<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1998.
REGISTRATION NO. 333-57587
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LAIDLAW ENVIRONMENTAL SERVICES, INC.
SAFETY-KLEEN SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4953 51-0228924
DELAWARE 4953 75-2178928
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
SUITE 300, 1301 GERVAIS STREET
COLUMBIA, SOUTH CAROLINA 29201
(803) 933-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HENRY H. TAYLOR, ESQ.
LAIDLAW ENVIRONMENTAL SERVICES, INC.
SUITE 300, 1301 GERVAIS STREET
COLUMBIA, SOUTH CAROLINA 29201
(803) 933-4200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
LEONARD V. QUIGLEY, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
- ---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING
ZIP CODE, AND
STATE OR OTHER PRIMARY STANDARD IRS TELEPHONE NUMBER,
JURISDICTION OF INDUSTRIAL EMPLOYER INCLUDING AREA CODE,
INCORPORATION CLASSIFICATION IDENTIFICATION OF REGISTRANTS'
NAME OR ORGANIZATION CODE NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICES
---- --------------- ---------------- -------------- ---------------------------
<S> <C> <C> <C> <C>
Safety-Kleen (Lone and Grassy
Mountain), Inc. ................ Oklahoma 4953 73-0774247 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Tulsa), Inc. ....... Oklahoma 4953 73-1072214 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (San Antonio),
Inc. ........................... Texas 4953 74-1670248 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Wichita), Inc. ..... Kansas 4953 48-1025760 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Delaware) Inc. ..... Delaware 4953 57-1036619 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Rosemount), Inc. ... Minnesota 4953 36-3645772 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Sawyer), Inc. ...... Oklahoma 4953 76-0306990 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (PPM) Inc. .......... Georgia 4953 48-0926641 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Ninth Street Properties, Inc. .... Missouri 4953 48-1009630 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (San Jose), Inc. .... California 4953 94-2685637 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
Chemclear, Inc. of Los Angeles.... California 4953 76-0292745 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
USPCI, Inc. of Georgia............ Georgia 4953 76-0299932 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen Holdings, Inc. ...... Delaware 4953 76-0289923 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Westmorland),
Inc. ........................... California 4953 57-0891474 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Buttonwillow),
Inc. ........................... California 4953 57-0891472 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (NE), Inc. .......... New Hampshire 4953 02-0335983 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Crowley), Inc. ..... Louisiana 4953 72-0989782 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (La Porte), Inc. .... Texas 4953 76-0209879 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (TG), Inc. .......... Delaware 4953 57-0600257 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Roebuck), Inc. ..... South 4953 57-0811015 1301 Gervais Street
Carolina Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (TS), Inc. .......... Delaware 4953 57-0784795 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Colfax), Inc. ...... Delaware 4953 86-0713567 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
GSX Chemical Services of Ohio,
Inc. ........................... Ohio 4953 34-1210390 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
LEMC, Inc. ....................... Delaware 4953 57-0987727 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C>
Safety-Kleen Chemical Services,
Inc. ........................... Massachusetts 4953 04-2308230 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Altair), Inc. ...... Texas 4953 76-0187429 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (FS), Inc. .......... Delaware 4953 51-0268319 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (GS), Inc. .......... Tennessee 4953 62-1261102 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (BDT), Inc. ......... New York 4953 16-1153020 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Clive), Inc. ....... Oklahoma 4953 73-1311262 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (WT), Inc. .......... Ohio 4953 31-0747129 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen OSCO Holdings,
Inc. ........................... Delaware 4953 62-1478930 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Nashville), Inc. ... Tennessee 4953 62-1268344 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Bartow), Inc. ...... Florida 4953 59-2692187 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (California),
Inc. ........................... California 4953 65-0121392 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Chattanooga),
Inc. ........................... Tennessee 4953 57-0853102 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Pecatonica),
Inc. ........................... Illinois 4953 36-3337048 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Pinewood), Inc. .... South 4953 04-2639118 1301 Gervais Street
Carolina Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (White Castle),
Inc. ........................... Colorado 4953 84-0619137 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
LES Merger, Inc. ................. Delaware 4953 Applied 1301 Gervais Street
For Columbia, South Carolina 29201
(803) 933-4200
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C> <C> <C>
Safety-Kleen (Puerto Rico),
Inc. ........................... Puerto Rico 4953 Not 1301 Gervais Street
applicable Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Bridgeport),
Inc. ........................... Delaware 4953 23-1704900 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Deer Park), Inc. ... Delaware 4953 51-022884 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Baton Rouge),
Inc. ........................... Delaware 4953 51-0228882 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Plaquemine),
Inc. ........................... Delaware 4953 52-1126035 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Custom Transport),
Inc. ........................... Delaware 4953 51-0277687 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Los Angeles),
Inc. ........................... California 4953 95-3562319 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Tipton), Inc. ...... Delaware 4953 43-1495372 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Gloucester), Inc.
............................... Delaware 4953 51-0336950 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Deer Trail),
Inc. ........................... Colorado 4953 76-0167186 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Mt. Pleasant),
Inc. ........................... Tennessee 4953 58-1735252 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Minneapolis),
Inc. ........................... Minnesota 4953 41-1392441 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Aragonite), Inc. ... Delaware 4953 25-1563807 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Sussex), Inc. ...... Delaware 4953 51-0262487 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen (Encotec), Inc. ..... Delaware 4953 51-0290240 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen Systems, Inc. ....... Wisconsin 7389 39-6090019 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
Dirt Magnet, Inc. ................ Colorado 7389 84-0705639 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
The Midway Gas & Oil Co. ......... Colorado 7389 84-0266380 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Elgint Corp. ..................... Nevada 7389 88-0374364 Suite 850
101 Convention Center
Las Vegas, Nevada 89109
Safety-Kleen Envirosystems
Company......................... California 7389 94-2764195 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen Envirosystems Company
of Puerto Rico, Inc. ........... Indiana 7389 35-1283524 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Petrocon, Inc. ................... Delaware 7389 36-3562993 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Phillips Acquisition Corp. ....... Delaware 7389 36-3515322 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen Aviation, Inc. ...... Delaware 7389 36-3772680 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
SK Insurance Company.............. Vermont 7389 36-3933116 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
SK Real Estate, Inc. ............. Illinois 7389 36-3973105 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen International,
Inc. ........................... Delaware 7389 36-3396234 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen Oil Recovery Co. .... Delaware 7389 36-3546688 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
Safety-Kleen Oil Services,
Inc. ........................... Delaware 7389 98-0082130 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
The Solvents Recovery Service of
New Jersey, Inc. ............... New Jersey 7389 22-1292778 1301 Gervais Street
Columbia, South Carolina 29201
(803) 933-4200
</TABLE>
<PAGE> 7
PROSPECTUS
SAFETY-KLEEN SERVICES, INC.
OFFER TO EXCHANGE ITS 9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
(GUARANTEED BY LAIDLAW ENVIRONMENTAL SERVICES, INC.) WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING 9 1/4% SENIOR SUBORDINATED
NOTES DUE 2008 (GUARANTEED BY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
THE EXCHANGE OFFER WILL EXPIRE AT P.M., NEW YORK CITY TIME ON
,
1998, UNLESS EXTENDED.
------------------------------------------
Safety-Kleen Services, Inc. (formerly known as LES, Inc.) (the "Company"), a
wholly-owned subsidiary of Laidlaw Environmental Services Inc. (the "Parent"),
hereby offers to exchange up to $325,000,000 aggregate principal amount of its
9 1/4% Senior Subordinated Notes due 2008 (the "New Notes") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for any and all outstanding 9 1/4% Senior Subordinated Notes due 2008 (the
"Existing Notes," and, together with the New Notes, the "Notes"), upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal" and together with this
Prospectus, the "Exchange Offer"). The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of Existing Notes being tendered for
exchange pursuant to the Exchange Offer. However, the Exchange Offer is subject
to the absence of certain conditions which may be waived by the Company. See
"The Exchange Offer -- Conditions to the Exchange Offer." Subject to the absence
or waiver of such conditions, the Company will accept for exchange any and all
Existing Notes validly tendered on or prior to p.m., New York City time, on
, 1998, unless the Exchange Offer is extended (the "Expiration Date").
Existing Notes may be tendered only in integral multiples of $1,000. The date of
acceptance and exchange of the Existing Notes (the "Exchange Date") will be the
third business day following the Expiration Date, unless an earlier date is
selected by the Company. Existing Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time prior to p.m., New York City time, on the
Expiration Date; otherwise such tenders are irrevocable. The New Notes will be
issued and delivered promptly after the Exchange Date.
The terms of the New Notes are identical in all material respects to the
terms of the Existing Notes, except that the New Notes have been registered
under the Securities Act and are generally freely transferable by holders
thereof and are issued without any covenant upon the Company regarding
registration under the Securities Act. See "The Exchange Offer -- Consequences
of Failure to Exchange; Resales of New Notes." The New Notes will evidence the
same debt as the Existing Notes and will be issued under, and entitled to the
benefits of, the indenture, dated May 29, 1998 (the "Indenture"), among the
Company, the Parent, as a Guarantor, the Subsidiary Guarantors (as defined
herein) and The Bank of Nova Scotia Trust Company of New York, as trustee (the
"Trustee"), governing the Existing Notes. For a complete description of the
terms of the New Notes, see "Description of the Notes."
Interest on the New Notes will be payable semiannually in arrears on June 1
and December 1 of each year, commencing December 1, 1998. For each Existing Note
accepted for exchange, the holder of such Existing Note will receive a New Note
having a principal amount equal to that of the surrendered Existing Note. The
New Notes will bear interest from the most recent date to which interest has
been paid on the Existing Notes or, if no interest has been paid on the Existing
Notes, from May 29, 1998. Accordingly, if the relevant record date for interest
payment occurs after the consummation of the Exchange Offer registered holders
of New Notes on such record date will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from May 29, 1998. If, however, the relevant record date for interest payment
occurs prior to the consummation of the Exchange Offer registered holders of the
Existing Notes on such record date will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from May 29, 1998. Existing Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer, except
as set forth in the immediately preceding sentence. Holders of Existing Notes
whose Existing Notes are accepted for exchange will not receive any payment in
respect of interest on such Existing Notes otherwise payable on any interest
payment date the record date for which occurs on or after the consummation of
the Exchange Offer.
The Notes mature on June 1, 2008. The Notes will be redeemable, in whole or
in part, at the option of the Company, at any time prior to June 1, 2003 at a
redemption price equal to the greater of (i) 100% of the principal amount of
such Notes or (ii) the sum of the present values of 104.625% of the principal
amount of such New Notes and the scheduled payments of interest thereon through
and including June 1, 2003 discounted to such redemption date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined herein) plus 50 basis points, together with
accrued and unpaid interest, if any to the redemption date. The Notes will be
redeemable, in whole or in part, at the option of the Company at any time on or
after June 1, 2003 at the redemption prices set forth herein, plus accrued and
unpaid interest to the date of redemption. In addition, prior to June 1, 2001,
the
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS OF EXISTING NOTES AND PROSPECTIVE
PURCHASERS OF NEW NOTES.
------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 8
(Continued from previous page)
Company may redeem up to 35% of the original aggregate principal amount of the
Notes with the net proceeds of one or more Public Equity Offerings (as defined
herein) at a redemption price equal to 109.25% of the principal amount thereof,
plus accrued and unpaid interest to the date of redemption; provided that
immediately after giving effect to any such redemption at least $211.3 million
aggregate principal amount of the Notes remains outstanding. Upon a Change of
Control (as defined herein), each holder of Notes may require the Company to
repurchase all or a portion of such holder's Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest to the date or repurchase. See
"Description of the Notes."
The Notes will be general unsecured obligations of the Company, subordinated
in right of payment to all existing and future senior indebtedness of the
Company. The Notes will rank senior in right of payment to all existing and
future subordinated indebtedness of the Company, if any. The New Notes will be
guaranteed, on a senior subordinated basis, by the Parent and the wholly-owned
domestic subsidiaries of the Company (the "Subsidiary Guarantors"). The New
Notes will be effectively subordinated in rights of payment to all indebtedness
and other liabilities (including trade payables) of the Company's subsidiaries
that are not Subsidiary Guarantors. As of May 31, 1998, the Company, the Parent
and the Subsidiary Guarantors had approximately $1.5 billion of indebtedness
outstanding ranking senior to the New Notes, and the subsidiaries of the Company
that are not Subsidiary Guarantors had an aggregate of approximately $106.5
million of third-party indebtedness and accounts payable outstanding. See
"Description of the Notes -- Subordination."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement, dated
as of May 29, 1998 (the "Registration Rights Agreement"), among the Company, the
Parent, the Subsidiary Guarantors and TD Securities (USA) Inc. and NationsBanc
Montgomery Securities LLC, as the initial purchasers (collectively, the "Initial
Purchasers") of the Existing Notes, with respect to the initial sale of the
Existing Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. The Company
expressly reserves the right to terminate or amend the Exchange Offer and not to
accept for exchange any Existing Notes not theretofore accepted for exchange
upon the occurrence of any of the events specified under "The Exchange Offer --
Conditions to the Exchange Offer." If any such termination or amendment occurs,
the Company will notify the Exchange Agent (as defined herein) and will either
issue a press release or give oral or written notice to the holders of the
Existing Notes as promptly as practicable. In the event the Company terminates
the Exchange Offer and does not accept for exchange any Existing Notes with
respect to the Exchange Offer, the Company will promptly return such Existing
Notes to the holders thereof. See "The Exchange Offer."
The Existing Notes were originally issued and sold on May 29, 1998 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Existing Notes may not be reoffered, resold, or otherwise pledged, hypothecated
or transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based upon interpretations by the staff of the Securities and Exchange
Commission (the "Commission") issued to third parties, the Company believes that
New Notes issued pursuant to the Exchange Offer in exchange for Existing Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any holder which is a broker-dealer or an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of business and
such holders have no arrangement with any person to participate in the
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by delivery of a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 90 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The New Notes will constitute a new issue of securities with no established
trading market. The Company does not intend to list any Notes on a national
securities exchange or to apply for quotation of any Notes through the National
Association of Securities Dealers Automated Quotation System. Any Existing Notes
not tendered and accepted in the Exchange Offer will remain outstanding. To the
extent that Existing Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered and tendered but unaccepted Existing Notes
could be adversely affected. Following consummation of the Exchange Offer, the
holders of Existing Notes will continue to be subject to the existing
restrictions on transfers thereof, and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Existing Notes held by them. No assurance can be given as to the
liquidity of the trading market for either the Existing Notes or the New Notes.
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Unless the
context otherwise requires, all references to (i) the "Company" are to
Safety-Kleen Services Inc. (formerly known as LES, Inc.) (the issuer of the
Notes) and its direct and indirect subsidiaries (including Safety-Kleen), (ii)
the "Parent" are to Laidlaw Environmental Services, Inc., the sole shareholder
of the Company, on a stand-alone basis, (iii) "Safety-Kleen" are to Safety-Kleen
Systems, Inc. (formerly known as Safety-Kleen Corp.), and its direct and
indirect subsidiaries, (iv) the "Safety-Kleen Acquisition" are to both the
acquisition by the Company of approximately 94% of the outstanding capital stock
of Safety-Kleen in April 1998 and the acquisition of the remaining capital stock
of Safety-Kleen through a merger in May 1998 (the "Safety-Kleen Merger") and (v)
the "Safety-Kleen Transactions" are to the Safety-Kleen Acquisition, the Debt
Tender Offer (as defined herein) and borrowings under the Senior Credit Facility
(as defined herein) to finance such transactions. Unless the context otherwise
requires, any reference to a "fiscal" year of the Company, Parent or
Safety-Kleen, as the case may be, refers to (i) the Company's or Parent's fiscal
year ended or ending on August 31 in such year and (ii) Safety-Kleen's fiscal
year ended or ending on the Saturday closest to December 31 in such year. Unless
the context otherwise requires, any reference to financial data or information
in this Prospectus refers to financial data or information of the Parent and its
consolidated subsidiaries (including the Company). Certain statements in the
Prospectus Summary are "forward-looking statements." See "Disclosure Regarding
Forward-Looking Statements."
THE COMPANY
The Company is a vertically integrated hazardous and industrial waste
management company that collects, transports, treats, recycles and disposes of
waste by distillation, incineration, landfilling and other methods. The Company
is the leading hazardous and industrial waste management company in North
America (based on fiscal 1997 revenues and facilities) with operations in the
United States, Canada and Europe. The Company categorizes its hazardous and
industrial waste activities into five components: (i) collection network
services, (ii) treatment, disposal and transportation services, (iii) used oil
collection and recovery services, (iv) other specialty services and (v) European
operations. The Company's strategy is to continue to develop vertically
integrated operations and to enhance the Company's profitability by taking
advantage of opportunities to rationalize operations, internalize waste streams
and expand the services provided to its existing customer base. The Company
serves over 400,000 customers with operations across North America and Europe
through an extensive network of 284 collection facilities, 11 landfills, eight
incinerators and 13 recycling facilities.
In May 1998, the Company consummated the Safety-Kleen Acquisition for
aggregate consideration of approximately $1.1 billion in cash and the issuance
of approximately 166 million shares of Common Stock of the Parent (the "Parent
Common Stock"). Safety-Kleen is a leader in servicing the recycling and waste
needs of companies in the automotive/retail repair, industrial and other
business sectors. The Company also repurchased substantially all of the
outstanding $100.0 million 9 1/4% Notes due September 15, 1999 of Safety-Kleen
(the "Safety-Kleen Notes") which were tendered to Laidlaw Environmental pursuant
to its offer to purchase and consent solicitation (the "Debt Tender Offer"). The
remainder of the Safety-Kleen Notes were defeased on May 29, 1998. The Company
financed the cash portion of the Safety-Kleen Acquisition and the Debt Tender
Offer and refinanced certain indebtedness with total borrowings of approximately
$1.8 billion under its senior secured bank facility (the "Senior Credit
Facility"). Pro forma for the Safety-Kleen Transactions, the Rollins Acquisition
(as defined herein) and certain related transactions, the Parent's revenues and
Adjusted EBITDA (as defined herein) would have been $1.3 billion and $380.3
million, respectively, for the nine months ended May 31, 1998.
Effective July 1, 1998, the Parent commenced doing business as
"Safety-Kleen Corp." and intends to change its name to Safety-Kleen Corp. after
its next annual meeting. Also on July 1, 1998, the subsidiaries of the Parent
(including the Company) changed their names to eliminate references to Laidlaw.
1
<PAGE> 10
In May 1997, Rollins Environmental Services, Inc. ("Rollins"), the largest
commercial hazardous waste incineration company in North America, acquired
Laidlaw Inc.'s hazardous and industrial waste operations (the "Rollins
Acquisition"). Upon consummation of the Rollins Acquisition, which was accounted
for as a reverse acquisition, Rollins changed its name to Laidlaw Environmental
Services, Inc. To finance the Rollins Acquisition, the Parent (i) issued 120
million shares of Parent Common Stock, (ii) issued a $350.0 million 5%
subordinated convertible pay-in-kind debenture (the "PIK Subordinated
Debenture") and (iii) paid $349.1 million in cash to Laidlaw Inc. ("Laidlaw").
Laidlaw currently beneficially owns 35% of the outstanding Parent Common Stock
(49% assuming the conversion of the PIK Subordinated Debenture). Laidlaw
provides (i) passenger services, including school bus transportation and public
transit services, in the United States and Canada and (ii) emergency healthcare
services, including healthcare transportation and physician practice management
services, in the United States.
