maximum of three percent of the total
compensation paid to all eligible employees. During 1996, the Companies made
contributions totaling $325,089. Additional amounts may be contributed at the
option of the Companies. No additional contributions were made by the Companies
during 1996.
(7) STOCKHOLDERS' EQUITY:
Common stock of the Companies consists of the following authorized, issued and
outstanding shares as of December 31, 1996:
<TABLE>
<CAPTION>
Shares
Shares Issued and Par
Authorized Outstanding Value Amount
---------- ----------- ----- ------
<S> <C> <C> <C> <C>
AAA Disposal 10,000 100 $1.00 $ 100
AAA Land & Building 5,000 1,000 .01 10
AAA Maintenance - Voting 2,500 100 - 500
AAA Maintenance - Nonvoting 2,500 1,900 - 9,500
AAA Recycling - Voting 2,500 100 - 1,000
AAA Recycling - Nonvoting 2,500 900 - 9,000
AAA Commercial - Voting 2,500 100 - 1,000
AAA Commercial - Nonvoting 2,500 900 - 9,000
-------
$30,110
=======
</TABLE>
(8) SUBSEQUENT EVENTS:
On February 4, 1997, the Companies entered into a merger agreement with
Republic Industries, Inc. ("Republic") whereby Republic would acquire all of
the outstanding capital stock of the Companies for 2,916,667 shares of
Republic common stock. Such transaction was consummated on February 28, 1997.
On February 28, 1997, the mortgage payable to stockholder and the notes payable
to banks outstanding as of December 31, 1996 totaling $2,676,659 and
$9,107,680, respectively, were paid in full through borrowings from Republic.
F-102
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
York Waste Disposal, Inc.
York, Pennsylvania
We have audited the accompanying balance sheets of York Waste
Disposal, Inc. as of December 31, 1996 and 1995, and the related statements of
earnings, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of York Waste Disposal,
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
MILLER & CO.
York, Pennsylvania
January 27, 1997
F-103
<PAGE> 13
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
---------------------------
1996 1995
---------- ----------
$ $
<S> <C> <C>
CURRENT ASSETS
Cash 8,643 143,358
Short-term investments 53,104 31,446
Accounts receivable 3,746,699 3,655,595
Notes receivable 507,701 0
Inventories 85,607 0
Prepaid expenses 146,780 107,598
Deposits 185,788 148,976
Cash surrender value of life insurance 164,471 0
---------- ----------
TOTAL CURRENT ASSETS 4,898,793 4,086,973
---------- ----------
INVESTMENTS 31,000 83,537
---------- ----------
EQUIPMENT AND IMPROVEMENTS
Machinery and equipment 12,473,222 10,355,396
Automobiles and trucks 16,046,426 14,519,314
Office equipment 364,065 344,065
Leasehold improvements 110,887 110,887
---------- ----------
28,994,600 25,329,662
Less: Accumulated depreciation and amortization 14,038,175 10,523,776
---------- ----------
TOTAL EQUIPMENT AND IMPROVEMENTS (NET) 14,956,425 14,805,886
---------- ----------
OTHER ASSETS
Noncompete agreements (net of accumulated amortization of $1,842,252
and $1,384,002, respectively) 452,748 905,998
Goodwill (net of accumulated amortization of $72,340 and $36,517,
respectively) 118,160 138,983
Cash surrender value of life insurance 0 65,901
---------- ----------
TOTAL OTHER ASSETS 570,908 1,110,882
---------- ----------
TOTAL ASSETS 20,457,126 20,087,278
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
- --------------------------------------------------------------------------------
F-104
<PAGE> 14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
--------------------------
1996 1995
---------- ---------
$ $
<S> <C> <C>
CURRENT LIABILITIES
Line of credit 1,365,312 857,173
Current maturities of notes payable 1,829,159 2,157,395
Accounts payable 3,293,188 3,518,529
Accrued payroll 165,121 129,973
Payroll taxes withheld and accrued 67,754 47,223
Accrued expenses 338,949 566,004
Deferred revenue 2,613,412 2,481,471
---------- ----------
TOTAL CURRENT LIABILITIES 9,672,895 9,757,768
LONG-TERM DEBT
Notes payable 6,692,237 5,592,808
---------- ----------
TOTAL LIABILITIES 16,365,132 15,350,576
---------- ----------
COMMITMENTS
CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock (no par value; 100,000 shares authorized; 5,750 shares
issued and outstanding) 11,500 11,500
Paid-in capital 13,700 13,700
Retained earnings 4,029,690 4,696,056
Unrealized holding gains 37,104 15,446
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 4,091,994 4,736,702
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 20,457,126 20,087,278
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
F-105
<PAGE> 15
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
HOLDING TOTAL
COMMON PAID-IN RETAINED GAINS STOCKHOLDERS'
STOCK CAPITAL EARNINGS (LOSSES) EQUITY
----------- ---------- ---------- ----------- -------------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
BALANCES - DECEMBER 31, 1994 11,500 13,700 3,034,591 (500) 3,059,291
Net earnings 5,042,965 5,042,965
Stockholders' distributions (3,381,500) (3,381,500)
Unrealized holding gains 15,946 15,946
---------- ---------- ---------- ---------- ----------