BUSINESS STRATEGY AND ACQUISITION RATIONALE
The Company's strategy is to continue to vertically integrate its
operations and to enhance the Company's profitability by taking advantage of
opportunities to rationalize operations, internalize waste streams and expand
the services provided to its existing customer base. The Company achieves
vertical integration through the combination of its full-service collection and
transportation network with its treatment and disposal services. To implement
its strategy, the Company examines strategic acquisitions on an opportunistic
basis. The Rollins Acquisition combined the Company's full-service collection
and treatment network with Rollins' expertise in solids incineration technology
and provided significant savings from facility and administrative
rationalizations. The Company believes the Safety-Kleen Acquisition combines
complementary assets that enhance the Company's competitive position and provide
opportunities for significant cost savings from synergies related to facility
consolidation, waste internalization and selling, general and administrative
cost savings.
Strategic Fit. The Company's collection network, which links customers to
treatment and disposal facilities such as landfills and incinerators, is one of
the Company's primary operational strengths. This network differentiates the
Company from its competitors and allows for both responsiveness and
accountability in managing a customer's hazardous or industrial waste stream.
The Company believes the Safety-Kleen Acquisition increases vertical integration
of its business by processing waste streams collected by Safety-Kleen. In
addition, the Company believes that the Safety-Kleen Acquisition strengthens its
market position by: (i) providing additional market coverage in key geographic
regions; (ii) introducing a base of smaller-sized customers to complement the
Company's existing base of medium and larger-sized customers; (iii) providing
significant expansion into the solvent recycling market; and (iv) increasing
profitability by capitalizing on cost saving opportunities.
Synergies. The Company intends to build upon Safety-Kleen's leading market
presence and quality brand name recognition. The Company believes that the
Safety-Kleen Acquisition provides an opportunity to achieve significant cost
savings through the elimination of existing redundancies between the Company's
and Safety-Kleen's operations. The Company expects that the planned selling,
general and administrative cost savings, the closure of duplicative collection
and processing facilities, the increased utilization of the remaining facilities
and the internalization of various waste streams will generate annual cost
savings of approximately $103.5 million to $165.0 million. The Company expects
to begin achieving cost savings within three months of the Safety-Kleen
Acquisition and to fully realize these annualized cost savings within twelve
months after consummation of the Safety-Kleen Acquisition. Through the Rollins
Acquisition, the Company has demonstrated its ability to manage the integration
of a large acquisition and to realize substantial cost savings. To date, the
Company believes that it has generated approximately $75.0 million of annualized
cost savings in connection with the Rollins Acquisition. There can be no
assurance, however, that the projected cost savings from the Safety-Kleen
Acquisition will be achieved.
The Company expects to achieve cost savings in the following areas:
- Facility Consolidation. Based on a review of the Company's and
Safety-Kleen's facilities, the Company estimates that it can close 35
to 45 collection facilities and five processing facilities due to
geographic overlap among facilities. The Company estimates that the
cost savings resulting from its
2
<PAGE> 11
planned facility consolidation will be approximately $2.0 to $2.5
million per processing facility and $1.0 to $1.5 million per collection
facility. The cost savings per location assume that waste collection
and routing efficiencies can be achieved by combining the
transportation resources of the overlapping locations and reducing the
total number of vehicles and drivers required to service the existing
combined customer base. The closure of redundant facilities will also
result in cost savings related to the personnel and property costs
associated with such facilities. The Company estimates that this
facility consolidation will generate approximately $45.0 million to
$80.0 million of annual cost savings.
- Waste Internalization. During fiscal 1997, Safety-Kleen spent over
$50.0 million for outside disposal of waste it collected, consisting
of fuel blend material, as well as waste disposed at hazardous waste
incinerators, landfills and wastewater treatment facilities. Prior to
the Safety-Kleen Acquisition, the Company received an insignificant
amount of Safety-Kleen's waste material for disposal. The Company has
already begun to internalize Safety-Kleen's incinerable and
wastewater materials for disposal at its facilities. The fuel blend
material may either be used as a fuel source or blended with solid
waste material for burning at the Company's incinerator facilities.
When used as a fuel source, Laidlaw Environmental will avoid the cost
of purchasing conventional fuel from third parties. The Company
estimates that the internalization of these waste streams, after
taking into account incremental costs, will generate approximately
$13.5 million to $25.0 million of annual cost savings.
- Selling, General and Administrative Cost Savings. The Company
intends to incorporate the Safety-Kleen operations into the Company's
existing operational organization, which will result in the
elimination of all duplicative administrative support functions. In
connection with the elimination of duplicative support functions, the
Company expects that it will eliminate 600 to 800 personnel and their
associated costs. The Company estimates that the planned selling,
general and administrative cost consolidation will generate
approximately $45.0 million to $60.0 million of annual cost savings.
Potential Divestiture Opportunities. The Company is in the process of
analyzing whether, following consummation of the Safety-Kleen Acquisition, all
of its assets will be consistent with its strategies. To the extent certain
assets do not fit its strategies, the Company may elect to sell those assets and
use the proceeds from such sale to reduce outstanding indebtedness. For example,
the Company is currently considering the desirability of disposing of certain of
the assets utilized within Safety-Kleen's used oil collection and recovery
services business and its European operations. In fiscal 1997, revenue
attributable to Safety-Kleen's used oil collection and recovery services
business and European operations was $156.3 million and $109.9 million,
respectively.
COMPETITIVE STRENGTHS
Low-cost service provider. With over-expansion in the hazardous and
industrial waste management industry during the 1980s and the early 1990s, it
has become critical for successful waste management companies to maintain high
utilization of a well-managed fixed asset base. The Company has created a cost
structure which it believes is the lowest in the industry. The Company believes
this cost structure can be further reduced as a result of the Safety-Kleen
Acquisition.
Integrated customer service. Waste generators are demanding high quality
service and waste management expertise while reducing the number of vendors they
use for these services. As a result of its integrated, full-service approach to
managing its customers' needs, the Company believes that it is well positioned
to capture incremental business from existing customers.
Geographic footprint. It is critical for waste management providers to
have a broad geographic reach for two reasons. First, it is necessary to provide
full service capabilities to a marketplace that increasingly seeks a single
service provider. Additionally, with fixed cost disposal assets, it is necessary
to collect and feed high volumes of waste to those assets in the most efficient
manner possible. As a result of the Safety-Kleen Acquisition, the Company
believes that it provides the broadest geographic coverage of any hazardous and
industrial waste management company.
3
<PAGE> 12
Diverse Customer Base. The Company has over 400,000 customers representing
diverse industries. Pro forma for the Safety-Kleen Acquisition, no one customer
represented greater than 5% of the Company's fiscal 1997 revenues. In addition,
a significant amount of the Company's revenue is derived from the collection,
treatment and disposal of industrial waste which is classified as non-hazardous.
Internalization of waste streams. Hazardous and industrial waste
management services companies that are able to internalize or feed waste streams
to their own treatment and disposal facilities are able to boost profitability
significantly. As a result of the Safety-Kleen Acquisition, the Company expects
its internalization of collected waste streams to exceed 80%, which the Company
believes is without parallel in the industry.
------------------------
The principal executive offices of the Company are located at 1301 Gervais
Street, Suite 300, Columbia, South Carolina 29201.
PRO FORMA CORPORATE STRUCTURE
[FLOW CHART]
- ---------------
(1) Except for its ownership of the capital stock of the Company, the Parent has
no independent business operations.
(2) Excludes three non-wholly-owned domestic subsidiaries of the Company.
(3) The direct and indirect foreign subsidiaries and non-wholly-owned domestic
subsidiaries of the Company are not guarantors of the Senior Credit Facility
or the Notes. However, the Company has pledged 65% of the capital stock of
such foreign subsidiaries to the lenders under the Senior Credit Facility.
4
<PAGE> 13
THE EXCHANGE OFFER
For definitions of certain capitalized terms used herein, see "Description
of the Notes."
Securities Offered......... Up to $325,000,000 aggregate principal amount of
9 1/4% Senior Subordinated Notes due 2008 which
have been registered under the Securities Act. The
terms of the New Notes and those of the Existing
Notes are identical in all material respects,
except that the New Notes have been registered
under the Securities Act and are freely
transferable by holders thereof (other than as
provided herein) and are not subject to any
registration rights under the Securities Act.
The Exchange Offer......... The New Notes are being offered in exchange for a
like principal amount of Existing Notes. Existing
Notes may be exchanged only in integral multiples
of $1,000. The issuance of the New Notes is
intended to satisfy obligations of the Company
under the Registration Rights Agreement.
Expiration Date; Withdrawal
of Tender.................. The Exchange Offer will expire at p.m,
New York City time, on , 1998, or such
later date and time to which it is extended by the
Company. The tender of Existing Notes pursuant to
the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Existing Notes
not accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the
conditions will be satisfied and that no waivers
will be necessary. See "The Exchange Offer --
Conditions to the Exchange Offer."
Procedures for Tendering
Existing Notes............. Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date a
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Existing Notes and any other required
documentation, to the Exchange Agent at the address
set forth herein. See "The Exchange Offer --
Procedures for Tendering Existing Notes."
Letters of Transmittal and certificates
representing Existing Notes should not be sent to
the Company. Such documents should only be sent to
the Exchange Agent. Questions regarding how to
tender and requests for information should be
directed to the Exchange Agent. See "The Exchange
Offer -- Exchange Agent."
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of the Existing Notes pursuant to the
Exchange Offer.
Certain Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer will
not be a taxable event for U.S. federal income tax
purposes. See "Certain U.S. Federal Income Tax
Considerations."
Exchange Agent............. The Bank of Nova Scotia Trust Company of New York
is serving as the Exchange Agent in connection with
the Exchange Offer.
5
<PAGE> 14
CONSEQUENCE OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Company to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of the holder's business and such holders have
no arrangement or understanding with any person to participate in a distribution
of such New Notes and are not participating in, and do not intend to participate
in, the distribution of such New Notes. By tendering, each holder will represent
to the Company in the Letter of Transmittal that, among other things, the New
Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the holder, that neither the holder nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes, that neither the holder nor any such person is participating
in or intends to participate in the distribution of such New Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company. Each broker-dealer that receives
New Notes for its own account in exchange for Existing Notes must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution." In addition, to comply with the securities
laws of certain jurisdictions, if applicable, the New Notes may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdiction or any exemption from registration or qualification is available
and complied with. The Company has agreed, pursuant to the Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the New Notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the Notes reasonably requests in writing. If
a holder of Existing Notes does not exchange such Existing Notes for New Notes
pursuant to the Exchange Offer, such Existing Notes will continue to be subject
to the restrictions on transfer contained in the legend thereon. In general, the
Existing Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the New Notes will not be, and the Existing
Notes are not expected to be, eligible for PORTAL trading.
Except as otherwise indicated, the following description relates both to
the Existing Notes issued in the Offering and to the New Notes to be issued in
exchange for Existing Notes pursuant to the Exchange Offer. The New Notes will
be obligations of the Company evidencing the same indebtedness as the Existing
Notes, and will be entitled to the benefits of the same Indenture. The form and
terms of the New Notes are the same as the form and terms of the Existing Notes,
except that the New Notes have been registered under the Securities Act and
therefore will not bear legends restricting the transfer thereof. For a more
complete description of the Notes, see "Description of the Notes." Throughout
this Prospectus, references to the "Notes" refer to the New Notes and the
Existing Notes collectively.
THE NOTES
Issuer..................... Safety-Kleen Services, Inc.
Maturity Date.............. June 1, 2008.
Interest................... June 1 and December 1 of each year, commencing
December 1, 1998. For each Existing Note accepted
for exchange, the holder of such Existing Note will
receive a New Note having a principal amount equal
to that of
6
<PAGE> 15
the surrendered Existing Note. The New Notes will
bear interest from the most recent date to which
interest has been paid on the Existing Notes or, if
no interest has been paid on the Existing Notes,
from May 29, 1998. Accordingly, if the relevant
record date for interest payment occurs after the
consummation of the Exchange Offer registered
holders of New Notes on such record date will
receive interest accruing from the most recent date
to which interest has been paid or, if no interest
has been paid, from May 29, 1998. If, however, the
relevant record date for interest payment occurs
prior to the consummation of the Exchange Offer
registered holders of the Existing Notes on such
record date will receive interest accruing from the
most recent date to which interest has been paid
or, if no interest has been paid, from May 29,
1998. Existing Notes accepted for exchange will
cease to accrue interest from and after the date of
consummation of the Exchange Offer, except as set
forth in the immediately preceding sentence.
Holders of Existing Notes whose Existing Notes are
accepted for exchange will not receive any payment
in respect of interest on such Existing Notes
otherwise payable on any interest payment date the
record date for which occurs on or after the
consummation of the Exchange Offer.
Guarantees................. The Company's payment obligations under the Notes
are guaranteed on a senior subordinated basis by
the Parent (the "Parent Guarantee"). The Company's
payment obligations under the Notes are also
jointly and severally guaranteed on a senior
subordinated basis (the "Subsidiary Guarantees"
and, together with the Parent Guarantee, the
"Guarantees") by the Company's domestic
subsidiaries other than three non-wholly-owned
domestic subsidiaries of the Company (the
"Subsidiary Guarantors" and, together with the
Parent, the "Guarantors"). The Guarantees are
subordinated to all senior indebtedness of the
Guarantors. See "Description of the
Notes -- Guarantees."
Make-Whole Redemption...... The Notes are redeemable, in whole or in part, at
the option of the Company, at any time prior to
June 1, 2003 at a redemption price equal to the
greater of (i) 100% of the principal amount of such
Notes or (ii) the sum of the present values of
104.625% of the principal amount of such Notes and
the scheduled payments of interest thereon through
and including June 1, 2003 discounted to such
redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at
the Adjusted Treasury Rate (as defined herein) plus
50 basis points, together with accrued and unpaid
interest, if any, to the redemption date. See
"Description of the Notes -- Make-Whole
Redemption."
Optional Redemption........ The Notes are redeemable, in whole or in part, at
the option of the Company, at any time on or after
June 1, 2003, at the redemption prices set forth
herein, plus accrued and unpaid interest to the
date of redemption. In addition, at any time on or
prior to June 1, 2001, the Company may, at its
option, redeem up to 35% of the original aggregate
principal amount of the Notes with the net proceeds
of one or more Public Equity Offerings, at a
redemption price equal to 109.25% of the principal
amount thereof, plus accrued and unpaid interest to
the date of redemption; provided that immediately
after giving effect to such redemption, at least
$211.3 million aggregate principal amount of Notes
remains outstanding. See "Description of the
Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control (as defined herein), each
holder of Notes will have the right to require the
Company, subject to certain conditions, to
7
<PAGE> 16
repurchase such holder's Notes at a purchase price
equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of
repurchase. See "Description of the Notes -- Change
of Control."
Ranking.................... The Notes are general unsecured obligations of the
Company subordinated in right of payment to all
existing and future senior indebtedness of the
Company, including indebtedness incurred pursuant
to the Senior Credit Facility. The Notes rank
senior in right of payment to all existing and
future subordinated indebtedness of the Company, if
any. The Notes are guaranteed, on a senior
subordinated basis, by the Guarantors and
effectively subordinated in right of payment to all
indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries that are
not Subsidiary Guarantors. As of May 31, 1998, the
Company, the Parent and the Subsidiary Guarantors
have approximately $1.5 billion of indebtedness
outstanding ranking senior to the Notes, and the
Company's subsidiaries that are not Subsidiary
Guarantors had an aggregate of approximately $106.5
million of third-party indebtedness and accounts
payable outstanding. See "Description of the
Notes -- Subordination." The Indenture pursuant to
which the Existing Notes were and the New Notes
will be issued permits the Company and its
subsidiaries to incur additional indebtedness,
including senior indebtedness, subject to certain
limitations. See "Capitalization" and "Description
of the Notes -- Subordination."
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, will restrict the Company and
its Restricted Subsidiaries (as defined herein)
with respect to: (i) the incurrence of additional
debt; (ii) restricted payments; (iii) asset sales;
(iv) transactions with affiliates; (v) dividend and
other payment restrictions affecting Restricted
Subsidiaries; (vi) issuing stock of subsidiaries to
third parties; (vii) certain liens; and (viii)
certain consolidations, mergers or sales of assets.
All of these restrictions are subject to a number
of significant limitations and qualifications.
Certain of the covenants in the Indenture
(including the limitations on additional debt,
restricted payments, asset sales and transactions
with affiliates) do not apply to the Parent and
none of the covenants in the Indenture apply to any
Unrestricted Subsidiaries (as defined herein). See
"Description of the Notes -- Covenants." If the
Notes achieve an Investment Grade rating and
certain other conditions are satisfied, upon the
request of the Company, all of such covenants (with
limited exceptions) will cease to apply, and the
Company and its Restricted Subsidiaries will be
subject to covenants that will restrict the Company
and its Restricted Subsidiaries with respect to (x)
incurring liens securing indebtedness and (y)
engaging in sale and leaseback transactions. See
"Description of the Notes -- Certain Investment
Grade Covenants."
8
<PAGE> 17
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined statement of income data for fiscal 1997
gives effect to the Safety-Kleen Transactions, the Rollins Acquisition and
certain related transactions as if they occurred on September 1, 1996. The
unaudited pro forma combined statement of income data for the nine months ended
May 31, 1998 gives effect to the Safety-Kleen Transactions as if they occurred
on September 1, 1996. The following information is not necessarily indicative of
the actual results of operations that would have occurred had the transactions
assumed herein occurred on such dates or of expected future results. The
unaudited combined balance sheet data at May 31, 1998 reflects the Safety-Kleen
Acquisition which was consummated in May 1998. See "Unaudited Pro Forma Combined
Financial Information."
<TABLE>
<CAPTION>
PRO FORMA(1)
----------------------------
FISCAL YEAR NINE MONTHS
ENDED ENDED
AUGUST 31, MAY 31,
1997 1998
------------ ------------
(IN THOUSANDS, EXCEPT RATIOS
AND PER SHARE INFORMATION)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenue................................................... $1,802,627 $1,319,980
Expenses:
Operating.............................................. 1,282,863 895,201
Depreciation and amortization.......................... 182,282 115,210
Selling, general and administrative.................... 224,502 147,002
Restructuring charge(2)................................ 331,697 65,831
---------- ----------
Total expenses............................................ 2,021,344 1,223,244
Operating income (loss)................................... (218,717) 96,736
Loss from continuing operations........................... (256,410) (32,938)
Income from discontinued operations....................... 20 --
Extraordinary loss, net of applicable tax(3).............. -- (11,283)
Net loss.................................................. (256,390) (44,221)
PER SHARE DATA(4):
Basic income (loss) per share:
Loss from continuing operations........................ $ (0.731) $ (0.095)
Income from discontinued operations.................... -- --
Extraordinary loss, net of applicable tax.............. -- (0.032)
Net loss............................................... (0.731) (0.127)
Weighted average common stock outstanding................. 350,904 348,372
OTHER DATA:
EBITDA(5)................................................. $ 295,262 $ 277,777
Cash interest expense(6).................................. 172,472 128,864
Ratio of earnings to fixed charges(7)..................... (7) 0.77x
</TABLE>
9
<PAGE> 18
<TABLE>
<CAPTION>
MAY 31, 1998(8)
---------------
(DOLLARS IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Assets:
Total current assets...................................... $ 515,487
Plant, property and equipment, net........................ 2,800,888
Total assets.............................................. 4,406,082
Liabilities:
The Company and subsidiaries:
Total current liabilities(9)........................... 343,843
Senior Credit Facility................................. 1,531,190
9 1/4% Senior Subordinated Notes....................... 325,000
Other long-term debt(10)............................... 15,856
Deferred financing costs............................... (44,757)
Other liabilities...................................... 750,738
Total Company liabilities............................ 2,921,870
Parent (holding company only)(11):
Total current liabilities.............................. 2,749
Long-term debt(12)..................................... 125,200
PIK Subordinated Debenture(13)......................... 350,000
Total Parent liabilities............................. 477,949
Total liabilities......................................... 3,399,819
Stockholders' equity........................................ 1,006,263
</TABLE>
- ---------------
(1) The pro forma results of operations (i) for the fiscal year ended August
31, 1997 include 12 months of the Company and 52 weeks of Safety-Kleen and,
(ii) for the nine months ended May 31, 1998 include nine months of the
Company and 29 weeks of Safety-Kleen. The operations of the Company
includes the operations of the combined company subsequent to the
acquisition date of April 1, 1998.
(2) For fiscal year 1997, reflects a non-recurring restructuring charge of
$331.7 million ($200.0 million after tax or $1.45 per share) incurred in
connection with the closing of certain of the operating facilities that had
become redundant, and an impairment in the carrying value of certain
operating facilities due to lower than expected future cash flows, as a
result of the Rollins Acquisition.
For the nine months ended May 31, 1998, reflects a non-recurring
restructuring charge of $65.8 million ($39.5 million after tax or $0.11 per
share) for the costs associated with the closing of certain facilities and
the severance of employees as a result of the acquisition of Safety-Kleen.
(3) Related to an extraordinary charge of approximately $18.8 million ($11.3
million net of tax or $0.05 per share) related to the write-off of previous
deferred debt issuance costs and prepayment penalties.
(4) Diluted earnings per share amounts, which would include the dilutive effect
of the assumed conversions of potential common shares, have not been
included for the year ended August 31, 1997 nor for the nine months ended
May 31, 1998 as the effect of such inclusion would be to increase earnings
per share, and thus be anti-dilutive.
(5) EBITDA represents operating income plus (i) depreciation and amortization,
(ii) for fiscal 1997, the $331.7 million non-recurring restructuring charge
incurred in fiscal 1997 in connection with the Rollins Acquisition, and
(iii) for the nine months ended May 31, 1998, the $65.8 million
non-recurring restructuring charge incurred in connection with the
Safety-Kleen Acquisition. EBITDA is presented because it provides useful
information regarding the Company's ability to service debt. EBITDA should
not be considered as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles). Adjusted EBITDA of $495.3 million and $380.3
million for fiscal 1997 and the nine months ended May 31, 1998,
respectively, represents EBITDA plus (i) $130.0 million of annual cost
savings (or $97.5 million for the nine months ended May 31, 1998) that the
Company
10
<PAGE> 19
expects to realize in connection with the Safety-Kleen Acquisition (based
on the approximate mid-point of the range of potential cost savings
described in "-- Business Strategy and Acquisition Rationale" above) and
(ii) $70.0 million and $5.0 million in fiscal 1997, and the nine months
ended May 31, 1998, respectively, of potential cost savings not yet
realized in connection with the Rollins Acquisition. No assurance can be
given that any such cost savings will be realized. To date, the Company
believes it has generated $75.0 million in annualized cost savings from the
Rollins Acquisition based on estimated realized cost-savings from the
Rollins Acquisition of $5.0 million and $52.5 million in fiscal 1997 and
the nine months ended May 31, 1998, respectively. Adjusted EBITDA should
not be considered as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles). See "Risk Factors -- Uncertainties in Integrating
Operations and Achieving Cost Savings" and "Disclosure Regarding
Forward-Looking Statements."
(6) Cash interest expense reflects pro forma interest expense minus non-cash
interest expense attributable to the PIK Subordinated Debenture. Such
excluded interest expense related to interest attributable to the PIK
Subordinated Debenture was $17.5 million for fiscal 1997 and $13.1 million
for the nine months ended May 31, 1998. The ratio of Adjusted EBITDA to
cash interest expense was 2.87x and 2.95x for fiscal 1997 and the nine
months ended May 31, 1998, respectively. See "Description of Other
Indebtedness -- The Parent -- PIK Subordinated Debenture" and "Unaudited
Pro Forma Combined Financial Information."
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs and the
portion of rental expense that represents the interest factor. Earnings
were insufficient to cover fixed charges by $189.8 million for fiscal 1997.
(8) Reflects the Safety-Kleen Transactions which were consummated in May, 1998.
(9) Excludes current portion of Senior Credit Facility of $78.0 million.
(10) Includes Company IRBs (as defined herein) of $15.7 million and other debt
of $0.2 million. See "Description of Other Indebtedness -- The
Company -- Company IRBs."
(11) The Parent is a holding company only and has no independent business
operations, and all of the business operations of the Parent are conducted
through the Company and its subsidiaries.
(12) Includes approximately $65.2 million of Parent IRBs (as defined herein) and
a $60.0 million Parent Promissory Note (as defined herein). See
"Description of Other Indebtedness -- Parent IRBs" and "--Parent Promissory
Note."
(13) The PIK Subordinated Debenture is subordinated in right of payment to the
Parent Guarantee of the Notes. The PIK Subordinated Debenture bears
interest at the fixed rate of 5% per annum. Until May 15, 1999 (the
"Mandatory PIK Interest Payment Period"), interest on the outstanding
principal balance of the PIK Subordinated Debenture accrues at the 5% rate,
but will be paid in shares of Parent Common Stock. After the Mandatory PIK
Interest Payment Period, at the election of the Parent any payment due
under the PIK Subordinated Debenture (except upon an optional early
redemption), including any accrued interest or principal, may be paid in
shares of Parent Common Stock. Interest on the outstanding principal
balance may be paid in cash or shares of Parent Common Stock. The Senior
Credit Facility requires such interest to be paid in shares of Parent
Common Stock until April 2000. See "Description of Other
Indebtedness -- The Parent -- PIK Subordinated Debenture."
11
<PAGE> 20
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Notes,
as well as information under "Disclosure Regarding Forward Looking Statements."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
As a result of the Safety-Kleen Acquisition, the Company has substantial
indebtedness and debt service obligations. As of May 31, 1998, the Company has
$1.8 billion of indebtedness outstanding (including $1.5 billion outstanding
under the Senior Credit Facility) and $1.0 billion of stockholders' equity and
the Parent had $475.2 million of indebtedness outstanding (including $350.0
million under the PIK Subordinated Debenture). The degree to which the Company
and the Parent are leveraged will have significant consequences to holders of
the Notes, including the following: (i) the ability of the Company to obtain
additional financing in the future, whether for working capital, capital
expenditures, acquisitions or other purposes, may be impaired; (ii) a
substantial portion of the Company's cash flow from operations will be dedicated
to the payment of principal and interest on debt, thereby reducing funds
available to the Company for other purposes; (iii) the Company's flexibility in
planning for or reacting to changes in market conditions may be limited; (iv)
the Company may be more vulnerable in the event of a downturn in its business;
and (v) to the extent that the Company incurs any debt under the Senior Credit
Facility at variable rates that have not been hedged, the Company will be
vulnerable to increases in interest rates. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Laidlaw Environmental." The Indenture and the Senior Credit
Facility permit the Company and its subsidiaries to incur additional
indebtedness (subject to certain limitations) and permit the Parent to incur
additional indebtedness (without restriction). All borrowings under the Senior
Credit Facility will mature prior to the maturity of the Notes. See "Description
of Other Indebtedness -- The Company -- Senior Credit Facility."
The ability of the Company to meet its debt service obligations (including
the Notes) will depend on the future operating performance and financial results
of the Company, which will be subject in part to factors beyond the control of
the Company. If the Company is unable to generate earnings sufficient to cover
its debt service obligations and is unable to borrow funds under either the
Senior Credit Facility or from other sources, it may be required to refinance
all or a portion of its existing debt (including the Notes) or to sell all or a
portion of its assets. There can be no assurance that a refinancing would be
possible, nor can there be any assurance as to the timing of any asset sales or
the proceeds the Company could realize therefrom. In addition, the terms of the
Senior Credit Facility and the Indenture restrict the Company's ability to sell
assets and the Company's use of the proceeds therefrom. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Laidlaw Environmental."
If for any reason, including a shortfall in anticipated operating results,
the Company were unable to meet its debt service obligations, it would be in
default under the terms of the Senior Credit Facility. In the event of such a
default, the lenders under the Senior Credit Facility could elect to declare all
of such indebtedness immediately due and payable, including accrued and unpaid
interest, and to terminate their commitments with respect to funding obligations
under the Senior Credit Facility. In addition, such lenders could proceed
against their collateral, which consists of substantially all of the domestic
assets of the Company. Any default with respect to the Senior Credit Facility
could result in a default under other indebtedness or result in a bankruptcy of
the Company. Such defaults could delay or preclude payment of principal of, or
interest on, the Notes. See "Description of the Notes -- Subordination."
UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS
The Safety-Kleen Acquisition was significantly larger than the Company's
previous acquisitions (including the Rollins Acquisition) and represents a
substantial increase in the scope of the Company's business. Safety-Kleen's
revenues for fiscal 1997 were $1.0 billion, and the Company's revenues for
fiscal 1997 were $679.0 million. Successful integration of Safety-Kleen's
operations will depend primarily on the Company's ability to consolidate
operations, systems and procedures and to eliminate redundancies and excess
costs. There can be no
12
<PAGE> 21
assurances that the Company will be able to successfully integrate the
operations of Safety-Kleen into the Company's operations. In particular, the
Company may experience (i) difficulty in assimilating the operations and
personnel of Safety-Kleen, (ii) disruption of the Company's ongoing business,
(iii) difficulty in the maintenance of uniform standards, controls, procedures
and policies and (iv) the impairment of relationships with employees and
customers. In addition, the Company expects to realize certain operating
efficiencies and cost savings as a result of the Safety-Kleen Acquisition. The
realization and timing of such operating efficiencies and cost savings could be
affected by a number of factors beyond the Company's control, such as general
economic conditions, increased operating costs, the response of competitors or
customers and regulatory developments. There can be no assurance that the
Company will achieve the expected operating efficiencies and cost savings.
ENVIRONMENTAL REGULATION AND LIABILITIES
The Company's operations are subject to certain federal, state,
territorial, provincial and local requirements which regulate health, safety,
environment, zoning and land-use. Operating and other permits are generally
required for incinerators, landfills, transfer and storage facilities, certain
collection vehicles, storage tanks and other facilities owned or operated by the
Company, and these permits are subject to revocation, modification and renewal.
Although the Company believes that its facilities meet federal, state and local
requirements in all material respects and have all of the required operating and
other permits, the Company may be required to expend considerable time, effort
and money to keep its existing or acquired facilities in compliance with
applicable regulatory requirements, including new regulations, and to maintain
existing permits and approvals and to obtain the permits and approvals necessary
to increase their capacity. In addition, environmental regulatory changes could
accelerate expenditures for closure and post-closure monitoring and corrective
action for past and current operations at the Company's facilities and obligate
the Company to spend sums in addition to those presently reserved for such
purposes. These factors could increase substantially the Company's operating
costs and could impair the Company's investment in its facilities. Applicable
requirements are enforceable by injunctions and fines or penalties, including
criminal penalties. These regulations are administered by the United States
Environmental Protection Agency (the "EPA") and various other federal, state and
local environmental and health and safety agencies and authorities, including
the Occupational Safety and Health Administration of the United States
Department of Labor and by the provincial environmental ministries in Canada.
See "Business -- Regulation."
The United States Resource and Conservation Recovery Act, as amended,
("RCRA"), provides for the establishment of a national hazardous waste
management program through a comprehensive regulatory system. Among other
things, it defines hazardous wastes and provides standards for generators,
transporters and disposers of hazardous wastes, and for the issuance of permits
for sites where such material is treated, stored and disposed. These regulations
also require the Company's facilities to demonstrate financial assurance for
sudden and accidental and, in the case of land based treatment facilities,
non-sudden and gradual pollution occurrences. Financial assurance for future
closure and post-closure expenses and corrective actions must also be
maintained. The Company believes that each of its facilities has all necessary
operating permits and that each permit will be renewed at the end of its
existing term. However, any such permit issuance or renewal could include
conditions requiring further capital expenditures or corrective actions.
Although the Company also believes that each of its operating facilities
complies in all material respects with the applicable requirements of RCRA and
Canadian law for the Canadian facilities, it may be necessary to expend
considerable time, effort and money to keep existing or acquired facilities of
the Company in compliance with applicable requirements, including new
regulations, to maintain existing permits and approvals and to obtain the
permits and approvals necessary to increase their capacity. See
"Business -- Regulation."
The United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes liability for natural
resources damages and the cleanup of sites from which there is a release or
threatened release of a hazardous substance into the environment on, among
others, the current and former owners and operators of such sites. Hundreds of
substances are defined as "hazardous" under CERCLA and the release to the
environment of such substances, even in minute amounts, can result in
substantial liability. The statute provides for the remediation of contaminated
facilities and imposes costs on the responsible parties. The expense of
conducting such a cleanup can be significant. Notwithstanding its efforts to
comply with
13
<PAGE> 22
applicable regulations and to avoid any unregulated release of hazardous
substances to the environment, releases of such substances may occur as a result
of the Company's operations. Given the substantial costs involved in a CERCLA
cleanup and the difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on the Company's
business, financial condition and future prospects.
With respect to various operating facilities, the Company is required by
law to provide certain financial assurances with respect to certain statutorily
required closure, post-closure and corrective obligations. These financial
assurances may take the form of insurance, guarantees, bonds, letters of credit,
deposits of cash or demonstration of net worth of the responsible party, to the
extent acceptable to the United States, Canadian or other foreign, state,
territorial, federal, provincial or local courts, executive offices,
legislatures, governmental agencies or ministries, commissions, or
administrative, regulatory or self-regulatory authorities or instrumentalities
("Governmental Entities") requiring such assurances. Following the consummation
of the Safety-Kleen Acquisition, the Company will be obligated to provide
financial assurances for certain Safety-Kleen operations as well. There can be
no assurance that the Company will be able to provide the required financial
assurances without increased cost which could be material. The Indenture will
restrict the amount of certain financial assurance obligations the Company can
incur. See "Description of the Notes -- Certain Covenants -- Incurrence of
Contingent Obligations."
Anticipated payments of remedial and closure costs (corrective action
costs, closure and post-closure costs for the Company's landfills and other
facilities, and CERCLA-type liabilities) for the Company (including an aggregate
of $41.3 million accrued by Safety-Kleen as of January 3, 1998) for each of the
next five years and thereafter are as follows (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1998........................................ $ 38,259
1999........................................ 40,283
2000........................................ 28,417
2001........................................ 19,646
2002........................................ 14,016
Thereafter.................................. 180,710
--------
Total............................. $321,331
========
</TABLE>
See "Business -- Operations," "-- Regulations" and "-- Legal Proceedings."
COMPETITION AND TECHNOLOGICAL ADVANCES
The hazardous and industrial waste industry is highly competitive. The
Company believes that it and Chemical Waste Management, Inc. are the largest
competitors within the industry. The Company also competes with local and
regional companies of varying sizes, as well as counties and municipalities that
maintain their own waste collection and disposal operations. The key competitive
factors within the hazardous and industrial waste industry include the breadth
of services offered, price, quality, reliability of service and technical
proficiency in handling hazardous waste properly. Knowledgeable customers are
sensitive to the reputation and financial strength of the companies they use to
collect, treat, recycle and dispose of their hazardous and industrial waste
primarily because such customers, as the original generator of such waste,
remain liable under federal and state environmental laws for improper disposal
of such waste. There can be no assurance that the Company's business, financial
condition or future prospects will not be materially adversely affected by
competitive conditions. See "Business -- Competition."
In addition, technological advances in the treatment and disposal of
hazardous waste can significantly alter competition in the hazardous waste
business. In particular, patent or proprietary processes developed by or held by
competitors may adversely affect the Company's competitive position.
CYCLICAL AND SEASONAL NATURE OF BUSINESS
The hazardous and industrial waste industry is cyclical to the extent that
it is dependent upon a stream of waste from cyclical industries. If those
cyclical industries slow significantly, the business that the Company
14
<PAGE> 23
receives from those industries is likely to slow. Also, the Company's business
is somewhat seasonal in that less waste is received in winter months due to
difficult working conditions.
INTERNATIONAL OPERATIONS
As a result of the Safety-Kleen Acquisition, the Company now has business
operations in the United States, Canada and Europe. Certain risks are inherent
in international operations, including the risks of differing regulation,
currency fluctuations and differing tax treatment. Prior to the Safety-Kleen
Acquisition, the Company generally operated only under Canadian and United
States-based environmental and other regulation. As a result of the Safety-Kleen
Acquisition, the Company is now subject to European regulation. Also, the
relative values of the United States dollar, Canadian dollar and European
currencies could change. The impact of future exchange rate fluctuations on the
results of operations cannot be accurately predicted. As a result of the
Safety-Kleen Acquisition, the Company is subject to U.S., European and Canadian
tax laws and regulations. The application of United States and foreign tax laws
and regulations to the Company and to intercompany relationships created by the
Safety-Kleen Acquisition will be subject to audit and review by independent
national tax authorities. In addition, business practices or laws in Europe may
impose costs, restrictions or requirements on such activities that differ in
significant respects from the U.S. business environment.
RELIANCE ON MANAGEMENT
The Company relies significantly on the services of its senior management
team. The Company could be adversely affected if any member of the senior
management team were unwilling or unable to continue in the Company's employ.
See "Management."
CONTROL BY SIGNIFICANT STOCKHOLDER
Laidlaw beneficially owns 35% of the outstanding Parent Common Stock (49%
assuming the conversion of the PIK Subordinated Debenture). As a result, Laidlaw
has significant influence, particularly if the PIK Subordinated Debenture is
converted, with respect to all matters submitted to a vote of the stockholders
of the Parent. In turn, the Company is controlled by the Parent, which owns 100%
of the outstanding capital stock of the Company and can decide all matters
subject to stockholder approval and elect all directors of the Company.
Consequently, Laidlaw has significant influence with respect to the Parent and
the Company.
If (a) at any time Laidlaw ceases to be a primary stockholder of the Parent
or, (b) at any time when the Consolidated Total Leverage Ratio (as defined in
the Senior Credit Facility) is greater than 2.50 to 1.00, Laidlaw ceases to own
at least 20% of the outstanding Parent Common Stock, (c) at any time the Parent
ceases to own 100% of the outstanding common stock of the Company, (d) at any
time the Company ceases to own 100% of the outstanding common stock of
Safety-Kleen (Canada) Ltd., a wholly-owned subsidiary of the Company (the
"Canadian Borrower"), or (e) at any time there ceases to be at least one member
of the Board of Directors of the Parent who is a designee of Laidlaw, in each
case, an event of default will occur under the Senior Credit Facility. There is
no contractual requirement then on the part of Laidlaw with the Parent to
maintain its ownership at such level. If such an event of default were to occur,
there can be no assurance that the Company will be able to obtain a waiver or,
if necessary, refinance or repay the indebtedness under the Senior Credit
Facility.
RISKS OF PENDING AND FUTURE LEGAL PROCEEDINGS
The Company, like other hazardous waste management companies, is involved
in legal proceedings in the ordinary course of business. Alleged failure by the
Company to comply with laws and regulations may lead to the imposition of fines
or the denial, revocation or delay of the renewal of permits and licenses by
Governmental Entities. In addition, Governmental Entities as well as surrounding
landowners may claim that the Company is liable for environmental damages.