BALANCES - DECEMBER 31, 1995 11,500 13,700 4,696,056 15,446 4,736,702
Net earnings 2,529,246 2,529,246
Stockholders' distributions (3,195,612) (3,195,612)
Unrealized holding gains 21,658 21,658
---------- ---------- ---------- ---------- ----------
BALANCES - DECEMBER 31, 1996 11,500 13,700 4,029,690 37,104 4,091,994
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
- --------------------------------------------------------------------------------
F-106
<PAGE> 16
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995
------------------------- ---------------------
$ % % $
<S> <C> <C> <C> <C>
SALES 39,290,486 100.00 100.00 38,195,498
COST OF SALES 27,173,237 69.16 64.22 24,531,757
----------- --------- --------- -----------
GROSS PROFIT 12,117,249 30.84 35.78 13,663,741
ADMINISTRATIVE EXPENSES 4,614,507 11.74 10.52 4,019,224
----------- --------- --------- -----------
EARNINGS FROM OPERATIONS BEFORE
DEPRECIATION AND AMORTIZATION OF
NONCOMPETE AGREEMENTS AND GOODWILL 7,502,742 19.10 25.26 9,644,517
DEPRECIATION 4,130,245 10.51 8.79 3,359,217
AMORTIZATION OF NONCOMPETE AGREEMENTS AND
GOODWILL 494,074 1.26 1.27 484,612
----------- --------- --------- -----------
EARNINGS FROM OPERATIONS 2,878,423 7.33 15.20 5,800,688
INTEREST EXPENSE 683,518 1.74 1.59 605,919
OTHER INCOME (EXPENSES) 334,341 0.85 (0.41) (151,804)
----------- --------- --------- -----------
NET EARNINGS 2,529,246 6.44 13.20 5,042,965
=========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
- --------------------------------------------------------------------------------
F-107
<PAGE> 17
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995
---------- ----------
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 39,600,172 38,535,333
Cash paid to suppliers and employees (32,298,965) (27,444,082)
Interest and dividends received 4,676 17,374
Interest paid (683,518) (605,919)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 6,622,365 10,502,706
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,436,830) (7,309,565)
Proceeds from disposal of equipment and improvements 296,651 237,350
Purchase of investments (31,000) 0
Cash paid in exchange for notes receivable (507,701) 0
Purchase of noncompete agreement (5,000) (20,000)
Purchase of goodwill (15,000) (155,000)
----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (4,698,880) (7,247,215)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in line of credit 508,139 857,173
Proceeds from notes payable 2,895,253 2,145,165
Principal repayments of notes payable (2,265,980) (2,764,751)
Principal repayments of obligations under capital lease 0 (74,199)
Stockholders' distributions (3,195,612) (3,381,500)
----------- -----------
NET CASH USED IN FINANCING
ACTIVITIES (2,058,200) (3,218,112)
----------- -----------
NET INCREASE (DECREASE) IN CASH (134,715) 37,379
CASH - BEGINNING 143,358 105,979
----------- -----------
CASH - ENDING 8,643 143,358
=========== ===========
</TABLE>
- Continued -
The accompanying notes are an integral part of this statement.
- --------------------------------------------------------------------------------
F-108
<PAGE> 18
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995
---------- -----------
$ $
<S> <C> <C>
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net earnings 2,529,246 5,042,965
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 4,130,245 3,359,217
Amortization of noncompete agreements and goodwill 494,073 484,612
Provision for doubtful accounts 59,501 103,978
Loss on disposal of equipment and improvements 1,315 129,301
Realized loss on investments 83,537 0
Unrealized loss on investments 0 8,038
Change in cash surrender value of life insurance (98,570) (12,857)
(Increase) decrease in assets:
Accounts receivable (150,605) 3,826
Inventories (85,607) 0
Prepaid expenses (39,182) 63,010
Deposits (36,812) (140,371)
Increase (decrease) in liabilities:
Accounts payable (225,341) 992,892
Accrued payroll 35,148 2,231
Payroll taxes withheld and accrued 20,531 (20,699)
Accrued expenses (227,055) 355,126
Deferred revenue 131,941 131,437
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 6,622,365 10,502,706
=========== ===========
</TABLE>
- Continued -
The accompanying notes are an integral part of this statement.
- --------------------------------------------------------------------------------
F-109
<PAGE> 19
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS - CONTINUED
SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
IN 1996:
The Company acquired equipment for $241,920 in exchange for a note
payable of $141,920 and $100,000 of cash.
The Company recorded unrealized holding gains on available-for-sale
securities of $21,658 as a direct increase to stockholders' equity.
IN 1995:
The Company acquired equipment for $600,000 in exchange for a note
payable of $420,000 and $180,000 of cash.
The Company recorded unrealized holding gains on available-for-sale
securities of $15,946 as a direct increase to stockholders' equity.
The accompanying notes are an integral part of this statement.