Citizens groups have become increasingly active in challenging the grant or
renewal of permits and licenses for hazardous waste facilities, and responding
to such challenges has further increased the costs associated with establishing
new facilities or expanding current facilities. A significant judgment against
the Company, the loss of a significant permit or license or the imposition of a
significant fine could have a material adverse effect on the Company's business,
financial condition and future prospects. The
15
<PAGE> 24
Company is currently a party to various legal and regulatory proceedings which
have arisen in the ordinary course of its business. Although there can be no
assurance with respect to the outcome of these legal and environmental
proceedings or the effect such outcomes may have on the Company, the Company
believes that, based on currently available information, none of the currently
pending proceedings, when ultimately resolved, will have a material adverse
effect on the Company's business, financial condition or future prospects.
RISKS ASSOCIATED WITH INDUSTRY OVER-CAPACITY
Since the 1980s, the hazardous and industrial waste management industry has
been adversely affected by over-capacity. Although recently there has been a
decrease in capacity, there can be no assurance that this trend will continue.
Such industry over-capacity may adversely affect the Company's ability to
operate its facilities at efficient capacity levels and/or affect the prices
that the Company can charge for disposal services.
POTENTIAL UNDISCLOSED LIABILITIES ASSOCIATED WITH ACQUISITIONS
The Company generally conducts due diligence in connection with each of its
acquisitions. In connection with the Safety-Kleen Acquisition, the Rollins
Acquisition or any acquisition made by the Company, there may be liabilities
that the Company fails or is unable to discover in its due diligence prior to
the consummation of the acquisition. In particular, to the extent that prior
owners of businesses acquired in connection with the Safety-Kleen Acquisition
and the Rollins Acquisition failed to comply with or otherwise violated
environmental laws, the Company, as a successor owner, may be financially
responsible for these violations. The discovery of any material liabilities
could have a material adverse effect on the Company's business, financial
condition or future prospects.
SUBORDINATION; RANKING OF THE NOTES AND GUARANTEES
The Notes and the Guarantees are unsecured, general obligations of the
Company and the Guarantors, respectively, subordinated in right of payment to
all existing and future senior indebtedness of the Company and the Guarantors,
respectively. As of May 31, 1998, the Parent and the Subsidiary Guarantors would
have had approximately $1.5 billion of indebtedness outstanding ranking senior
to the Notes, and the Company would have had $192.0 million of additional
borrowing availability (excluding letters of credit) under the Senior Credit
Facility, all of which would be senior indebtedness. Upon any payment or
distribution of assets of the Company or any Guarantor to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency
or similar proceedings of the Company or any Guarantor, the holders of senior
indebtedness will be entitled to receive payment in full of the principal of and
premium, if any, and interest on such senior indebtedness, including all amounts
due or to become due on all senior indebtedness, or provision will be made for
payment in cash or cash equivalents or otherwise, before the Holders of Notes
are entitled to receive any payments, subject to certain exceptions. See
"Description of the Notes -- Subordination." In addition, the subordination
provisions of the Indenture provide that no cash payments may be made with
respect to the Notes during the continuance of a payment default under certain
senior indebtedness. Furthermore, if certain nonpayment defaults exist with
respect to certain senior indebtedness, the holders of such senior indebtedness
would be able to prevent payments on the Notes for certain periods of time. See
"Description of the Notes -- Subordination."
None of the Company's foreign subsidiaries or non-wholly-owned domestic
subsidiaries are Subsidiary Guarantors, and the Notes are effectively
subordinated in right of payment to all indebtedness and other liabilities
(including trade payables) of these subsidiaries. As of May 31, 1998, the
Company's subsidiaries that are not Subsidiary Guarantors would have had
approximately $106.5 million of third-party indebtedness and accounts payable
outstanding. The right of the Company to receive assets of any of its
subsidiaries that are not Subsidiary Guarantors upon liquidation or
reorganization of such subsidiary will be subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent the
Company itself is recognized as a creditor of such subsidiary. See "Description
of the Notes -- Subordination."
16
<PAGE> 25
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITY AND THE INDENTURE
The Senior Credit Facility and the Indenture will contain a number of
significant covenants that, among other things, will restrict the ability of the
Company to dispose of assets, incur additional indebtedness, incur liens on
property or assets, repay other indebtedness, pay dividends, enter into certain
investments or transactions, repurchase or redeem capital stock, engage in
mergers or consolidations, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect the Company's ability
to finance its future operations or capital needs or engage in other business
activities that may be in the interest of the Company. In addition, the Senior
Credit Facility also requires the Company to maintain compliance with certain
financial ratios. The ability of the Company to comply with such ratios may be
affected by events beyond the Company's control. A breach of any of these
covenants or the inability of the Company to comply with the required financial
ratios could result in a default under the Senior Credit Facility. In the event
of any such default, the lenders under the Senior Credit Facility could elect to
declare all borrowings outstanding under the Senior Credit Facility, together
with accrued interest and other fees to be due and payable, to require the
Company and the Guarantors to apply all of their available cash to repay such
borrowings or to prevent the Company from making debt service payments on the
Notes. If the Company were unable to repay any such borrowings when due, the
lenders could proceed against their collateral. If the indebtedness under the
Senior Credit Facility or the Notes were to be accelerated, there can be no
assurance that the assets of the Company and the Guarantors would be sufficient
to repay such indebtedness in full. See "Description of the Notes" and
"Description of Other Indebtedness -- The Company -- Senior Credit Facility."
Certain of the covenants in the Indenture (including the limitations on
additional debt, restricted payments, assets sales and transactions with
affiliates) do not apply to the Parent and none of such covenants will apply to
any Unrestricted Subsidiaries. If the Notes achieve an Investment Grade rating
and certain other conditions are satisfied, upon the request of the Company, all
of such covenants (with limited exceptions) will cease to apply, and the Company
and its Restricted Subsidiaries will be subject to covenants that will restrict
the Company and its Restricted Subsidiaries with respect to (x) incurring liens
and securing indebtedness and (y) engaging in sale and leaseback transactions.
Accordingly, the Notes will thereafter be entitled to substantially no covenant
protection. See "Description of the Notes -- Certain Investment Grade
Covenants."
LIMITATION ON SUBSIDIARY GUARANTEES AND THE PARENT GUARANTEE; FRAUDULENT
CONVEYANCE CONCERNS
The issuance of a Subsidiary Guarantee by a Subsidiary Guarantor and the
Parent Guarantee by the Parent may be subject to review under federal or state
fraudulent conveyance laws in the event of the bankruptcy or other financial
difficulty of such Subsidiary Guarantor or Parent, as the case may be. Depending
upon the standard applied in connection with such review, such review could
result in the indebtedness evidenced by a Guarantee being voided or subordinated
to all other indebtedness of such Guarantor (in addition to the senior
indebtedness of such Guarantor to which such Guarantee is expressly
subordinated), and could result in payments previously made in respect of such
Guarantee being returned to such Guarantor.
For example, under applicable law, if a court, in a lawsuit by an unpaid
creditor or representative of creditors of a Subsidiary Guarantor or Parent,
were to find that when such Subsidiary Guarantor or Parent incurred the
indebtedness evidenced by its Guarantee, such Subsidiary Guarantor or Parent
(a)(i) was insolvent or was rendered insolvent by reason of such incurrence,
(ii) was engaged in a business or transaction for which the assets remaining
with such Guarantor constituted unreasonably small capital or (iii) intended to
incur, or believed (or reasonably should have believed) that it would incur,
indebtedness beyond its ability to pay such indebtedness as it matures and (b)
received less than reasonably equivalent value or fair consideration for the
incurrence of such indebtedness, then the Subsidiary Guarantee or Parent
Guarantee could be voided, or claims in respect of the Subsidiary Guarantee or
Parent Guarantee could be subordinated to all other indebtedness of such
Guarantor. In addition, any amounts previously paid by a Subsidiary Guarantor or
Parent pursuant to a Guarantee could be voided and required to be returned to
such Guarantor or to a fund for the benefit of the creditors of such Guarantor.
The measure of insolvency for purposes of the foregoing considerations will vary
depending upon the law of the jurisdiction being applied. Generally, however, a
Subsidiary Guarantor or the Parent would be considered insolvent if (i) the sum
of its debts, including contingent liabilities, is greater than the saleable
value
17
<PAGE> 26
of all of its assets at a fair valuation or if the present fair saleable value
of its assets is less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become absolute and matured or (ii) it could not pay its debts as they become
due.
A court will likely find that a Subsidiary Guarantor or the Parent did not
receive fair consideration or reasonably equivalent value for its Guarantee to
the extent that its liability thereunder exceeds any direct benefit it received
from the issuance of the Notes. Each Guarantee will limit the liability of the
Guarantor, thereunder to the maximum amount that it could pay without the
guarantee being deemed a fraudulent transfer. There can be no assurance that
this limitation will be effective. If this limitation is not effective, the
issuance of a Guarantee by a Subsidiary Guarantor or the Parent could be deemed
to render insolvent such Guarantor. If this limitation is effective, there can
be no assurance that the limited amount so guaranteed would be sufficient to pay
amounts owed under the Notes in full.
POTENTIAL INABILITY TO EFFECT CHANGE OF CONTROL
The Indenture requires the Company, in the event of a Change of Control, to
make an offer to purchase all outstanding Notes at a price equal to 101% of the
principal amount thereof, plus accrued interest to the date of repurchase. The
Senior Credit Facility will restrict such a purchase and such an offer would
require the approval of the lenders thereunder. In addition, certain events
involving a change of control may be an event of default under the Senior Credit
Facility or other indebtedness of the Company that may be incurred in the
future. Accordingly, the right of the holders of the Notes to require the
Company to repurchase the Notes may be of limited value if the Company cannot
obtain the required approval under the Senior Credit Facility. Even if such
approval were obtained, there can be no assurance that the Company will have the
financial resources necessary to purchase the Notes upon a Change of Control.
Failure to offer to repurchase the Notes under such circumstances, however,
would constitute an event of default under the Indenture. See "Description of
the Notes -- Change of Control."
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are a new issuance of securities for which there is currently
no trading market. The New Notes will not be listed on any securities exchange.
The New Notes will not be eligible for PORTAL trading. There can be no assurance
that an active trading market will develop for, or as to the liquidity of, any
of the New Notes. The Company has been advised by the Initial Purchasers that
they intend to make a market in the Notes; however, the Initial Purchasers are
not obligated to do so, and any such market-making activities may be
discontinued at any time without notice. If the New Notes are traded, they may
trade at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities, the performance of the
Company and other factors.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Existing Notes may not be offered or sold unless registered under
the Securities Act and applicable state laws, or pursuant to an exemption
therefrom. The Company does not intend to register the Existing Notes under the
Securities Act, other than in the limited circumstances contemplated by the
Registration Rights Agreement. In addition, any holder of Existing Notes who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes may be deemed to have received restricted securities and, if
so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent that Existing Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered or tendered but unaccepted Existing Notes
could be adversely affected. See "The Exchange Offer -- Consequences of Failure
to Exchange; Resales of New Notes."
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<PAGE> 27
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Existing Notes, holders of Existing Notes must transmit a
properly completed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to the Exchange Agent at one of the addresses set
forth below under "The Exchange Offer -- Exchange Agent" on or prior to the
Expiration Date. In addition, either (i) certificates for such Existing Notes
must be received by the Exchange Agent along with the Letter of Transmittal or
(ii) a timely confirmation of a book-entry transfer described in this
Prospectus, must be received by the Exchange Agent on or prior to the Expiration
Date or (iii) the holder must comply with the guaranteed delivery procedures
described in this Prospectus. See "The Exchange Offer."
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<PAGE> 28
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $325,000,000
aggregate principal amount of New Notes for a like aggregate principal amount of
Existing Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Existing Notes. The total
aggregate principal amount of Existing Notes and New Notes will in no event
exceed $325,000,000.
As of the date of this Prospectus, $325,000,000 aggregate principal amount
of the Existing Notes was outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1998, to all
holders of Existing Notes known to the Company. The Company's obligation to
accept Existing Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth under "-- Conditions to the Exchange Offer"
below.
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were issued by the Company on May 29, 1998 in a
transaction exempt from the registration requirements of the Securities Act.
Accordingly, the Existing Notes may not be reoffered, resold, or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration and prospectus delivery requirements of the
Securities Act is available.
In connection with the issuance and sale of the Existing Notes, the
Company, the Parent and the Subsidiary Guarantors entered into the Registration
Rights Agreement, which requires the Company, the Parent and the Subsidiary
Guarantors to file on or before July 28, 1998 (60 days after the date of
issuance of the Existing Notes) a registration statement relating to the
Exchange Offer (or use its best efforts to file a shelf registration statement
relating to resales of the Existing Notes) and to use its best efforts to cause
the registration statement relating to the Exchange Offer or the shelf
registration statement to become effective on or before October 18, 1998 (150
days after the date of issuance of the Existing Notes). The Exchange Offer is
being made by the Company to satisfy certain of their obligations with respect
to the Registration Rights Agreement.
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases New Notes from the
Company to resell pursuant to Rule 144A or any other available exemption)
without compliance with the registration and prospectus delivery requirements of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes and are not participating in, and do not intend to participate in, the
distribution of such New Notes. The Company has not sought, and does not intend
to seek, its own no-action letter with regard to the Exchange Offer.
Accordingly, there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Any holder of
Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Thus, any New Notes acquired by
such holders will not be freely transferable except in compliance with the
Securities Act. A secondary resale transaction in the United States by a holder
using the Exchange Offer to participate in a distribution of Existing Notes must
be covered by an effective registration statement containing the selling
security holder information required by Item 507 of Regulation S-K under the
Securities Act. See "-- Consequences of Failure to Exchange; Resale of New
Notes."
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<PAGE> 29
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at p.m., New York City time,
on , 1998, unless the Company, in its sole discretion, has
extended the period of time for which the Exchange Offer is open (such date, as
it may be extended, is referred to herein as the "Expiration Date"). The
Expiration Date will be at least 20 business days after the commencement of the
Exchange Offer in accordance with Rule 14e-1(a) under the Exchange Act. In
addition, the Company has agreed in the Registration Rights Agreement to keep
the Exchange Offer open for not less than 90 days after the date that notice
thereof is first mailed to the holders of the Existing Notes. The Company
expressly reserves the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Existing Notes, by giving oral notice (promptly
confirmed in writing) or written notice to the Exchange Agent and by giving
written notice of such extension to the holders thereof or by press release or
other public announcement communicated, unless otherwise required by applicable
law or regulation, in each case, no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. During any
such extension, all Existing Notes previously tendered will remain subject to
the Exchange Offer unless properly withdrawn.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "-- Conditions to the Exchange Offer." If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Existing Notes as promptly as practicable.
For purposes of the Exchange Offer, the term "business day" has the meaning
set forth in Rule 14d-1(c)(6) under the Exchange Act.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Existing Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth below on or
prior to the Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below. A tender will not be deemed to have been timely
received if the tendering holder's properly completed and duly signed Letter of
Transmittal accompanied by the Existing Notes is mailed prior to the Expiration
Date but is received by the Exchange Agent after the Expiration Date.
THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO EXISTING NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the amount of an Eligible Institution (as defined herein). In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by a firm
which is a member of a registered U.S. national securities exchange or a member
of the National Association of Securities Dealers, Inc. or by a clearing agency,
an insured
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<PAGE> 30
credit union, a savings association or a commercial bank or trust company having
an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Existing Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Existing Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the
Existing Notes at the book-entry transfer facility, The Depository Trust
Company, for the purpose of facilitating the Exchange Offer, and subject to the
establishment thereof, any financial institution that is a participant in the
book-entry transfer facility's system may make book-entry delivery of Existing
Notes by causing such book-entry transfer facility to transfer such Existing
Notes into the Exchange Agent's account with respect to the Existing Notes in
accordance with the book-entry transfer facility's procedures for such transfer.
Although delivery of Existing Notes may be effected through book-entry transfer
into the Exchange Agent's account at the book-entry transfer facility, an
appropriate Letter of Transmittal with any required signature guarantee and all
other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Existing Note to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date a letter,
telegram or facsimile transmission from an Eligible Institution setting forth
the name and address of the tendering holder, the names in which the Existing
Notes are registered and, if possible, the certificate numbers of the Existing
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date the
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Existing Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of New Notes in exchange for Existing Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Existing Notes not timely or properly tendered or to
not accept any particular Existing Notes which acceptance might, in the judgment
of the Company or its counsel, be unlawful. The Company also reserves the
absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Existing Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Existing Notes in the Exchange Offer). The interpretation of
the terms and conditions of the Exchange Offer as to any particular Existing
Notes either before or after the Expiration Date (including the Letter of
Transmittal and
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<PAGE> 31
the instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Existing Notes for exchange must be cured within such reasonable period of
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Existing Notes.
If the Letter of Transmittal or any Existing Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, proper evidence satisfaction to the Company of their authority to so
act must be submitted.
By tendering, each holder will represent to the Company in the Letter of
Transmittal that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, that
neither the holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such New Notes, that
neither the holder nor any such other person is participating in or intends to
participate in the distribution of such New Notes and that neither the holder
nor any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, may be deemed to be an "underwriter" within the meaning of the
Securities Act and must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Tender of Existing Notes may be withdrawn at any time prior to the close of
business, New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent prior to the Expiration Date at its address
set forth below. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Existing Notes to be withdrawn (the "Depositor"),
(ii) identify the Existing Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Existing Notes), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Existing Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Existing Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Existing
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. Any Existing Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Existing Notes which have been tendered for
exchange and which are properly withdrawn will be returned to the holder thereof
without cost to such holder as soon as practicable after such withdrawal.
Properly withdrawn Existing Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Existing Notes" above at
any time on or prior to the Expiration Date.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Existing Notes
properly tendered and will issue the New Notes promptly
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<PAGE> 32
after acceptance of the Existing Notes. See "-- Conditions to the Exchange
Offer" below. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Existing Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note.