- --------------------------------------------------------------------------------
F-110
<PAGE> 20
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
The Company provides waste disposal and recycling services for
its customers. The Company operates in South Central Pennsylvania and
Northern Maryland.
NOTE 2 - ESTIMATES AND SUMMARY OF ACCOUNTING POLICIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, and the disclosure of contingent assets and
liabilities, if any, at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A summary of the significant accounting policies consistently
applied in the preparation of the accompanying financial statements
follows:
(A) SHORT-TERM INVESTMENTS
Short-term investments in equity securities having a readily
determinable fair value are classified as available-for-sale
securities and stated at fair value. Unrealized gains and
losses are excluded from operating results and are reported as
a separate component of equity.
(B) INVENTORIES
Inventories are determined by physical count and are stated at
the lower of cost or market, cost being determined on the
first-in, first-out method. Inventories include materials and
direct labor.
- Continued -
- --------------------------------------------------------------------------------
F-111
<PAGE> 21
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - ESTIMATES AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
(C) INVESTMENTS
Investments are accounted for by the equity method. The
investment are increased by the Company's prorata share of
earnings or losses and reduced when dividends are received.
(D) EQUIPMENT AND IMPROVEMENTS
Equipment and improvements are stated at cost and are
depreciated or amortized using the straight-line method over
the estimated average useful lives of the assets as follows:
machinery and equipment, three to ten years; automobiles and
trucks, five to seven years; office equipment, five to seven
years; and leasehold improvements, thirty-one and one half
years. Accelerated methods of depreciation and amortization
are used for income tax purposes.
(E) NONCOMPETE AGREEMENTS
Noncompete agreements are amortized over the five year lives
of the agreements.
(F) GOODWILL
Goodwill is stated at cost and is amortized over five years.
(G) DEFERRED REVENUE
Deferred revenue represents advance billings for residential
waste collections to be performed during the first and second
quarters of the following year, and commercial waste
collections to be performed during the following month.
- --------------------------------------------------------------------------------
F-112
<PAGE> 22
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - SHORT-TERM INVESTMENTS
The cost, gross unrealized gains and losses, and fair value
for available-for-sale securities consist of the following as of:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------
GROSS
UNREALIZED
GAINS FAIR
COST (LOSSES) VALUE
---- -------- -----
$ $ $
<S> <C> <C> <C>
Equity securities 44,719 8,385 53,104
======= ======= =======
DECEMBER 31, 1995
--------------------------------
Equity securities 44,719 (13,273) 31,446
======= ======= =======
</TABLE>
Prior to December 31, 1995, an unrealized loss of $28,719 was
charged to operations.
NOTE 4 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of
December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
$ $
<S> <C> <C>
Accounts receivable - trade 3,856,252 3,758,968
Less: Allowance for doubtful accounts 109,553 103,373
--------- ---------
3,746,699 3,655,595
========= =========
</TABLE>
- --------------------------------------------------------------------------------
F-113
<PAGE> 23
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES RECEIVABLE
Notes receivable consist of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
$ $
<S> <C> <C>
Kinsley & Wagner Partnership - term loans for the purchase of
certain assets; requiring monthly interest and principal
of $8,713; fixed interest rate of 7%; intended to be
repaid within one year 440,000 0
Kinsley & Wagner Partnership - term loans for the purchase of
certain assets; requiring monthly interest and principal
of $1,341; fixed interest rate of 7%; intended to be
repaid within one year 67,701 0
----------- ---------
507,701 0
=========== =========
</TABLE>
NOTE 6 - INVESTMENTS
The Company invested in a corporate mutual insurance company
located in Bermuda as part of its general insurance coverage plan. The
Company accounts for this investment on a one year lag basis. The
investment income (loss) reported by the Company for the years ended
December 31, 1996 and 1995 amounted to $-0- and ($8,038), respectively.
There were no dividends received for either year. The Company's total
ownership percentage was 2.6% as of December 31, 1996 and 1995. During
the year ended December, 1996, the mutual insurance company ceased
operations due to the fact that operating results were below Bermudian
statutory requirements. The stock was then deemed worthless and the
carrying value of $83,537 was written-off.
- Continued -
- --------------------------------------------------------------------------------
F-114
<PAGE> 24
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INVESTMENTS (CONTINUED)
This investment consists of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
$ $
<S> <C> <C>
Original acquisition cost 62,570 62,570
Cost of additional shares acquired 38,869 38,869
Accumulated loss recognized (5,260) (5,260)
----------- -----------
96,179 96,179
Less: Accumulated dividends received 12,642 12,642
Write-off due to worthlessness 83,537 0
----------- -----------
0 83,537
=========== ===========
</TABLE>
During the year ended December 31, 1996, the Company invested
in another mutual insurance company located in the Cayman Islands. The
Company accounts for this investment on a one year lag basis. The
investment income reported by the Company for the year ended December
31, 1996 amounted to $-0-. There were no dividends received during the
year. The Company's total ownership percentage was 1.25% as of December
31, 1996.