In all cases, issuance of New Notes for Existing Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Existing Notes or a
timely book-entry confirmation of such Existing Notes into the Exchange Agent's
account at the book-entry transfer facility, a properly completed and duly
executed Letter of Transmittal and all other required documents. If any tendered
Existing Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Existing Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Existing Notes will be returned without expense to the tendering
holder thereof (or, in the case of Existing Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Existing Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration of
the Exchange Offer.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Existing Notes and may terminate or amend the Exchange Offer if at any
time on or after the date of this Prospectus and prior to the Expiration Date
any of the following events shall occur:
(i) any action or proceeding shall have been instituted or threatened
in any court or before any governmental agency or body that in the
Company's judgment would reasonably be expected to prohibit, prevent or
otherwise impair the ability of the Company to proceed with the Exchange
Offer;
(ii) there shall occur a change in the current interpretation of the
staff of the Commission which current interpretation permits the New Notes
issued pursuant to the Exchange Offer in exchange for the Existing Notes to
be offered for resale, resold or otherwise transferred by holders thereof
(other than (i) a broker-dealer who purchases such New Notes directly from
the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act) or (ii) a person that is an affiliate
of the Company within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of the New
Notes;
(iii) a law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer;
(iv) a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the Registration
Statement or the qualification of the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), or proceedings shall
have been initiated or, to the knowledge of the Company, threatened for
that purpose, or any governmental approval has not been obtained, which
approval the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or
(v) any change, or any development involving a prospective change, in
the business or financial affairs of the Company has occurred which, in the
sole judgment of the Company, might materially impair the ability of the
Company to proceed with the Exchange Offer.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company, in whole or
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<PAGE> 33
in part, at any time from time to time, if it determines in its reasonable
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, subject to applicable law. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Existing Notes and return
any Existing Notes that have been tendered to the holders thereof, (ii) extend
the Exchange Offer and retain all Existing Notes tendered prior to the
Expiration Date, subject to the rights of such holders of tendered Existing
Notes to withdraw their tendered Existing Notes, or (iii) waive such termination
event with respect to the Exchange Offer and accept all properly tendered
Existing Notes that have not been withdrawn or otherwise amend the terms of the
Exchange Offer in any respect. If such waiver or amendment constitutes a
material change in the Exchange Offer, the Company will disclose such change by
means of a post-effective amendment to the Registration Statement of which this
Prospectus is a part and will distribute an amended or supplemented Prospectus
to each registered holder of Existing Notes, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver or amendment and the manner of disclosure to the
registered holders of the Existing Notes, if the Exchange Offer would otherwise
expire during such period.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of Nova Scotia Trust Company of New York has been appointed as the
Exchange Agent for the Exchange Offer. All executed Letters of Transmittal
should be directed to the Exchange Agent at one of the addresses set forth
below:
<TABLE>
<S> <C>
By Hand/ By Mail:
Overnight Courier: (Insured or Registered Recommended)
Mr. George Timmes Mr. George Timmes
The Bank of Nova Scotia The Bank of Nova Scotia
Trust Company of New York Trust Company of New York
One Liberty Plaza, 23rd Floor One Liberty Plaza, 23rd Floor
New York, NY 10006 New York, NY 10006
</TABLE>
By Facsimile:
Mr. George Timmes
(212) 225-5422
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The cash
expenses to be incurred by the Company in connection with the Exchange Offer
will be paid by the Company.
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<PAGE> 34
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company.
Neither the deliver of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Existing Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Existing Notes not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Existing Notes tendered, or if
tendered Existing Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Existing Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the carrying value of the Existing Notes
as reflected in the Company's account records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of New Notes for Existing Notes. Expenses incurred in
connection with the issuance of the New Notes will be amortized over the term of
the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Existing
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Existing Notes under the
Securities Act. However, if prior to the time the Exchange Offer is completed,
existing Commission interpretations are changed such that the Initial Notes
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Notes are not or would not be, upon receipt, transferable by each
such holder without need for further compliance with Section 5 of the Securities
Act (except for the requirement to deliver a prospectus included in the Exchange
Registration Statement applicable to resales by broker-dealers of Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Notes other than those acquired by the broker-dealer
directly from the Company), in lieu of conducting the Exchange Offer
contemplated by Section 2(a) the Company and the Guarantors shall file under the
Securities Act a "shelf" registration statement.
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases New Notes from the
Company to resell pursuant to Rule 144A or any other available exemption)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New
26
<PAGE> 35
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Notes and are not participating in, and do not
intend to participate in, the distribution of such New Notes. The Company has
not sought, and does not intend to seek, its own no-action letter with regard to
the Exchange Offer. Accordingly, there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer. If any holder has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff of
the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. A broker-dealer who holds Existing Notes that were acquired
for its own account as a result of market making or other trading activities may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of New Notes. Each such broker-dealer that
receives New Notes for its own account in exchange for Existing Notes, where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, may be deemed to be an
"underwriter" within the meaning of the Securities Act and must acknowledge in
the Letter of Transmittal that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. A secondary resale transaction in the United States by a holder using the
Exchange Offer to participate in a distribution of Existing Notes must be
covered by an effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K under the Securities
Act. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of certain jurisdictions.
Participation in the Exchange Offer is voluntary, and holders of Existing
Notes should carefully consider whether to participate. Holders of the Existing
Notes are urged to consult their financial and tax advisors in making their own
decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Existing Notes who do not tender their Existing Notes in
the Exchange Offer will continue to hold such Existing Notes and will be
entitled to all the rights, and limitations applicable thereto, under the
Indenture, except for any such rights under the Registration Rights Agreement
that by their terms terminate or cease to have further effectiveness as a result
of the making of this Exchange Offer. See "Description of the Notes." All
untendered Existing Notes will continue to be subject to the restrictions on
transfer set forth in the Indenture. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
Existing Notes could be adversely affected.
The Company may in the future seek to acquire untendered Existing Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The terms of any such purchases or offers may differ from
the terms of the Exchange Offer.
27
<PAGE> 36
USE OF PROCEEDS
No proceeds will be received by the Company from the issuance of the New
Notes. The net proceeds from the issuance of the Existing Notes were $316.0
million. The Company used all of the net proceeds to repay a portion of the
borrowings outstanding under the Senior Credit Facility. For a description of
the terms of the Senior Credit Facility, see "Description of Other
Indebtedness -- The Company -- Senior Credit Facility."
28
<PAGE> 37
CAPITALIZATION
The following table sets forth, as of May 31, 1998, the consolidated debt
and capitalization of the Parent. See "Use of Proceeds." The following table
should be read in conjunction with the consolidated financial statements and
notes thereto of the Parent appearing elsewhere herein.
<TABLE>
<CAPTION>
AS OF MAY 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 19,497
==========
Current portion of Term Loans............................... $ 78,000
==========
Long-term debt:
The Company and subsidiaries:
Senior Credit Facility(1):
Term Loans net of current portion.................... $1,245,190
Revolver............................................. 208,000
9 1/4% Senior Subordinated Notes due 2008............ 325,000
Other long-term debt(2)................................ 15,856
----------
Total long-term debt of Company...................... 1,794,046
----------
Parent (holding company only):
Parent IRBs(3)......................................... 65,200
Parent Promissory Note(4).............................. 60,000
----------
Total long-term debt of Parent....................... 125,200
----------
Total long-term debt........................................ 1,919,246
PIK Subordinated Debenture(5)............................... 350,000
Stockholders' equity(6)..................................... 1,006,263
----------
Total capitalization...................................... $3,275,509
==========
</TABLE>
- ---------------
(1) The Senior Credit Facility includes a $1.325 billion term loan facility (the
"Term Loans") and a $550.0 million revolving credit facility, which includes
a $200.0 million and $400.0 million sublimit for letters of credit and
loans, respectively (the "Revolver"). On May 31, 1998, the Company had
$192.0 million of additional borrowing availability (excluding letters of
credit) under the Revolver. Excluded from the amounts under the Senior
Credit Facility are approximately $44.8 million in deferred financing costs
which have been deducted from long-term debt shown in the balance sheet as
of May 31, 1998. See "Unaudited Pro Forma Combined Financial Information"
and "Description of Other Indebtedness -- The Company -- Senior Credit
Facility."
(2) The Company has two outstanding series of industrial revenue bonds (the
"Company IRBs") issued in connection with the operation of certain of the
Company's facilities. See "Description of Other Indebtedness -- The
Company -- Company IRBs."
(3) The Parent has two outstanding series of industrial revenue bonds (the
"Parent IRBs") issued in connection with the operation of certain of the
Company's facilities. See "Description of Other Indebtedness -- The
Parent -- Parent IRBs."
(4) On May 15, 1997, the Parent issued a $60.0 million promissory note (the
"Parent Promissory Note") which matures on May 15, 2003. See "Description of
Other Indebtedness -- The Parent -- Parent Promissory Note."
(5) The PIK Subordinated Debenture is an obligation of the Parent and at the
Parent's election, interest and principal due may be paid in shares of
Parent Common Stock, subject to certain limitations. The PIK Subordinated
Debenture is subordinated in right of payment to the Parent Guarantee of the
Notes. See "Description of Other Indebtedness -- The Parent -- PIK
Subordinated Debenture."
(6) As of May 31, 1998, there were approximately 351.0 million shares of Parent
Common Stock outstanding.
29
<PAGE> 38
THE TRANSACTIONS
In November 1997, the Parent stated its intention to acquire Safety-Kleen
pursuant to a tender offer for all of the issued and outstanding shares of
common stock of Safety-Kleen (the "Tender Offer") for consideration comprised of
cash and Parent Common Stock. Safety-Kleen is a leader in servicing the
recycling and waste needs of companies in the automotive/retail repair,
industrial and other business sectors. On March 16, 1998, the Parent, a
subsidiary of the Company and Safety-Kleen entered into an agreement and plan of
merger pursuant to which the Company would acquire all of the outstanding shares
of common stock of Safety-Kleen which were not tendered pursuant to the Tender
Offer (the "Merger Agreement"). The Tender Offer expired on March 31, 1998 and,
as a result, as of April 7, 1998, the Company owned approximately 94% of the
outstanding shares of common stock of Safety-Kleen.
In May 1998, the Company consummated the Safety-Kleen Merger and acquired
100% of the outstanding shares of common stock of Safety-Kleen. The Safety-Kleen
Acquisition was completed for aggregate consideration of approximately $1.1
billion in cash and the issuance of approximately 166 million shares of Parent
Common Stock. The Company also repurchased substantially all of the outstanding
$100.0 million Safety-Kleen Notes which were tendered to the Company pursuant to
the Debt Tender Offer. The remaining outstanding Safety-Kleen Notes were
defeased on May 29, 1998. The Company financed the cash portion of the
Safety-Kleen Acquisition and the Debt Tender Offer and refinanced certain
indebtedness with total borrowings of approximately $1.8 billion under the
Senior Credit Facility. Pro forma for the Safety-Kleen Transactions, the Rollins
Acquisition and certain related transactions, the Parent's revenues and Adjusted
EBITDA for the nine months ended May 31, 1998 would have been $1.3 billion and
$380.3 million, respectively.
Effective July 1, 1998, the Parent commenced doing business as
"Safety-Kleen Corp." and intends to change its name to Safety-Kleen Corp. after
its next annual meeting. Also on July 1, 1998, the subsidiaries of the Parent
(including the Company) changed their names to eliminate references to Laidlaw.
In May 1997, Rollins, the largest commercial hazardous waste incineration
company in North America, acquired Laidlaw's hazardous and industrial waste
operations. Upon consummation of the Rollins Acquisition, which was accounted
for as a reverse acquisition, Rollins changed its name to Laidlaw Environmental
Services, Inc. To finance the Rollins Acquisition, the Parent (i) issued 120
million shares of Parent Common Stock, (ii) issued the PIK Subordinated
Debenture and (iii) paid $349.1 million in cash to Laidlaw. Laidlaw currently
beneficially owns 35% of the outstanding Parent Common Stock (49% assuming the
conversion of the PIK Subordinated Debenture).
30
<PAGE> 39
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unless the context otherwise requires, all references to the "Parent" under
the heading "Unaudited Pro Forma Combined Financial Information" shall be deemed
to include the Parent, the Company and the Company's direct and indirect
subsidiaries (including Safety-Kleen).
The accompanying unaudited pro forma combined statement of income for
fiscal 1997 gives effect to the Safety-Kleen Transactions, the Rollins
Acquisition and certain related transactions as if they occurred on September 1,
1996. The unaudited pro forma combined statement of income for the nine months
ended May 31, 1998 gives effect to the Safety-Kleen Transactions as if they
occurred on September 1, 1996. As the Safety-Kleen Transactions, the Rollins
Acquisition and certain related transactions occurred prior to May 31, 1998 and
is reflected in the combined balance sheet as of that date, no pro forma
combined balance sheet as of May 31, 1998 is presented.
The Rollins Acquisition and the Safety-Kleen Acquisition have been
accounted for using the purchase method of accounting and are based on the
assumptions in the notes below.
The Company believes that planned selling, general and administrative cost
consolidation, the consolidation of collection and processing facilities, the
increased utilization of remaining facilities and the internalization of various
waste streams resulting from the Safety-Kleen Acquisition will generate annual
cost savings of approximately $103.5 million to $165.0 million. The unaudited
pro forma combined financial information does not give effect to these potential
cost savings or potential cost savings yet to be realized in connection with the
Rollins Acquisition.
The unaudited pro forma combined financial statements do not purport to
represent what the Parent's results of operations or financial condition would
have been had the Rollins Acquisition and the Safety-Kleen Acquisition occurred
on the dates indicated or to predict the Parent's results of operations or
financial condition in the future. The unaudited pro forma combined financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto of the Parent and the consolidated financial
statement and notes thereto of Safety-Kleen included elsewhere in this
Prospectus.
31
<PAGE> 40
LAIDLAW ENVIRONMENTAL SERVICES, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
HISTORICAL LAIDLAW FOR ROLLINS LAIDLAW
ROLLINS ENVIRONMENTAL ACQUISITION ENVIRONMENTAL
---------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues..................... $150,985 $ 678,619 $ (4,099)(Da) $ 825,505
Expenses:
Operating.................. 149,791 485,062 (4,099)(Da) 630,754
Depreciation and
amortization............. 22,606 53,506 (6,345)(Db) 69,767
Selling, general and
administrative........... 22,371 73,068 95,439
Restructuring charge....... -- 331,697 331,697
-------- --------- -------- ----------
Total expenses....... 194,768 943,333 (10,444) 1,127,657
-------- --------- -------- ----------
Operating income (loss)...... (43,783) (264,714) 6,345 (302,152)
Interest expense............. 5,856 44,273 9,625(Dc) 59,754
Other income................. -- 2,865 -- 2,865
-------- --------- -------- ----------
Income (loss) from continuing
operations before income
tax........................ (49,639) (306,122) (3,280) (359,041)
Income tax expense
(benefit).................. (17,460) (122,789) 3,251(Dd) (136,998)
-------- --------- -------- ----------
Income (loss) from continuing
operations before minority
interest................... (32,179) (183,333) (6,531) (222,043)
Minority interest (net of
tax)....................... -- (119) (119)
-------- --------- -------- ----------
Income (loss) from continuing
operations................. $(32,179) $(183,452) $ (6,531) $ (222,162)
======== ========= ======== ==========
Basic income (loss) per share
(Note D5).................. $ (1.329)
Weighted average common stock
outstanding................ 138,033
<CAPTION>
PRO FORMA
ADJUSTMENTS
HISTORICAL FOR SAFETY-KLEEN PRO FORMA
SAFETY-KLEEN ACQUISITION COMBINED
------------ ---------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues..................... $977,122 $ -- $1,802,627
Expenses:
Operating.................. 652,109 -- 1,282,863
Depreciation and
amortization............. 80,018 32,497(D1) 182,282
Selling, general and
administrative........... 129,063 -- 224,502
Restructuring charge....... -- -- 331,697
-------- --------- ----------
Total expenses....... 861,190 32,497 2,021,344
-------- --------- ----------
Operating income (loss)...... 115,932 (32,497) (218,717)
Interest expense............. 18,504 111,714(D2) 189,972
Other income................. 1,587 -- 4,452
-------- --------- ----------
Income (loss) from continuing
operations before income
tax........................ 99,015 (144,211) (404,237)
Income tax expense
(benefit).................. 38,294 (49,242)(D3) (147,946)
-------- --------- ----------
Income (loss) from continuing
operations before minority
interest................... 60,721 (94,969) (256,291)
Minority interest (net of
tax)....................... -- -- (119)
-------- --------- ----------
Income (loss) from continuing
operations................. $ 60,721 $ (94,969) $ (256,410)
======== ========= ==========
Basic income (loss) per share
(Note D5).................. $ (0.731)(D4)
Weighted average common stock
outstanding................ 350,904(D4)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
32
<PAGE> 41
LAIDLAW ENVIRONMENTAL SERVICES, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
LAIDLAW HISTORICAL PRO FORMA PRO FORMA
ENVIRONMENTAL SAFETY-KLEEN ADJUSTMENTS COMBINED
------------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues....................................... $750,472 $569,508 $ -- $1,319,980
Expenses:
Operating.................................... 513,138 382,063 -- 895,201
Depreciation and amortization................ 55,927 45,297 13,986 115,210
Selling, general and administrative.......... 74,273 72,729 -- 147,002
Restructuring charge......................... 65,831 -- -- 65,831
-------- -------- -------- ----------
Total expenses....................... 709,169 500,089 13,986 1,223,244
-------- -------- -------- ----------
Operating income (loss)........................ 41,303 69,419 (13,986) 96,736
Interest expense............................... 61,266 9,358 71,365 141,989
Other income (expense)......................... 3,216 (8,235) -- (5,019)
-------- -------- -------- ----------
Income (loss) from continuing operations before
income taxes................................. (16,747) 51,826 (85,351) (50,272)
Income tax expense (benefit)................... (6,282) 18,996 (29,919) (17,205)
-------- -------- -------- ----------
Income (loss) from continuing operations before
minority interest............................ (10,465) 32,830 (55,432) (33,067)
Minority interest.............................. 129 -- -- 129
-------- -------- -------- ----------
Income (loss) from continuing operations....... (10,336) 32,830 (55,432) (32,938)
Extraordinary loss, net of applicable tax...... (11,283) -- -- (11,283)
-------- -------- -------- ----------
Net income (loss).................... $(21,619) $ 32,830 $(55,432) $ (44,221)
======== ======== ======== ==========
Basic loss per share:
Loss from continuing operations.............. $ (0.095)
Extraordinary loss, net of applicable tax.... (0.032)
Net loss..................................... (0.127)
Weighted average common stock outstanding...... 348,372
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
33
<PAGE> 42
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
A. SUMMARY OF SAFETY-KLEEN ACQUISITION
In the Tender Offer, the Company offered to exchange $18.30 in cash and 2.8
shares of Parent Common Stock for each outstanding share of common stock of
Safety-Kleen ("Safety-Kleen Common Stock"). The Company acquired in the
aggregate 55,751,582 shares of Safety-Kleen Common Stock pursuant to the Tender
Offer on April 3 and April 7, 1998.
In contemplation of the Safety-Kleen Acquisition, the Company established a
$2.2 billion Senior Credit Facility (which includes a $200.0 million letter of
credit sublimit) through an affiliate of TD Securities (USA) Inc. The Senior
Credit Facility is secured by all of the tangible assets of the combined Company
and the Guarantors to the extent required by the syndicate of banks and other
financial institutions (collectively, the "Lenders") acceptable to the Company
and the Agent that will make the loans pursuant to the Senior Credit Facility.
All of the capital stock of the Company's wholly-owned domestic subsidiaries,
including the acquired Safety-Kleen domestic subsidiaries, have been pledged as
part of such security for the Senior Credit Facility, and such subsidiaries have
guaranteed the obligations of the Company.
On May 29, 1998, Safety-Kleen Services, Inc., a wholly-owned subsidiary of
the Company, issued $325 million 9.25% Senior Subordinated Notes due 2008 (the
"Notes") in a private offering. Net proceeds from the sale of the Notes, after
the underwriting discount and other expenses, were approximately $316 million.
The proceeds were used to repay a portion of the borrowings outstanding under
the Senior Credit Facility.
B. ACCOUNTING TREATMENT (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The Safety-Kleen Acquisition has been accounted for using the purchase
method of accounting applied in accordance with generally accepted accounting
principles. Accordingly, the assets and liabilities of Safety-Kleen have been
recorded at their estimated fair value, with any difference between the amount
of such fair value and the purchase price being recorded as goodwill. The
operating results of the combined company will include the results of operations
of Safety-Kleen from and after the date of the acquisition of the Safety-Kleen
Common Stock pursuant to the Tender Offer.