The investment consists of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
$ $
<S> <C> <C>
Original acquisition cost 31,000 0
=========== ========
</TABLE>
- --------------------------------------------------------------------------------
F-115
<PAGE> 25
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NONCOMPETE AGREEMENTS
On October 1, 1996, the Company purchased the certain assets
of J & P Hauling and Douglas Waste Service, Inc. for the aggregate sum
of $172,000. In conjunction with this purchase, the Company entered
into five-year noncompete agreements with Douglas Waste Service, Inc.,
Virginia Gayle Douglas and Charles Harry Douglas, each in the amount of
$1,000 and with J & P Hauling, Patricia Ann Griffith, Kerry Lee Barrow
and Fred Joseph Isaac, each in the amount of $500.
On March 31, 1995, the Company purchased the certain assets of
County Waste, Inc., Diffenderfers Disposal Service, Inc. and Veteran's
Hauling Service, Inc. for the aggregate sum of $775,000. In conjunction
with this purchase, the Company entered into five-year noncompete
agreements with Ronald L. Felty, John J. Devaney and Paul M. Fischer,
each in the amount of $5,000, and with County Waste, Inc.,
Diffenderfers Disposal Service, Inc. and Veteran's Hauling Service,
Inc. in the amount of $5,000.
On July 1, 1993, the Company purchased the certain assets of
J. L. Howard Sanitation, Inc. for an aggregate sum of $1,600,000. In
conjunction with this purchase, the Company entered into five-year
noncompete agreements with J. L. Howard Sanitation, Inc. in the amount
of $50,000, and with John L. Howard in the amount of $950,000.
On November 5, 1992, the Company purchased certain assets of
Chambers Development of PA for an aggregate sum of $305,000. In
conjunction with this purchase, the Company entered into a five-year
noncompete agreement with Chambers Development of PA in the amount of
$205,000.
- Continued -
- --------------------------------------------------------------------------------
F-116
<PAGE> 26
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NONCOMPETE AGREEMENTS (CONTINUED)
On October 30, 1992, the Company purchased certain assets of
Fetrow Refuse, Inc. for an aggregate sum of $900,000. In conjunction
with this purchase, the Company entered into five-year noncompete
agreements with each principal, Edward P. Roof and James C. Weire, each
in the amount of $287,500. The five-year noncompete agreements are
stated net of imputed interest of 7.5%. The Company also entered into a
five-year noncompete agreement with Fetrow Refuse, Inc. in the amount
of $30,000.
On December 23, 1991, the Company purchased certain assets of
Boxit Disposal Systems, Inc. for an aggregate sum of $949,300. In
conjunction with this purchase, the Company entered into a five-year
noncompete agreement with its principals, Paul G. and Kay E. Bechtold,
in the amount of $440,000. On January 10, 1992, the Company paid the
Bechtolds $220,000 and issued a letter of credit in the amount of
$132,150 in favor of Paul G. and Kay E. Bechtold as required by the
agreement. The noncompete agreements became effective February 1, 1992
and are stated net of imputed interest of 7.5%. The Company also
entered into a five-year noncompete agreement with Boxit Disposal
Systems, Inc. in the amount of $20,000.
- Continued -
- --------------------------------------------------------------------------------
F-117
<PAGE> 27
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NONCOMPETE AGREEMENTS (CONTINUED)
Noncompete agreements consist of the following as of
December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
$ $
<S> <C> <C>
County Waste, Inc., Diffenderfers Disposal
Service, Inc. and Veteran's Hauling Service, Inc. 5,000 5,000
Ronald L. Felty 5,000 5,000
John J. Devaney 5,000 5,000
Paul M. Fischer 5,000 5,000
J. L. Sanitation, Inc. 50,000 50,000
John L. Howard 950,000 950,000
Chambers Development of PA 205,000 205,000
Edward P. Roof 287,500 287,500
James C. Weire 287,500 287,500
Fetrow Refuse, Inc. 30,000 30,000
Paul G. and Kay E. Bechtold 440,000 440,000
Boxit Disposal Systems, Inc. 20,000 20,000
Douglas Waste Service, Inc. 1,000 0
Virginia Gayle Douglas 1,000 0
Charles Harry Douglas 1,000 0
J & P Hauling 500 0
Patricia Ann Griffith 500 0
Kerry Lee Barrow 500 0
Fred Joseph Isaac 500 0
--------------- ---------------
2,295,000 2,290,000
Less: Accumulated amortization 1,842,252 1,384,002
--------------- ---------------
452,748 905,998
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
F-118
<PAGE> 28
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - GOODWILL
Goodwill consists of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
DATE ACQUIRED COMPANY $ $
----------------- -----------------------------
<S> <C> <C> <C>
December 23, 1991 Boxit Disposal Systems, Inc. 5,000 5,000
October 30, 1992 Fetrow Refuse, Inc. 5,000 5,000
November 5, 1992 Chambers Development of PA 5,000 5,000
July 1, 1993 J. L. Howard Sanitation, Inc. 5,000 5,000
April 13, 1994 Sonrise Handyman Services 500 500
March 31, 1995 County Waste, Inc., Diffenderfers Disposal
Service, Inc. and Veteran's Hauling
Service, Inc. 155,000 155,000
October 1, 1996 J & P Hauling 5,000 0
October 1, 1996 Douglas Waste Service 10,000 0
----------- -----------
190,500 175,500
Less: Accumulated amortization 72,340 36,517
----------- -----------
118,160 138,983
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
F-119
<PAGE> 29
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - CASH SURRENDER VALUE OF LIFE INSURANCE
The Company is the owner and beneficiary of two life insurance
policies on one of the stockholders. The policies have an aggregate
face value of $1,000,000. Annual increases in cash surrender value of
the insurance policies are applied to reduce life insurance expense for
financial statement purposes.
The Company is the owner of three split-dollar policies. The
policies have an aggregate face value of $10,500,000. The annual
increases in cash surrender value of the insurance policies are applied
to reduce life insurance expense for financial statement purposes.
In contemplation of these policies being surrendered or
purchased by the insured during 1997, the cash surrender value as of
December 31, 1996 of $164,471 is classified as a current asset.
NOTE 10 - LINE OF CREDIT
The Company has an authorized $3,000,000 working capital line
of credit with Dauphin Deposit Bank & Trust Company. The line of credit
bears interest at the bimonthly average federal funds rate plus 150
basis points (6.8% as of December 31, 1996) and is collateralized by
accounts receivable, inventory and equipment and improvements. The line
of credit has an outstanding balances of $1,365,312 and $857,173 as of
December 31, 1996 and 1995, respectively.
- --------------------------------------------------------------------------------
F-120
<PAGE> 30
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - NOTES PAYABLE
Notes payable consist of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ----------
$ $
<S> <C> <C>
Dauphin Deposit Bank - equipment loans under a $8,000,000
authorized line of credit with structured terms;
requiring monthly principal payments of $125,000, plus
interest at the bimonthly average federal funds rate
plus 175 basis points (7.15% at December 31, 1996);
collateralized by equipment, inventory and
accounts receivables 7,909,152 6,616,683
County Waste, Inc. - installment note for the purchase
of certain assets from County Waste, Inc.; dated
March 31, 1995, requiring monthly payments of
$13,164; interest at 8%; collateralized by
personal guarantee of one stockholder 199,262 335,150
Leach Credit Corporation - installment note dated October 29,
1996; requiring monthly payments of $2,279, including
interest at 10.75%; collateralized by specific equipment 98,634 0
RIDAGEN/RIDA GENERAL - purchase of certain recycling assets;
installment note dated August 23, 1993; requiring
monthly payments of $1,915; interest at 2%;
collateralized by specific equipment and the personal
guarantees of all stockholders 82,963 104,053
Dauphin Deposit Bank - installment note dated October 4,
1993; requiring monthly payments of $1,429, plus
interest at the bank's base rate (8.25% as
of December 31, 1996) 65,714 82,857
</TABLE>
- Continued -
- --------------------------------------------------------------------------------
F-121
<PAGE> 31
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
$ $
<S> <C> <C>
Leach Credit Corporation - installment note dated October 29,
1996; requiring monthly payments of $1,006, including
interest at 11.5%; collateralized by specific equipment 37,266 0
Edward P. Roof - noncompete agreement; requiring monthly
payments of $3,256 with imputed interest at 7.5%;
collateralized by the personal guarantees of
the stockholders 34,528 69,556
James C. Weirc - noncompete agreement; requiring monthly
payments of $3,256 with imputed interest of 7.5%;
collateralized by the personal guarantees of
the stockholders 34,528 69,556
Dauphin Deposit Bank - installment note dated March 4, 1993;
requiring monthly payments of $1,933, plus interest at
the bank's base rate (8.25% as of December 31, 1996) 29,000 52,200
RIDAGEN/RIDA GENERAL - purchase of certain recycling assets;
installment note dated February 25, 1993, requiring
monthly payments of $1,753; interest at 2%;
collateralized by specific equipment and personal
guarantees of all the stockholders 25,945 46,237
Paul G. and Kay E. Bechtold - noncompete agreement;
requiring monthly payments of $4,405 with imputed
interest at 7.5%; collateralized by a $132,150
letter of credit and the personal guarantee of
one stockholder 4,404 54,846
</TABLE>
- Continued -
- --------------------------------------------------------------------------------
F-122
<PAGE> 32
- --------------------------------------------------------------------------------
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
$ $
<S> <C> <C>
The Associates - installment note dated December 18, 1995;
due September 1, 1996; requiring monthly payments of
$21,639; interest free; collateralized by specific
equipment; repaid during 1996 0 194,750
Dauphin Deposit Bank - installment note dated November 19,
1992; requiring monthly payments of $10,417, including
interest at 7%; collateralized by equipment, accounts
receivable and inventory; repaid during 1996 0 124,315
--------- ---------
8,521,396 7,750,203
Less: Current maturities 1,829,159 2,157,395
--------- ---------
6,692,237 5,592,808
========= =========
</TABLE>
Aggregate future maturities of notes payable, assuming no
changes in current terms, consist of the following for the five years ending
December 31:
AGGREGATE FUTURE
MATURITIES OF
NOTES PAYABLE
----------------
$
1997 1,829,159
1998 1,630,853
1999 1,571,652
2000 1,565,183
2001 1,515,398
- --------------------------------------------------------------------------------
F-123
<PAGE> 33
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - RELATED PARTY ACTIVITY
Related party balances and transactions consist of the
following as of and for the years ended December 31:
1996 1995
-------- --------
$ $
Accounts receivable 536,480 39,763
Accounts payable 259,405 132,297
Revenues 349,835 258,084
Rent expense 352,977 336,219
Rental income 161,760 0
NOTE 13 - PROFIT SHARING PLAN
In 1991, the Company implemented a 401(k) profit sharing plan
in accordance with the Internal Revenue Service guidelines. An employee
is considered eligible having completed one year of service, provided
at least 1,000 hours during the previous twelve-month period, and
attained twenty-one years of age. The plan provides for a Company match
of 25% of employees' contributions up to 5% of the employees' salary.