The aggregate purchase price totals $1,938,990 and is comprised as follows:
<TABLE>
<S> <C>
Safety-Kleen Common Stock outstanding at March 28, 1998..... 60,052,141
Safety-Kleen Common Stock previously acquired by the
Company................................................... (601,100)
------------
Safety-Kleen Common Stock remaining to acquire.............. 59,451,041
============
Cash cost at $18.30 per share of Safety-Kleen Common Stock,
including cost of fractional shares....................... $ 1,087,963
Cost of additional shares of Parent Common Stock to be
issued:
Number of shares of Parent Common Stock to be issued at
Exchange Ratio of 2.8................................... 166,460,350
Price per share........................................... $ 4.125
Total cost......................................... 686,649
------------
1,774,612
Cost of Safety-Kleen Common Stock previously acquired by the
Company................................................... 13,000
Transaction costs, including stock options and severance.... 76,378
Termination fees associated with prior merger agreement..... 75,000
------------
Total purchase price for Safety-Kleen
Acquisition...................................... $ 1,938,990
============
</TABLE>
34
<PAGE> 43
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
The price per share of the additional shares of Parent Common Stock issued
of $4.125 was the average of the closing New York Stock Exchange (NYSE: LLE)
market price for the three trading days prior to and the three trading days
immediately following and including March 16, 1998, the date of the Merger
Agreement.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on estimated fair values at the date of acquisition as
follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 227,775
Property, plant and equipment............................... 1,686,232
Goodwill.................................................... 936,625
Other assets................................................ 18,560
Current liabilities......................................... (457,532)
Deferred income taxes....................................... (342,050)
Other deferred items........................................ (130,620)
----------
Purchase price for Safety-Kleen Acquisition............ $1,938,990
==========
</TABLE>
C. BASIS OF PRESENTATION
The unaudited pro forma combined statement of income for the fiscal year
ended August 31, 1997 gives effect to (a) the Rollins Acquisition and certain
related transactions under the heading "Pro Forma Laidlaw Environmental" and (b)
the Rollins Acquisition and certain related transactions and the Safety-Kleen
Transactions under the heading "Pro Forma Combined" as if each had occurred as
of September 1, 1996. The unaudited pro forma combined statement of income for
the nine months ended May 31, 1998 gives effect to the Safety-Kleen Transactions
as if it had occurred as of September 1, 1996.
Since the May 31, 1998 balance sheet reflects the Safety-Kleen Acquisition
and the Rollins Acquisition, no pro forma disclosure is required. The unaudited
pro forma combined statement of income for the year ended August 31, 1997
includes the Parent for the year ended August 31, 1997, Rollins for the period
September 1, 1996 to May 15, 1997, and Safety-Kleen for the aggregate of the 16
weeks ended December 28, 1996 and 36 weeks ended September 6, 1997. The
unaudited pro forma combined statement of income for the nine months ended May
31, 1998 includes the Parent for the nine months ended May 31, 1998 and
Safety-Kleen for the aggregate of the 17 weeks ended January 3, 1998 and the 12
weeks ended March 28, 1998.
Both acquisitions have been presented using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets acquired
and liabilities assumed based upon management's best preliminary estimate of
their fair values and anticipated continued use in the operations of the
combined company. The preliminary allocation of the purchase price will be
subject to further adjustments as the Company finalizes the allocation of the
purchase price in accordance with generally accepted accounting principles.
Management does not anticipate that the final allocation of the purchase price
will result in a material change to income. The goodwill acquired is being
amortized over 40 years on a straight-line basis.
During the report periods, there were no material transactions between the
Parent and Safety-Kleen.
The unaudited pro forma combined financial information does not purport to
be indicative of the combined financial position or combined results of
operations of the Parent, Rollins and Safety-Kleen had the transactions assumed
therein occurred on the dates specified, nor are they indicative of future
financial position or results of operations. The unaudited pro forma combined
financial information does not give effect to potential cost savings yet to be
realized of the Rollins Acquisition, nor the annual cost savings of
approximately $103.5 million to $165.0 million that the Company's management
believes may be realized as a result of the Safety-Kleen Acquisition. There can
be no assurance that such cost savings, if any, will be achieved.
35
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
D. PRO FORMA ADJUSTMENTS (DOLLARS AND SHARES IN THOUSANDS)
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the Rollins
Acquisition and certain related transactions, as of the beginning of fiscal year
1997 using the purchase method of accounting:
(a) To eliminate transactions between combined companies.
(b) To adjust depreciation to reflect the fair value adjustment of
property and equipment and to reflect the effects of the Rollins
Acquisition upon goodwill amortization.
(c) To adjust expense to reflect financing costs associated with the
Rollins Acquisition.
(d) To adjust income taxes (benefits) to record the pro forma income
taxes (benefit) as computed under Statement of Financial Accounting
Standard No. 109 on pro forma pre-tax income (loss).
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the acquisition of
Safety-Kleen by the Company using the purchase method of accounting:
1. To adjust depreciation and amortization expense to reflect the fair value
adjustment of property, plant and equipment and the effect of the
Safety-Kleen Acquisition on goodwill amortization, as follows:
<TABLE>
<CAPTION>
YEAR NINE MONTHS
ENDED ENDED
AUGUST 31, MAY 31,
1997 1998
------------ -----------
<S> <C> <C>
To eliminate Safety-Kleen's estimated historical intangible
and other asset amortization expense...................... $(18,632) $(11,579)
To record amortization expense related to goodwill as a
result of the Safety-Kleen Acquisition.................... 23,416 11,708
To record depreciation expense related to certain
Safety-Kleen property, plant and equipment (primarily
buildings and land improvements), written up to estimated
fair value................................................ 27,713 13,857
-------- --------
Total adjustment................................... $ 32,497 $ 13,986
======== ========
</TABLE>
2. To adjust interest expense for the impact of the additional long-term debt
associated with the Safety-Kleen Acquisition, as follows:
<TABLE>
<CAPTION>
YEAR NINE MONTHS
ENDED ENDED
AUGUST 31, MAY 31,
1997 1998
------------ -----------
<S> <C> <C>
To eliminate historical Safety-Kleen interest expense....... $(18,504) $ (9,358)
To eliminate interest expense on refinanced debt of the
Company................................................... (29,984) (17,491)
To record interest expense on $1,531,048 of borrowings at
8.5%(2) under the Senior Credit Facility.................. 130,139 75,914
To record interest expense on $325,000 9 1/4% notes issued
May 29, 1998.............................................. 30,063 22,300
-------- --------
Total adjustment................................... $111,714 $ 71,365
======== ========
</TABLE>
- ---------------
(1) Includes long-term debt associated with the Safety-Kleen Acquisition
(Note D10) and refinancing of Safety-Kleen historical debt of $213,000.
(2) Calculated based on current rates pursuant to the terms of the Senior
Credit Facility, other costs and the effect of interest rate swap
agreements. See "Description of Other Indebtedness -- The Company --
Senior Credit Facility."
36
<PAGE> 45
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
3. To adjust income taxes (benefits) to record the pro forma income taxes
(benefits) as computed under SFAS 109 on pro forma pre-tax income (loss).
4. Pro forma weighted average common and common stock equivalents outstanding
comprise:
<TABLE>
<CAPTION>
YEAR NINE MONTHS
ENDED ENDED
AUGUST 31, MAY 31,
1997 1998
---------- -----------
<S> <C> <C>
Parent weighted average historical.......................... 138,033 181,912
Adjustment for Rollins Acquisition.......................... 46,411 --
Additional shares of Parent Common Stock to be issued in
connection with the Safety-Kleen Acquisition (see Note
B)........................................................ 166,460 166,460
Percentage of shares of Parent Common Stock held by former
Safety-Kleen shareholders after the Safety-Kleen
Acquisition............................................... 48.0% 47.4%
Shares of Parent Common Stock outstanding................... 180,435 350,959
Pro forma shares of Parent Common Stock..................... 346,895 350,959
Pro forma weighted average total............................ 350,904 348,372
======= =======
Pro forma loss per share.................................... $(0.731) $(0.127)
======= =======
</TABLE>
5. Diluted earnings per share amounts, which would include the dilutive effect
of the assumed conversions of potential common shares, have not been
included for the year ended August 31, 1997 nor for the nine months ended
May 31, 1998 as the effect of such inclusion would be anti-dilutive.
37
<PAGE> 46
SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA OF LAIDLAW ENVIRONMENTAL
The selected consolidated financial data set forth below for, and as of the
end of, each of the years in the three-year period ended August 31, 1997 are
derived from the consolidated financial statements of the Parent, which have
been audited by Coopers & Lybrand L.L.P., independent auditors. The selected
consolidated financial data set forth below for, and as of the end of, each of
the years in the two-year period ended August 31, 1994 are derived from the
financial statements of Laidlaw. The selected consolidated financial data set
forth below for the nine months ended May 31, 1997 and 1998 are derived from the
unaudited interim financial statements of the Parent. In the opinion of the
Parent's management, such unaudited interim statements include all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of the Parent's financial position and results of operations for such periods.
The results of operations for the nine months ended May 31, 1998 are not
necessarily indicative of the results that may be expected for the full year.
The selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Laidlaw Environmental" and the consolidated financial statements
and notes thereto of the Parent appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 31, MAY 31,
--------------------------------------------------------- -----------------------
1993(1) 1994 1995 1996 1997 1997 1998
-------- -------- ---------- ---------- --------- ---------- ----------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................. $511,554 $517,804 $ 599,241 $ 652,973 $ 678,619 $ 468,522 $ 750,472
Expenses:
Operating.............................. -- 354,499 428,932 473,563 485,062 338,343 513,138
Depreciation and amortization.......... -- 48,356 48,386 48,291 53,506 39,134 55,927
Selling, general and administrative.... -- 69,401 62,064 73,800 73,068 52,040 74,273
Restructuring charge(2)................ -- -- -- -- 331,697 331,697 65,831
-------- -------- ---------- ---------- --------- ---------- ----------
Operating income (loss).................. -- 45,548 59,859 57,319 (264,714) (292,692) 41,303
Allocated interest expense............... -- 30,961 36,846 41,506 24,030 24,030 --
Interest expense......................... -- 3,039 4,296 5,344 20,243 5,892 61,266
Other income............................. -- 14,183 2,967 1,391 2,865 2,129 3,216
-------- -------- ---------- ---------- --------- ---------- ----------
Income (loss) from continuing operations
before income tax...................... 17,066 25,731 21,684 11,860 (306,122) (320,485) (16,747)
Income tax expense (benefit)............. 5,200 3,200 4,769 2,500 (122,789) (128,934) (6,282)
-------- -------- ---------- ---------- --------- ---------- ----------
Income (loss) from continuing operations
before minority interest............... 11,866 22,531 16,915 9,360 (183,333) (191,551) (10,465)
Minority interest (net of tax)........... (212) -- (150) (2,646) (119) (266) 129
-------- -------- ---------- ---------- --------- ---------- ----------
Income (loss) from continuing
operations............................. 11,654 22,531 16,765 6,714 (183,452) (191,817) (10,336)
Income (loss) from discontinued
operations (net of tax)................ -- -- 819 1,496 20 20 --
-------- -------- ---------- ---------- --------- ---------- ----------
Income (loss) before extraordinary
item................................... 11,654 22,531 17,584 8,210 (183,432) (191,797) (10,336)
Extraordinary loss, net of applicable
tax(3)................................. -- -- -- -- -- -- (11,283)
-------- -------- ---------- ---------- --------- ---------- ----------
Net income (loss)........................ $ 11,654 $ 22,531 $ 17,584 $ 8,210 $(183,432) $ (191,797) $ (21,619)
======== ======== ========== ========== ========= ========== ==========
PER SHARE DATA:
Basic income (loss) per share:
Income (loss) from continuing
operations........................... $ 0.097 $ 0.188 $ 0.140 $ 0.056 $ (1.329) $ (1.550) $ (0.048)
Income (loss) from discontinued
operations........................... -- -- 0.007 0.012 -- -- --
Extraordinary loss, net of applicable
tax.................................. -- -- -- -- -- -- (0.052)
Net income (loss)...................... 0.097 0.188 0.147 0.068 (1.329) (1.550) (0.100)
</TABLE>
38
<PAGE> 47
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 31, MAY 31,
--------------------------------------------------------- -----------------------
1993(1) 1994 1995 1996 1997 1997 1998
-------- -------- ---------- ---------- --------- ---------- ----------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
Diluted income per share(4)
Income (loss) from continuing
operations........................... 0.097 0.188 0.140 0.056 (1.329) (1.550) (0.048)
Income (loss) from discontinued
operations........................... -- -- 0.007 0.012 -- -- --
Extraordinary loss, net of applicable
tax.................................. -- (0.052)
Net income (loss)...................... 0.097 0.188 0.147 0.068 (1.329) (1.550) (0.100)
Cash dividends per common share.......... -- -- -- -- -- -- --
OTHER DATA:
EBITDA(5)................................ -- $ 93,904 $ 108,245 $ 105,610 $ 120,489 $ 78,139 $ 163,061
Cash interest expense.................... -- 34,000 41,142 46,850 38,464 20,193 44,832
Ratio of earnings to fixed charges(6).... -- 1.60x 1.41x 1.20x (6) (6) 0.77x
BALANCE SHEET DATA (AT PERIOD END)
Working capital.......................... 119,522 90,831 60,075 40,677 76,095 49,778 90,895
Total assets............................. 947,976 974,053 1,367,411 1,491,294 1,610,878 1,587,784 4,406,082
Long-term debt........................... 24,253 18,454 55,149 48,556 528,010 525,050 1,874,489
Stockholders' equity(7).................. 795,887 798,597 1,094,777 1,094,777 327,965 325,074 1,006,263
Weighted average common stock
outstanding............................ 120,000 120,000 120,000 120,000 138,033 123,760 215,023
Weighted average common stock outstanding
and assumed conversions................ 120,000 120,000 120,000 120,000 165,439 123,760 215,023
</TABLE>
- ---------------
(1) Prior to May 15, 1997, the date of the Rollins Acquisition, the Company was
operated as a division of Laidlaw and, accordingly, the Company's results of
operations were included in the financial statements of Laidlaw. Certain of
the selected financial data for fiscal 1993 were combined with that of
Laidlaw and were not available on a separate basis.
(2) For fiscal 1997, reflects a non-recurring restructuring charge of $331.7
million ($200.0 million after tax or $1.45 per share) incurred in connection
with the closing of certain of the operating facilities that had become
redundant, and an impairment in the carrying value of certain operating
facilities due to lower than expected future cash flows, as a result of the
Rollins Acquisition.
For the nine months ended May 31, 1998, reflects a non-recurring
restructuring charge of $65.8 million ($39.5 million after tax or $0.11 per
share) for the costs associated with the closing of certain facilities and
the severance of employees as a result of the acquisition of Safety-Kleen.
(3) Related to an extraordinary charge of approximately $18.8 million ($11.3
million net of tax or $0.05 per share) related to the write off of previous
deferred debt issuance costs and prepayment penalties.
(4) Inclusion of diluted per share amounts would have been anti-dilutive in
fiscal 1997 and the nine months ended May 31, 1997 and 1998. No dilutive
components existed prior to 1997.
(5) EBITDA represents operating income plus (i) depreciation and amortization
(ii) in the case of fiscal 1997 and the nine months ended May 31, 1997, the
$331.7 million non-recurring restructuring charge incurred in fiscal 1997 in
connection with the Rollins Acquisition and (iii) in the nine months ended
May 31, 1998, the $65.8 million non-recurring restructuring charge incurred
in connection with the Safety-Kleen Acquisition. EBITDA is presented because
it provides useful information regarding the Company's ability to service
debt. EBITDA should not be considered as an alternative measure of operating
results or cash flow from operations (as determined in accordance with
generally accepted accounting principles).
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs and the
portion of rental expense that represents the interest factor. In fiscal
1997 and the nine months ended May 31, 1997, earnings were insufficient to
cover fixed charges by $249.8 million, and $280.3 million, respectively.
(7) For fiscal years 1993 to 1996 inclusive, stockholders' equity represents the
net investment of Laidlaw in the Parent.
39
<PAGE> 48
SELECTED HISTORICAL FINANCIAL DATA OF SAFETY-KLEEN
The selected consolidated financial data set forth below for, and as of the
end of, each of the years in the five-year period ended January 3, 1998 are
derived from the consolidated financial statements of Safety-Kleen, which have
been audited by Arthur Andersen LLP, independent auditors. The selected
consolidated financial data set forth below for the 12 weeks ended March 28,
1998 and March 22, 1997 are derived from the unaudited interim financial
statements of Safety-Kleen. In the opinion of Safety-Kleen's management, such
unaudited interim financial statements include all adjustments (consisting of
only normal recurring accruals) necessary for a fair presentation of
Safety-Kleen's financial position and results of operations for such periods.
The results of operations for the 12 weeks ended March 28, 1998 are not
necessarily indicative of the results that may be expected for the full year.
The selected historical financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Safety-Kleen" and the Consolidated Financial Statements and Notes
thereto of Safety-Kleen appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
------------------------
FISCAL YEAR MARCH 22, MARCH 28,
----------------------------------------------------------- ---------- -----------
1993 1994 1995 1996 1997(1) 1997 1998
--------- -------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT RATIO AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................ $ 795,508 $791,267 $ 859,251 $ 923,126 $1,007,903 $ 220,230 $ 241,777
Expenses:
Operating............................. 533,448 510,306 559,418 603,003 676,509 148,745 164,693
Selling, general and administrative... 109,923 103,907 113,569 122,892 129,959 30,256 32,594
Depreciation and amortization......... 81,481 77,730 77,801 77,741 81,010 17,658 19,046
Restructuring charge (credit)......... 179,000 -- (15,217) -- -- -- --
Special charge for environmental
remediation costs................... 50,000 -- 11,956 -- -- -- --
--------- -------- ---------- ---------- ---------- ---------- -----------
Operating income (loss)................. (158,344) 99,324 111,724 119,490 120,425 23,571 25,444
Interest expense........................ 11,111 15,209 20,230 19,240 18,108 4,361 3,612
Other income (expense).................. 846 711 974 1,398 (1,817) 227 (5,589)
Income (loss) from continuing operations
before income tax..................... (168,609) 84,826 92,468 101,648 100,500 19,437 16,243
Income tax expense (benefit)............ (67,263) 34,732 39,165 40,539 37,330 7,599 6,286
--------- -------- ---------- ---------- ---------- ---------- -----------
Net income (loss)....................... $(101,346) $ 50,094 $ 53,303 $ 61,109 $ 63,170 $ 11,838 $ 9,957
========= ======== ========== ========== ========== ========== ===========
PER SHARE DATA:
Income (loss) per share from continuing
operations
Basic................................. $ (1.76) $ 0.87 $ 0.92 $ 1.05 $ 1.08 $ 0.20 $ 0.17
Diluted............................... (1.76) 0.87 0.92 1.05 1.07 0.20 0.16
Cash dividends per common share......... 0.36 0.36 0.36 0.36 0.36 0.09 0.09
OTHER DATA:
EBITDA(2)............................... $ 102,137 $177,054 $ 174,308 $ 197,231 $ 201,435 $ 41,229 $ 44,490
Cash interest expense................... 11,111 15,209 20,230 19,240 18,108 4,361 3,612
Ratio of earnings to fixed charges(3)... (3) 4.81x 4.24x 4.42x 4.18x 3.66x 3.37x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital......................... $ 53,472 $ 31,766 $ 43,532 $ 72,340 $ 68,983 $ 75,361 $ (118,443)
Total assets............................ 950,664 973,444 1,009,050 1,044,823 1,034,706 1,048,933 1,055,135
Long-term debt.......................... 288,633 284,125 283,715 276,954 214,234 268,341 --
Stockholders' equity.................... 362,664 396,336 433,435 480,290 529,467 480,047 552,908
Weighted average common stock
outstanding........................... 57,679 57,741 57,813 58,089 58,415 58,258 59,652
Weighted average common stock
outstanding and assumed conversions... 57,679 57,741 57,857 58,152 58,926 58,420 61,131
</TABLE>
40
<PAGE> 49
- ---------------
(1) Fiscal 1997 was a fifty-three week year. All other years presented were
fifty-two weeks.