The Company matched $27,055 and $21,179 during the years ended December
31, 1996 and 1995, respectively.
- --------------------------------------------------------------------------------
F-124
<PAGE> 34
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - COMMITMENTS
The Company leases its office and shop facility through an
affiliated partnership in which a stockholder is one of the partners.
Total rent paid under this lease was $134,356 and $130,269 for the
years ended December 31, 1996 and 1995, respectively. This lease was
amended July 1, 1992 for a term of six years with escalating rentals
each year. There is an additional six-year option.
The Company leases its recycling facility through an
affiliated partnership in which a stockholder is one of the partners.
Total rent paid under this lease was $95,460 and $90,990 for the years
ended December 31, 1996 and 1995, respectively. This lease began
December 1, 1992 and is for a term of ten years with escalating rents
each year. There is an additional five-year option.
On December 31, 1992, the Company signed a five-year lease
purchase with a third party for 3.6 acres of land. Rental is $33,245
per year and is payable in advance by December 31 for the upcoming
year. Rent may increase or decrease based upon the prime rate as of
December 31, with a base rate of 6%. The term of the lease is for five
years and includes the right to purchase the land on December 31, 1997
at a predetermined value. The total payments made for this lease were
$36,902 for each of the years ended December 31, 1996 and 1995.
On December 30, 1994, the Company signed a seven-year lease
purchase, with John L. Howard, for a building plus eight acres of land
located in Mechanicsburg, Pennsylvania. Lease payments total $60,000
per year payable in monthly installments of $5,000. Total rent paid
under this lease was $60,000 for each of the years ended December 31,
1996 and 1995.
- Continued -
- --------------------------------------------------------------------------------
F-125
<PAGE> 35
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - COMMITMENTS
On December 1, 1993, the Company signed a ten-year lease for
the Lancaster facility with an affiliated partnership in which two
stockholders are partners. Total rent paid under this lease was
$117,845 and $114,960 for the years ended December 31, 1996 and 1995,
respectively.
The total aggregate rent expense for the years ended December
31, 1996 and 1995, amounted to $444,563 and $433,121, respectively.
Future minimum lease payments consist of the following for
each of the five years ending December 31, 2001, and thereafter:
FUTURE MINIMUM
LEASE PAYMENTS
--------------
$
1997 454,032
1998 390,059
1999 315,645
2000 318,775
2001 625,774
Thereafter 322,184
---------
2,426,469
=========
NOTE 15 - CONCENTRATION OF CASH
The Company has its cash deposited with one financial
institution located in York, Pennsylvania. The bank balances are
insured by the Federal Deposit Insurance Corporation up to $100,000. As
of December 31, 1996 and 1995, the Company's uninsured bank balances
amounted to $110,498 and $155,018, respectively.
- --------------------------------------------------------------------------------
F-126
<PAGE> 36
YORK WASTE DISPOSAL, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 16 - LETTER OF CREDIT
The Company has $525,784 and $250,000 letters of credit
outstanding as of December 31, 1996 and 1995, respectively. The letters
of credit serve as collateral for future Workmen's Compensation
Insurance claims.
NOTE 17 - INCOME TAXES
Federal and state income taxes on net earnings are payable
personally by the stockholders pursuant to elections to be a S
Corporation. Accordingly, no provision is made for federal and state
income taxes in the accompanying statements of earnings.
NOTE 18 - CONTINGENT LIABILITIES
The Company is a third party defendant in the Keystone
Sanitation Landfill site. The Company has accrued $50,000 to cover any
potential liability. Management and counsel considers this accrual to
be a conservative estimate based on current settlement offers, however
this estimate could possibly change over the course of the next year.
During 1996, the Company guaranteed a $5,000,000 loan of a
related entity. The balance outstanding as of December 31, 1996 was
$5,000,000.
- --------------------------------------------------------------------------------
F-127
<PAGE> 37
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
REPUBLIC INDUSTRIES, INC., AUTONATION INCORPORATED, ED MULLINAX, INC.,
GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP, AAA DISPOSAL SERVICE, INC.
AND YORK WASTE DISPOSAL, INC.