(2) EBITDA represents operating income plus (i) depreciation and amortization
plus or minus (ii) non-recurring restructuring charges or credits. EBITDA
should not be considered as an alternative measure of operating results or
cash flow from operations (as determined in accordance with generally
accepted accounting principles).
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs and the
portion of rental expense that represents the interest factor. In fiscal
1993, earnings were insufficient to cover fixed charges by $150.6 million.
41
<PAGE> 50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- LAIDLAW ENVIRONMENTAL
The following discussion and analysis represents the financial condition
and results of operations of the Parent and its consolidated subsidiaries and is
based on and should be read in conjunction with the consolidated financial
statements and notes thereto of the Parent included elsewhere in this
Prospectus. The Parent is a holding company only and has no independent business
operations, and all of the business operations of the Parent are conducted
through the Company and its subsidiaries. The consolidated financial statements
of the Parent do not give effect to the Safety-Kleen Acquisition for any period
prior to April 1, 1998 and, with respect to the Rollins Acquisition, for any
period prior to May 15, 1997. Certain statements in the following discussion and
analysis are "forward-looking statements." See "Disclosure Regarding
Forward-Looking Statements."
OVERVIEW -- LAIDLAW ENVIRONMENTAL
The historical results of operations of the Parent represent, for any
period prior to May 15, 1997, certain of the hazardous and industrial waste
operations of Laidlaw ("Old LESI"). As a division of Laidlaw, Old LESI greatly
expanded its operations when it acquired United States Pollution Control, Inc.
("USPCI"), Union Pacific Corporation's hazardous waste management business, in
December 1994. The acquisition of USPCI greatly enhanced Old LESI's service
breadth and depth as well as its customer base, both by size and geography. The
acquisition provided over $200.0 million in annualized revenue to Old LESI.
Through the USPCI transaction, Old LESI acquired substantial hazardous and
non-hazardous landfill capacity and an expanded rail transport capability.
In May 1997, Rollins, the largest commercial hazardous waste incineration
company in North America, acquired Old LESI. Upon consummation of the Rollins
Acquisition, which was accounted for as a reverse acquisition, Rollins changed
its name to Laidlaw Environmental Services, Inc. Laidlaw currently beneficially
owns 35% of the outstanding Parent Common Stock (49% assuming the conversion of
the PIK Subordinated Debenture). To finance the Rollins Acquisition, the Parent
(i) issued 120 million shares of Parent Common Stock, (ii) issued the $350.0
million PIK Subordinated Debenture and (iii) paid $349.1 million in cash to
Laidlaw.
In May 1998, the Company consummated the Safety-Kleen Acquisition for
aggregate consideration of approximately $1.1 billion in cash and the issuance
of approximately 166 million shares of Parent Common Stock. In connection with
the Safety-Kleen Acquisition, the Company consummated the Debt Tender Offer. The
Company financed the cash portion of the Safety-Kleen Acquisition and the Debt
Tender Offer and refinanced certain indebtedness with total borrowings of $1.8
billion under the Senior Credit Facility. The Safety-Kleen Acquisition has been
accounted for using the purchase method of accounting. The Safety-Kleen
Acquisition substantially increased the scope of Laidlaw Environmental's
business. Pro forma for the Safety-Kleen Transactions, the Rollins Acquisition
and certain related transactions, the Parent's revenues and operating income
(exclusive of the restructuring charge) for fiscal 1997 would have been $1.8
billion and $114.2 million, respectively, compared to $678.6 million and $67.0
million, respectively, on an actual basis. As a result of the impact of the
Safety-Kleen Transactions, the Parent believes that its historical results of
operations (which do not give effect to the Safety-Kleen Acquisition for any
period prior to April 1, 1998 and, with respect to the Rollins Acquisition, for
any period prior to May 15, 1997) do not reflect the current operations of the
Parent.
On May 29, 1998, the Company completed the issuance of aggregate principal
amount of $325.0 million of the Existing Notes. The net proceeds from the
issuance of the Existing Notes were used to repay a portion of the borrowings
outstanding under the Senior Credit Facility. In addition on May 29, 1998, all
of the outstanding $100.0 million principal amount of the Safety-Kleen Notes
were purchased in the Debt Tender Offer or defeased.
RECATEGORIZATION OF REVENUES
As a result of the Safety-Kleen acquisition, the Parent has recategorized
its revenue components. Components are no longer reported on a gross basis
requiring consolidated intercompany revenue eliminations. Revenues are now
reported at the initial point of entry into the Parent's operations. This change
in presentation has reduced the disclosed revenue for the disposal services
component which has historically been the beneficiary of intercompany revenue
from the collection and recovery services operations.
42
<PAGE> 51
The Parent now categorizes its services into two primary components:
collection and recovery services and disposal services. The collection and
recovery services component is further categorized into two sub-components:
industrial services and commercial and institutional services. Industrial
services includes drum and bulk waste collection and processing, lab pack
services and parts cleaner or on-site services performed for the Parent's
industrial customers. Commercial and institutional services includes service
offerings performed for the retail market and include parts cleaner, imaging,
vacuum and other specialty services. Used oil collection and re-refining is also
included in the commercial and institutional component.
The disposal services component includes the Parent's end-disposal
facilities for thermal treatment and landfilling as well as other operations.
Such other operations would include the Parent's harbor dredging program,
wastewater treatment, PCB management and other specialty disposal operations.
The Parent's European operations include many of the service offerings
included in the collection and recovery category. The revenue from these
European operations are reported separately.
The following tables restate the Parent's revenues in 1997 and 1998 in
accordance with the recategorization:
Quarterly Revenue ($ in millions)
<TABLE>
<CAPTION>
FIRST SECOND THIRD
------ ------ ------
<S> <C> <C> <C>
1998
Collection and Recovery Services
Industrial Services....................................... $118.4 $ 97.4 $182.3
Commercial and Institutional Services..................... 0.0 0.0 81.0
------ ------ ------
Total Collection and Recovery Services...................... 118.4 97.4 263.3
Disposal Services
Thermal Treatment......................................... 29.5 26.2 26.7
Landfill.................................................. 34.0 20.8 18.9
Other..................................................... 29.7 28.8 36.8
------ ------ ------
Total Disposal Services..................................... 93.2 75.8 82.4
European Operations......................................... 0.0 0.0 20.0
------ ------ ------
Total Revenue............................................... $211.6 $173.2 $365.7
====== ====== ======
</TABLE>
Quarterly Revenue ($ in millions)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1997
Collection and Recovery Services
Industrial Services......................... $102.0 $ 81.9 $ 92.9 $117.3 $394.1
Commercial and Institutional Services....... 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Total Collection and Recovery Services........ 102.0 81.9 92.9 117.3 394.1
Disposal Services
Thermal Treatment........................... 10.4 8.3 8.9 26.7 54.3
Landfill.................................... 40.7 33.3 36.6 31.2 141.8
Other....................................... 19.5 17.1 16.9 34.9 88.4
------ ------ ------ ------ ------
Total Disposal Services....................... 70.6 58.7 62.4 92.8 284.5
European Operations........................... 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------
Total Revenue................................. $172.6 $140.6 $155.3 $210.1 $678.6
====== ====== ====== ====== ======
</TABLE>
43
<PAGE> 52
RESULTS OF OPERATIONS -- LAIDLAW ENVIRONMENTAL
RESULTS OF OPERATIONS: NINE MONTHS ENDED MAY 31, 1998 COMPARED WITH
NINE MONTHS ENDED MAY 31, 1997
Operating results, excluding restructuring and extraordinary charges, are
as follows ($ in millions):
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31,
----------------------------------
1998 1997 1998 1997
------ ------ ----- -----
<S> <C> <C> <C> <C>
Revenue................................................... $750.5 $468.5 100.0% 100.0%
Operating expense......................................... 513.2 338.4 68.4% 72.2%
Depreciation & amortization............................... 55.9 39.1 7.4% 8.4%
Selling, general & administrative......................... 74.3 52.0 9.9% 11.1%
------ ------ ----- -----
Operating income.......................................... $107.1 $ 39.0 14.3% 8.3%
====== ====== ===== =====
</TABLE>
Revenues
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C> <C> <C>
Components of revenue ($ in millions):
Collection and Recovery Services
Industrial Services....................................... $398.1 53% $276.8 59%
Commercial and Institutional Services..................... 81.0 11% 0.0 0%
------ --- ------ ---
Total Collection and Recovery Services...................... 479.1 64% 276.8 59%
Disposal Services
Thermal Treatment......................................... 82.4 11% 27.6 6%
Landfill.................................................. 73.7 10% 110.6 24%
Other..................................................... 95.3 12% 53.5 11%
------ --- ------ ---
Total Disposal Services..................................... 251.4 33% 191.7 41%
European Operations......................................... 20.0 3% 0.0 0%
------ --- ------ ---
Total revenue............................................... $750.5 100% $468.5 100%
====== === ====== ===
</TABLE>
Revenues increased $282.0 million, or 60.2%, during the nine months ended
May 31, 1998 compared to the nine months ended May 31, 1997. Revenue from
collection and recovery services to industrial customers increased $121.3
million, or 43.8%, while the addition of collection and recovery services to
commercial and institutional customers generated an additional $81.0 million.
Increased revenue from industrial services reflects the inclusion of the
acquired Safety-Kleen and Rollins business while the commercial and
institutional additions reflect business acquired from Safety-Kleen exclusively.
Revenue from disposal services increased $59.7 million, or 31.1%, primarily due
to acquired Rollins business and also due to increased harbor related dredging,
treatment and disposal activities. Landfill disposal revenue declined due to a
relative shortfall in remedial and other project work providing volumes destined
for hazardous waste landfill sites and due to the sale of an industrial and
solid waste landfill on December 18, 1997. The acquired European operations of
Safety-Kleen provided an additional $20.0 million in revenues.
The Parent eliminates inter-company revenues in presenting consolidated
financial results. The majority of such eliminations occur at the Company's
disposal facilities which receive waste streams from the Company's collection
and recovery services network. For the nine months ended May 31, 1998, the
Company directed 76% of its waste streams to internal locations, up from 68% in
the prior year.
44
<PAGE> 53
Management's estimates of the components of changes in the Parent's
consolidated revenue are as follows:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE (DECREASE)
NINE MONTHS ENDED MAY 31,
--------------------------------
1998 OVER 1997 1997 OVER 1996
-------------- --------------
<S> <C> <C>
Expansion of customer base by acquisition................... 61.9% 3.2%
Other, primarily through volume and price changes........... 7.0% (5.2)%
Divestitures and closures................................... (8.0)% (1.0)%
Foreign exchange rate changes............................... (0.7)% (0.1)%
---- ----
Total............................................. 60.2% (3.1)%
==== ====
</TABLE>
The comparative increase in revenue for the nine months ended May 31, 1998
was primarily due to the inclusion of the acquired operations of Safety-Kleen
and Rollins. Current revenues from existing operations were supported by
increased activity by the Company's harbor related dredging, treatment and
disposal operations. Volume related increases were somewhat offset by reduced
receipts at certain hazardous waste and industrial waste landfills. Prior period
revenues included contributions from an industrial and municipal solid waste
landfill which was sold on December 18, 1997 as well as a wastewater facility
and the Clive, Utah incineration facility, both of which were closed in fiscal
1997. A reduction in revenues due to foreign exchange rate changes results from
a relative decline in the Canadian dollar translation rate.
Operating Expenses
Operating expenses increased $174.8 million, or 51.7%, during the nine
months ended May 31, 1998, compared to the nine months ended May 31, 1997. The
increase was primarily attributable to additional business obtained as part of
the acquisitions of Safety-Kleen and Rollins. As a percentage of revenue,
operating expense decreased to 68.4% from 72.2% in the comparable prior year
period, primarily due to stabilized pricing, the increased utilization of
existing facilities and acquisition related cost reduction initiatives.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $16.8 million, or 43.0%,
during the nine months ended May 31, 1998, compared to the prior year period.
The increase was related to the acquired operations of Safety-Kleen and Rollins
and was partially offset by generally reduced hazardous waste and non-hazardous
waste landfill cell space consumption as well as the closures of a wastewater
facility and the Clive, Utah incineration facility. As a percentage of revenue,
depreciation and amortization expense decreased to 7.4% from 8.4% in the prior
year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $22.3 million, or
42.9% during the nine months ended May 31, 1998, versus the prior year period.
The increase was attributable to the acquired operations of Safety-Kleen and
Rollins. As a percentage of revenue, selling, general and administrative
expenses decreased to 9.9% from 11.1% in the prior year period due to cost
reduction measures and economies of scale gained through the Safety-Kleen and
Rollins acquisitions.
Restructuring Charge
The integration of Safety-Kleen will result in personnel reductions and
facility closures at certain of the Parent's operations. Such actions are
expected to generate significant cash cost savings.
With respect to the existing operations, the Parent recorded a one-time
charge of $65.8 million ($39.5 million after tax) against earnings, to reflect
the costs associated with the closing of certain facilities and the severance of
employees as a result of the acquisition of Safety-Kleen.
45
<PAGE> 54
Interest Expense
Interest expense increased $31.3 million, or 104.8% during the nine months
ended May 31, 1998, over the prior year period primarily as a result of
recapitalizations related to the Safety-Kleen and Rollins acquisitions. Prior to
May 15, 1997 interest expense was allocated from the parent corporation,
Laidlaw.
Income Tax Expense
Prior to May 15, 1997, the Parent filed consolidated returns with Laidlaw.
Income taxes were calculated using applicable income tax rates on income for tax
purposes on a separate return basis. Effective May 15, 1997, the Parent files a
separate return and, accordingly, income taxes have been calculated at
applicable income tax rates.
Extraordinary Loss
In April 1998, the Company replaced its existing bank credit facility with
the Senior Credit Facility and recognized an extraordinary charge of
approximately $18.8 million ($11.3 million after tax) related to the write-off
of previous deferred debt issuance costs and repayment penalties.
Fiscal 1997 compared with Fiscal 1996
The following table sets forth, for each line item presented, for the
periods indicated, the amount of such line item and such amount as a percentage
of the Parent's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
------------------------------------------------
1996 1997
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Revenue..................................... $653.0 100.0% $678.6 100.0%
Operating expense........................... 473.6 72.5 485.1 71.5
Depreciation and amortization............... 48.3 7.4 53.5 7.9
Selling, general and administrative......... 73.8 11.3 73.1 10.7
------ ------
Operating income............................ $ 57.3 8.8% $ 66.9 9.9%
====== ======
</TABLE>
Revenues
The following table sets forth, for the periods indicated, the revenue
attributable to each line of business of the Parent and such revenue as a
percentage of the Parent's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
--------------------------------------------
1996 1997
-------------------- --------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Service Center................................. $ 294.8 39% $ 301.6 38%
Landfill....................................... 190.3 25 177.1 22
Incinerator.................................... 31.4 4 89.8 11
Transportation................................. 89.9 12 95.4 12
Specialty Services............................. 148.0 20 140.4 17
------- --- ------- ---
754.4 100% 804.3 100%
=== ===
Less: Intercompany eliminations................ (101.4) (125.7)
------- -------
Total revenue........................ $ 653.0 $ 678.6
======= =======
</TABLE>
Revenues increased by $25.6 million, or 3.9%, to $678.6 million during
fiscal 1997, compared to fiscal 1996, supported primarily by increases in the
incinerator and service center lines of business. Revenue for incinerators
increased 186.0% in fiscal 1997 from fiscal 1996 reflecting the inclusion of the
acquired Rollins' incineration facilities effective May 15, 1997. Service center
revenue increased 2.3% in fiscal 1997 over fiscal
46
<PAGE> 55
1996, also reflecting the Rollins Acquisition. Landfill revenue decreased 6.9%
in fiscal 1997 primarily due to nonrecurring event projects performed in the
comparable prior year period by the Company's industrial landfill in Utah, the
most significant of which included management and disposal activities related to
dredging in the New York/New Jersey harbor area. Transportation revenue
increased 6.1% in fiscal 1997, while specialty services decreased 5.1% in fiscal
1997 from fiscal 1996. Processing of intercompany streams increased 24.0% in
fiscal 1997 over fiscal 1996, reflecting the increased utilization of the
acquired Rollins' incineration facilities. As a result, the Company increased
the internalization of waste disposal activities to 68.0% in fiscal 1997, up
from 50.0% in fiscal 1996. Management anticipates increasing the internalization
of waste disposal activities to 75.0% with a full 12-month contribution from the
Rollins Acquisition.
Management's estimates of the components of changes in the Parent's
consolidated revenue are as follows:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
(DECREASE)
-------------------
<S> <C>
Expansion of customer base by acquisition................... 6.7%
Other, primarily through volume and price changes........... (2.7)
Foreign exchange rate changes............................... (0.1)
----
Total............................................. 3.9%
====
</TABLE>
The comparative increase in revenue for fiscal 1997 was primarily due to
the inclusion of acquired operations, the majority of which related to the
Rollins Acquisition. The increase was partially offset by lower pricing and
volumes received in the early portion of fiscal 1997. Lower volumes were
primarily related to dredging activities performed throughout fiscal 1996 by the
Company's landfill in Utah. Revenue also decreased during fiscal 1997 due to
pricing and volume reductions at the Company's government services locations,
the closure of a wastewater facility in May 1997 and the planned downsizing of
its Gulf Coast remedial operations. The negative effect of these price and
volume reductions were offset by improvements, primarily in the fourth quarter
of fiscal 1997, related to increased activity at certain of the Company's
landfills and at its PCB management operations. Additional harbor dredging
project work begun in the fourth quarter of fiscal 1997 was also a positive
factor.
The Company continues to focus on developing its sales force in order to
expand the customer base in the core markets in which it operates. While the
Company has taken action to protect its market share in existing regions and has
established new business relationships, significant price competition has
impacted revenue growth. The Company continues to take pricing actions in
response to industry conditions as it attempts to maintain a competitive mix of
price, performance and customer support services while managing profitability
and growth. The Company strives to mitigate the effects of price reductions by
reducing operating costs.
Operating Expenses
Operating expenses for fiscal 1997 increased $11.5 million, or 2.4%, to
$485.1 million compared to fiscal 1996. The increase was mainly due to the
Rollins Acquisition. Operating expense, as a percentage of revenue, decreased to
71.5% in fiscal 1997 from 72.5% in fiscal 1996 due to economies of scale gained
through the Rollins Acquisition and ongoing cost reduction initiatives.