The following Unaudited Condensed Consolidated Pro Forma Financial
Statements include the consolidated financial statements of Republic Industries,
Inc. and subsidiaries (the "Company") which include the results of operations of
National Car Rental System, Inc. ("National"), Maroone Automotive Group
("Maroone"), Wallace Automotive Group ("Wallace") and Taormina Industries, Inc.
("Taormina") which the Company acquired in February 1997 and Carlisle Motors,
Inc. ("Carlisle") which the Company acquired in January 1997. These
transactions have been accounted for under the pooling of interests method of
accounting and, accordingly, the Company's consolidated financial
statements have been restated as if the Company, National, Maroone, Wallace,
Taormina and Carlisle had operated as one entity since inception.
The following Unaudited Condensed Consolidated Pro Forma Statements of
Operations for the three months ended March 31, 1997 and for the year ended
December 31, 1996 present the pro forma results of operations of the Company as
if the acquisitions of AutoNation Incorporated ("AutoNation"), Ed Mullinax, Inc.
and subsidiaries ("Mullinax") and Grubb Automotive ("Grubb"), which were
acquired in January 1997, and Kendall Automotive Group ("Kendall"), AAA Disposal
Service, Inc. ("AAA") and York Waste Disposal, Inc. ("York"), which were
acquired in February 1997, had been consummated as of January 1, 1996. The pro
forma statement of operations for the year ended December 31, 1996 also contains
pro forma adjustments related to certain equity transactions in 1996 and 1997
which resulted in net proceeds to the Company of approximately $1.1 billion (the
"Equity Transactions").
The unaudited pro forma income per common and common equivalent share is
based on the combined weighted average number of common shares and common share
equivalents outstanding which include, where appropriate, the assumed exercise
or conversion of warrants and options. In computing the unaudited pro forma
income per common and common equivalent share, the Company utilizes the treasury
stock method. Primary income per share is not presented as it does not
significantly differ from fully diluted income per share.
These Unaudited Condensed Consolidated Pro Forma Financial Statements
should be read in conjunction with the respective historical consolidated or
combined financial statements and notes thereto of the Company, National,
Maroone, Wallace, Taormina, Carlisle, AutoNation, Mullinax, Grubb, Kendall, AAA
and York. These Unaudited Condensed Consolidated Pro Forma Financial Statements
were prepared utilizing the accounting policies of the respective entities as
outlined in their historical financial statements except as described in the
accompanying notes. The acquisitions of AutoNation, Mullinax, Grubb, Kendall
and York have been accounted for under the purchase method of accounting.
Accordingly, the Unaudited Condensed Consolidated Pro Forma Financial Statements
reflect the Company's preliminary allocations of the purchase prices of such
acquisitions which will be subject to further adjustments as the Company
finalizes the allocations of the purchase prices in accordance with generally
accepted accounting principles. The acquisition of AAA has been accounted for
under the pooling of interests method of accounting and, accordingly, has been
included in the Company's historical results of operation for the three months
ended March 31, 1997. Such acquisition was not material and consequently prior
period financial statements have not been restated and pro forma statements of
operations for 1995 and 1994 have not been included herein. The unaudited
condensed consolidated pro forma results of operations do not necessarily
reflect actual results which would have occurred if the acquisitions or the
Equity Transactions had taken place on the assumed dates, nor are they
necessarily indicative of the results of future combined operations.
F-128
<PAGE> 38
REPUBLIC INDUSTRIES, INC.,
AUTONATION INCORPORATED, GRUBB AUTOMOTIVE,
KENDALL AUTOMOTIVE GROUP AND YORK WASTE DISPOSAL, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(In millions, except per share data)
<TABLE>
<CAPTION>
REPUBLIC AUTONATION(1) GRUBB(2) KENDALL(2) YORK(2) COMBINED
--------- ---------- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 1,504.0 $ 14.2 $ 42.0 $ 69.6 $ 6.9 $ 1,636.7
Expenses:
Cost of operations 1,234.6 15.1 37.8 63.1 5.2 1,355.8
Selling, general and
administrative 229.4 8.9 3.8 5.4 .9 248.4
Other (income) expense:
Interest and other income (9.2) -- (.2) (.2) (.1) (9.7)
Interest expense 3.3 1.1 -- .3 .1 4.8
---------- ------ ------ ------ ------ ---------
1,458.1 25.1 41.4 68.6 6.1 1,599.3
---------- ------ ------ ------ ------ ---------
Income before income taxes 45.9 (10.9) .6 1.0 .8 37.4
Provision for income taxes 17.0 -- -- -- -- 17.0
---------- ------ ------ ------ ------ ---------
Net income $ 28.9 $(10.9) $ .6 $ 1.0 $ .8 $ 20.4
========== ====== ====== ====== ====== =========
Fully-diluted:
Income per share $ .08
==========
Weighted average shares
outstanding 373.9 17.5 4.0 1.2 1.1 397.7
========== ====== ====== ====== ====== =========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------------
DR. CR. PRO FORMA
---------- ---------- ------------
<S> <C> <C> <C>
Revenue $ 1,636.7
Expenses:
Cost of operations $ .9(c) 1,356.7
Selling, general and
administrative 248.4
Other (income) expense:
Interest and other income 1.1(b) (8.6)
Interest expense $ 1.1(b) 3.7
------ ------ ----------
2.0 1.1 1,600.2
------ ------ ----------
Income before income taxes 2.0 1.1 36.5
Provision for income taxes 3.5(e) 13.5
------ ------ ----------
Net income $ 2.0 $ 4.6 $ 23.0
====== ====== ==========
Fully-diluted:
Income per share $ .06
==========
Weighted average shares
outstanding (19.1)(f) 378.6
====== ==========
- ---------------------
(1) Represents the pre-acquisition results of operations for the month of January 1997.
(2) Represents the pre-acquisition results of operations for the months of January and
February 1997.
</TABLE>
The accompanying notes are an integral part of these statements.
F-129
<PAGE> 39
REPUBLIC INDUSTRIES, INC.,
AUTONATION INCORPORATED, ED MULLINAX, INC.,
GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP,
AAA DISPOSAL SERVICE, INC. AND YORK WASTE DISPOSAL, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In millions, except per share data)
<TABLE>
<CAPTION>
REPUBLIC AUTONATION MULLINAX GRUBB KENDALL AAA YORK COMBINED
--------- ---------- -------- -------- --------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $4,764.0 $ 31.5 $659.0 $440.0 $405.8 $32.4 $39.3 $6,372.0
Expenses:
Cost of operations 3,891.9 43.4 589.8 384.8 367.1 23.7 31.8 5,332.5
Selling, general and
administrative 784.2 38.6 54.5 46.9 34.3 5.1 4.6 968.2
Restructuring and merger
expenses 38.3 -- -- -- -- -- -- 38.3
Other (income) expense:
Interest and other income (36.3) -- -- (2.0) (.7) (.2) (.3) (39.5)
Interest expense 43.9 4.8 .9 4.3 1.3 .5 .7 56.4
-------- ------ ------ ------ ------ ----- ----- --------
4,722.0 86.8 645.2 434.0 402.0 29.1 36.8 6,355.9
-------- ------ ------ ------ ------ ----- ----- --------
Income before
income taxes and
extraordinary charge 42.0 (55.3) 13.8 6.0 3.8 3.3 2.5 16.1
Provision for income taxes 43.0 -- -- -- -- -- -- 43.0
-------- ------ ------ ------ ------ ----- ----- --------
Income before
extraordinary charge $ (1.0) $(55.3) $ 13.8 $ 6.0 $ 3.8 $ 3.3 $ 2.5 $ (26.9)
======== ====== ====== ====== ====== ===== ===== ========
Fully-diluted:
Income per share before
extraordinary charge $ --
========
Weighted average shares
outstanding 313.9 17.5 3.6 4.0 1.2 2.9 1.1 344.2
======== ====== ====== ====== ====== ===== ===== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------------
DR. CR. PRO FORMA
---------- ---------- -----------
<S> <C> <C> <C>
Revenue $6,372.0
Expenses:
Cost of operations $ 9.1(c) $ .9(a) 5,291.1
48.8(d)
.8(b)
Selling, general and
administrative 968.2
Restructuring and merger
expenses 38.3
Other (income) expense:
Interest and other income 5.6(b) (33.9)
Interest expense 51.6(d) --
4.8(b)
----- ------ --------
14.7 106.9 6,263.7
----- ------ --------
Income before
income taxes and
extraordinary charge 14.7 106.9 108.3
Provision for income taxes 25.0(e) 68.0
----- ------ --------
Income before
extraordinary charge $39.7 $106.9 $ 40.3
===== ====== ========
Fully-diluted:
Income per share
before extraordinary charge $ .11
========
Weighted average shares
outstanding 29.9(f) 374.1
===== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-130
<PAGE> 40
REPUBLIC INDUSTRIES, INC., AUTONATION INCORPORATED,
ED MULLINAX, INC., GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP,
AAA DISPOSAL SERVICE, INC. AND YORK WASTE DISPOSAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(a) Represents an entry to conform the inventory accounting policies of
acquired companies from LIFO to the specific identification method.
(b) Represents an entry to eliminate interest on advances from the Company to
AutoNation.
(c) Represents an adjustment to record amortization, on a straight-line basis,
of the intangible assets resulting from the preliminary purchase price
allocations of AutoNation, Mullinax, Grubb, Kendall and York. Intangible
assets resulting from these purchases are being amortized over a 40 year
life which approximates the estimated useful life.
(d) Represents the assumed interest savings on the payoff of a portion of the
existing indebtedness outstanding as of January 1, 1996 of the combined
entity with the proceeds from the Equity Transactions which are also
assumed to have occurred as of January 1, 1996.
(e) Represents the incremental change in the combined entity's provision for
income taxes as a result of the pre-tax income (loss) of AutoNation,
Mullinax, Grubb, Kendall, AAA and York and all pro forma adjustments as
described above.
(f) Includes the weighted average effect of shares issued in the acquisitions
and/or the Equity Transactions.
F-131