The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. During fiscal 1997,
the Company continued its process of consolidating common functions to reduce
redundant costs and improve the Company's ability to deliver its services.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $5.2 million, or 10.8%, to
$53.5 million during fiscal 1997 compared to fiscal 1996. The increase was
associated with increased hazardous landfill cell consumption and related
amortization during fiscal 1997 as well as the inclusion of the Clive, Utah
incineration facility's depreciation expense as of September 1, 1996 and
inclusion of depreciation and amortization related to the Rollins Acquisition as
of May 15, 1997. As a percentage of revenue, depreciation and amortization
expense
47
<PAGE> 56
increased to 7.9% during fiscal 1997 from 7.4% during fiscal 1996 due in part to
the higher hazardous landfill disposal as a proportion of total revenue and the
inclusion of the Clive facility.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $0.7 million, or
1.0%, to $73.1 million during fiscal 1997 versus fiscal 1996. The decrease was
attributable to a number of cost reduction initiatives implemented and completed
during fiscal 1997. As a percentage of revenue, selling, general and
administrative expenses decreased to 10.7% in fiscal 1997 from 11.3% in fiscal
1996, due to the cost reduction measures and economies of scale gained through
the Rollins Acquisition.
Restructuring Charge
A one-time restructuring charge of $331.7 million ($200.0 million after
tax) impacted fiscal 1997 earnings. The charge reflected the closing of certain
of the Company's operating facilities that had become redundant, and an
impairment in the carrying value of certain operating facilities due to lower
than expected future cash flows, as a result of the Rollins Acquisition.
Reductions of $18.0 million relating to depreciation and amortization expense
savings were reflected as a result of the restructuring charge.
Allocated Interest Expense
Allocated interest expense decreased $17.5 million during fiscal 1997 from
fiscal 1996 primarily as a result of the recapitalization related to the Rollins
Acquisition. Prior to May 15, 1997, interest expense was allocated to the Parent
from Laidlaw.
Interest Expense
Interest expense increased by $14.9 million during fiscal 1997 from fiscal
1996 primarily as a result of a recapitalization related to the Rollins
Acquisition. Effective May 15, 1997, interest expense includes financing costs
associated with the Company's bank credit facility, other long-term debt and the
PIK Subordinated Debenture.
Other Income
Other income increased by $1.5 million in fiscal 1997 from fiscal 1996
primarily as a result of a recapitalization related to the Rollins Acquisition
and a resultant increase in funds available for short-term investment.
Income Tax Expense (Benefit)
Prior to May 15, 1997, the operations of the Parent were included in
consolidated tax returns of Laidlaw. Income taxes were calculated using
applicable income tax rates for tax purposes on a separate return basis.
Effective May 15, 1997, the Parent files a separate return and, accordingly,
income taxes have been calculated at applicable income tax rates.
48
<PAGE> 57
FISCAL 1996 COMPARED WITH FISCAL 1995
The following table sets forth, for each line item presented, for the
periods indicated, the amount of such line item and such amount as a percentage
of the Parent's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
------------------------------------------------
1995 1996
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Revenue..................................... $599.2 100.0% $653.0 100.0%
Operating expense........................... 428.9 71.6 473.6 72.5
Depreciation and amortization............... 48.3 8.0 48.3 7.4
Selling, general and administrative......... 62.1 10.4 73.8 11.3
------ ------
Operating income............................ $ 59.9 10.0% $ 57.3 8.8%
====== ======
</TABLE>
Revenues
The following table sets forth, for the periods indicated, the revenue
attributable to each line of business of the Parent and such revenue as a
percentage of the Parent's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
--------------------------------------------
1995 1996
-------------------- --------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Service Center................................. $279.2 41% $ 294.8 39%
Landfill....................................... 139.1 21 190.4 25
Incinerator.................................... 30.1 4 31.4 4
Transportation................................. 99.1 15 89.9 12
Specialty Services............................. 131.0 19 148.0 20
------ --- ------- ---
678.5 100% 754.5 100%
=== ===
Less: Intercompany eliminations................ (79.3) (101.5)
------ -------
Total revenue........................ $599.2 $ 653.0
====== =======
</TABLE>
Revenues increased $53.8 million, or 9.0%, to $653.0 million during fiscal
1996, compared to fiscal 1995, supported primarily by the increased landfill
activity. Landfill revenue for fiscal 1996 increased 36.9% from fiscal 1995
during the same period primarily due to the full-year results of landfill
operations acquired from USPCI. Service center revenue increased 5.6% during
fiscal 1996 over fiscal 1995 while incinerator revenue increased 4.3% during the
same period. Transportation revenue decreased 9.3% during fiscal 1996 over
fiscal 1995. Specialty services revenue increased $17.0 million, or 13.0% in
fiscal 1996 over fiscal 1995. Processing of intercompany streams during fiscal
1996 increased $22.2 million, or 28.0%, over fiscal 1995.
Management's estimates of the components of changes in the Parent's
consolidated revenue are as follows:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
(DECREASE)
-------------------
<S> <C>
Expansion of customer base by acquisition................... 17.2%
Other, primarily through volume and price changes........... (8.4)
Foreign exchange rate changes............................... (0.2)
----
Total............................................. 8.6%
====
</TABLE>
Growth in revenue in fiscal 1996 was primarily attributable to the
inclusion of approximately $103.0 million from the acquired operations of USPCI
and Greenfield Services Corporation. Revenue from existing operations was lower,
primarily due to the reduced activity at the Company's remedial services
locations in the Gulf Coast and Western regions of the United States and a
decline in one-time, project work at the Company's landfills.
49
<PAGE> 58
Lower pricing within the hazardous waste management industry also was a
component of lower revenue for most areas of the Company.
Operating Expenses
Operating expenses increased $44.7 million, or 10.4%, to $473.6 million
during fiscal 1996, compared to fiscal 1995. The increase was primarily
attributable to additional business obtained as part of the acquisition of
USPCI. As a percentage of revenue, operating expense increased to 72.5% in
fiscal 1996 from 71.6% in fiscal 1995, primarily due to downward pricing
pressure on revenue.
Depreciation and Amortization Expense
Depreciation and amortization expense for fiscal 1996 was essentially
unchanged from fiscal 1995. As a percentage of revenue, depreciation and
amortization expense decreased to 7.4% in fiscal 1995 from 8.0% in fiscal 1995
also due to the decline in landfill cell amortization rates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $11.7 million, or
18.9%, to $73.8 million during fiscal 1996 over fiscal 1995. As a percentage of
revenue, selling, general and administrative expenses increased to 11.3% in
fiscal 1996 from 10.4% in fiscal 1995 due to higher selling costs related to the
acquired USPCI customer accounts.
Allocated Interest Expense
Allocated interest expense increased 12.6% during fiscal 1996 over fiscal
1995 primarily due to an increase in allocated interest expense from Laidlaw
associated with the acquisition of USPCI.
Interest Expense
Interest expense increased 24.4% during fiscal 1996 compared to fiscal 1995
primarily as a result of the acquisition of USPCI.
YEAR 2000 -- LAIDLAW ENVIRONMENTAL
The Year 2000 Issue is the result of computer programs being written using
a two-digit date field rather than four to define the applicable year. Computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar business activities.
The Parent has completed its assessment of the impact of the Year 2000
Issue on its operations and has engaged outside consultants to provide third
party confirmation of its findings. This assessment included a review of
applicable hardware and software systems and communication with all major
suppliers and customers. Preliminary estimates indicate that total costs to the
Parent for the Year 2000 Project will approximate $10.0 million.
SEASONALITY -- LAIDLAW ENVIRONMENTAL
Adverse winter weather moderately affects some of the Company's operations,
particularly during the second fiscal quarter. The main reason for this effect
is reduced volumes of waste being received at the Company's facilities and
higher operating costs associated with operating in sub-freezing weather and
high levels of snowfall.
50
<PAGE> 59
LIQUIDITY AND CAPITAL RESOURCES -- LAIDLAW ENVIRONMENTAL
Prior to May 15, 1997, Laidlaw provided the majority of the financing for
the Parent's operating and investing activities through a combination of
intercompany equity and debt investments. At August 31, 1996, the Parent's
capital consisted of $55.8 million of long-term debt and $1,094.8 million of
stockholders' equity.
Since May 15, 1997, the Parent's principal sources of funds have consisted
of cash from operations and financing activities. Cash provided by continuing
operations during the nine months ended May 31, 1998, and fiscal years 1997,
1996 and 1995 was $43.3 million, $37.0 million, $21.9 million and $39.8 million,
respectively. In the nine months ended May 31, 1998, cash provided by continuing
operations was composed of $116.2 million from operations before working capital
financing requirements of $39.9 million and $33.0 million in acquisition
liabilities. In fiscal 1997, accounts payable, accrued liabilities and deferred
liabilities decreased $52.6 million, excluding cash spending on acquisitions,
which includes costs related to landfill cell closures, site remediation and
facility closures. Deferred income taxes increased by $37.5 million in fiscal
1997. Cash provided by discontinued operations was $0.4 million, $3.2 million
and $0.3 million, in fiscal 1997, 1996 and 1995, respectively.
The cash used for investing activities in the nine months ended May 31,
1998 totaled $1,276.1 million which was comprised primarily of $1,282.7 million
expended for the acquisition of businesses, proceeds of $33.7 million from the
sale of assets held for sale and $24.6 million used for capital expenditures
(net of proceeds of disposal).
Investing activities from continuing operations used cash of $21.9 million,
$114.9 million and $300.8 million in fiscal 1997, 1996 and 1995, respectively.
Expenditures for the purchase of fixed assets (net of proceeds of disposal) for
normal replacement requirements and increases in services were $34.5 million,
$101.0 million and $67.5 million in fiscal 1997, 1996 and 1995, respectively.
Net cash provided by (used in) financing activities was $1,241.4 million,
$(2.5) million, $94.8 million and $263.8 million in the nine months ended May
31, 1998, and in fiscal 1997, 1996 and 1995, respectively.
To finance the cash portion of the Safety-Kleen Acquisition and the Debt
Tender Offer and to refinance certain existing indebtedness, the Company entered
into the Senior Credit Facility and borrowed $2.2 billion. The net proceeds from
the issuance of the Existing Notes were used to repay indebtedness under the
Senior Credit Facility. At May 31, 1998, the Company had an aggregate of $1.5
billion of borrowings outstanding under the Senior Credit Facility (consisting
of an aggregate of $1.33 billion in Term Loans and $208.0 million of borrowings
under the Revolver (excluding letters of credit)), which borrowings bore
interest at a weighted average interest rate of 8.37% per annum at such date. At
May 31, 1998, the Company had $192.0 million of additional borrowing
availability (excluding letters of credit) under the Revolver. The Senior Credit
Facility contains certain covenants including restrictions against mergers,
acquisitions, and disposition of assets, voluntary prepayments of debt,
financial covenants and certain other covenants. See "Use of Proceeds" and
"Description of Other Indebtedness -- The Company -- Senior Credit Facility."
Projected capital expenditures for fiscal 1998 are approximately $80.0
million, excluding any capital expenditures for potential acquisitions. This
includes capital expenditures related to compliance with environmental laws and
regulations. In addition, principal repayments on the Company's indebtedness
during the balance of fiscal 1998 will total $19.5 million. Finally, in the next
12 months, the Company anticipates incurring approximately $15.0 million in cash
expenditures related to the Safety-Kleen Acquisition, consisting of integration
costs, employee severance costs and facility closing costs. As discussed below,
the Company believes it has adequate resources to fund these expenditures.
The Company believes that its existing working capital (consisting of cash
and short-term investments), together with borrowings under the Senior Credit
Facility and anticipated cash flow from operating activities, will be sufficient
to meet its debt service and expected operating and capital spending
requirements for the next 12 months. To the extent that any additional capital
is required for any purpose (including potential acquisitions), the Company
believes that it will be able to raise such capital in the public or private
debt or equity markets.
51
<PAGE> 60
ENVIRONMENTAL LIABILITIES -- AFTER THE SAFETY-KLEEN ACQUISITION
In the Company's financial statements, accrued closure and post-closure
costs and environmental remediation costs represent an estimate of the current
value of the future obligations associated with closure and post-closure
monitoring of the facilities currently owned and/or operated by the Company and
environmental remediation costs of the Company. Such accrued liabilities appear
on the balance sheet under the caption "accrued liabilities" and "deferred
items -- others." Closure and post-closure monitoring and maintenance costs for
landfills are estimated based on the technical requirements of the applicable
environmental laws and regulations. The Company also evaluates potential
remedial liabilities at sites which it owns or operates or to which it
transports waste. When the Company concludes that it is probable that a
liability has been incurred, provision is made, based on management's judgment
and prior experience, for the Company's best estimate of liability. Discounting
of future costs is applied where the Company believes that both the amounts and
timing of related payments are reliably determinable. The Company periodically
updates its estimates of future closure and post-closure costs.
52
<PAGE> 61
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- SAFETY-KLEEN
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto of Safety-Kleen included
elsewhere in this Prospectus. Certain statements in the following discussion and
analysis are "forward-looking statements." See "Disclosure Regarding Forward-
Looking Statements."
RESULTS OF OPERATIONS -- SAFETY-KLEEN
In the first quarter of fiscal 1998, Safety-Kleen's net earnings decreased
to $9.9 million from $11.8 million in the first quarter of fiscal 1997. In
fiscal 1997 and 1996, Safety-Kleen's net earnings increased 3% and 15%,
respectively, from the prior year. The following table sets forth for the
periods indicated percentages which certain items reflected in the financial
data bear to consolidated revenue of Safety-Kleen.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
FISCAL ----------------------
----------------------- MARCH 22, MARCH 28,
1995 1996 1997 1997 1998
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses.............. 73.1 72.8 74.3 74.5 75.2
----- ----- ----- ----- -----
Gross profit................................ 26.9 27.2 25.7 25.5 24.8
Selling and administrative expenses....... 14.2 14.3 13.7 14.8 14.3
Restructuring (credit).................... (1.8) -- -- -- --
Special charge for environmental
remediation costs...................... 1.4 -- -- -- --
----- ----- ----- ----- -----
Operating Income............................ 13.1 12.9 12.0 10.7 10.5
Interest (income)......................... (0.1) (0.2) (0.1) (0.1) (0.2)
Interest expense.......................... 2.4 2.1 1.8 2.0 1.5
Merger related costs...................... -- -- 0.3 -- 2.5
----- ----- ----- ----- -----
Earnings before income taxes................ 10.8 11.0 10.0 8.8 6.7
Income taxes.............................. 4.6 4.4 3.7 3.5 2.6
----- ----- ----- ----- -----
Net earnings................................ 6.2% 6.6% 6.3% 5.3% 4.1%
===== ===== ===== ===== =====
</TABLE>
TWELVE WEEKS ENDED MARCH 28, 1998 COMPARED WITH TWELVE WEEKS ENDED MARCH 28,
1997
Revenues
Revenue for the twelve weeks ended March 28, 1998 was $241.8 million, up
$21.6 million, or 10%, from the comparable period last year.
53
<PAGE> 62
The following table sets forth total revenue derived from Safety-Kleen's
North American services and European operations during the twelve weeks ended
March 28, 1998 and March 22, 1997:
<TABLE>
<CAPTION>
PERCENTAGE
TWELVE WEEKS ENDED OF
------------------------------- INCREASE
MARCH 28, 1998 MARCH 22, 1997 (DECREASE)
-------------- -------------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
North America
Industrial Services........................... $ 76.8 $ 65.4 17%
Automotive/Retail Repair Services............. 63.0 59.3 6
Oil Recovery Services......................... 33.1 32.9 1
Other Services................................ 42.6 37.2 14
------ ------
Total North America........................... 215.5 194.8 11
Europe.......................................... 26.3 25.4 3
------ ------
Consolidated.................................... $241.8 $220.2 10
====== ======
</TABLE>
North American Industrial Services
Fluid Recovery Service. Revenue from Safety-Kleen's North American
Industrial Services for the twelve weeks ended March 28, 1998 includes $42.5
million from the Fluid Recovery Service, which represents an $8.1 million, or
24%, increase over the comparable period of 1997. Approximately $4.5 million of
the revenue increase is from the expansion of Safety-Kleen's new Technical Field
Services program introduced in early fiscal 1997. Waste drum service revenues
increased approximately $2.4 million in the twelve weeks ended March 28, 1998 of
which two thirds is due to increases in average prices and one third is due to
volume increases. The remaining revenue increase largely resulted from increased
absorbent sales.
Industrial Parts Cleaner Service. The North American Industrial Parts
Cleaner Service accounts for the remaining $34.3 million of the North American
Industrial Services revenue, which represents an increase of $3.3 million, or
10%, from the comparable period of 1997. The 10% revenue increase consisted of a
5% increase due to increases in average prices and a 5% increase due to volume
increases.
North American Automotive/Retail Repair Services
The continued expansion of the Vacuum Services business that was introduced
during the second half of 1996 increased revenue by $3.5 million in the twelve
weeks ended March 28, 1998 to $6.3 million. Automotive Parts Cleaning revenue
recognized in the first twelve weeks of fiscal 1998 was unchanged from the
comparable period of fiscal 1997 as an increase of 4% due to increases in
average prices was offset by a 4% volume decline.
North American Oil Recovery Services
Revenues increased by $0.2 million, or 1% to $33.1 million in the twelve
weeks ended March 28, 1998 over the comparable period in fiscal 1997. Used oil
collection pricing increased revenues by $0.7 million and oily water revenues
increased by $0.9 million in the twelve weeks ended March 28, 1998 primarily due
to volume. Fuel oil revenues declined $1.3 million substantially due to volumes
resulting from lower seasonal demand. A drop of approximately 7% in the per
gallon average price of base and blended lube oil from the comparable period of
1997 resulted in a revenue decline of $1.3 million. This price decline was
completely offset by a 21% volume increase in blended lube oil sales.
North American Other Services
Revenue from Other Services during the twelve weeks ended March 28, 1998
increased $5.4 million, or 14%, to $42.6 million over the comparable period of
fiscal 1997. Imaging Services accounted for $3.1 million of the increase
attributable mainly to increased precious metal sales. Safety-Kleen's service
revenue from its Integrated Customer Compliance Services increased by $1.3
million in the twelve weeks ended March 28, 1998
54
<PAGE> 63
due mainly to an acquisition made during the second quarter of fiscal 1997. The
remaining increase reflects improved pricing in Safety-Kleen's paint refinishing
business and improved volume in Safety-Kleen's dry cleaning business.
Europe
European revenues were $26.3 million in the twelve weeks ended March 28,
1998 up $0.9 million, or 3%, from $25.4 million in the comparable period of
fiscal 1997. The impact of foreign currency exchange rates reduced European
revenue in the current period by approximately $1.5 million, or 6% from the
comparable period in fiscal 1997. All major businesses showed increases in local
currency revenue.
Operating Costs and Expenses
Operating costs and expenses were $181.8 million (75.2% of revenue) in the
twelve weeks ended March 28, 1998 as compared to $164.1 million (74.5% of
revenue) for the comparable period in fiscal 1997. The increase in the operating
cost percentage reflects lower margins earned on the newer businesses, such as
Technical Field Services, Vacuum, Imaging, and Integrated Customer Compliance
Services.
Selling and Administrative Expenses
Selling and administrative expenses increased by $2.0 million or 6% to
$34.6 million in the twelve weeks ended March 28, 1998 over the comparable
period in fiscal 1997 due mainly to higher employee related costs. Despite this
increase, selling and administrative expenses decreased from 14.8% of revenue in
the twelve weeks ended March 22, 1997 to 14.3% of revenue in the same period of
fiscal 1998 as revenues increased at a greater rate than selling and
administrative expenses.
Interest Expense
Interest expense decreased $0.7 million to $3.6 million during the twelve
weeks ended March 28, 1998 due primarily to lower borrowings.
Merger Related Costs
The Company incurred $6.0 million in costs during the twelve weeks ended
March 28, 1998 in conjunction with the Safety-Kleen Acquisition and related
transactions. For a discussion of the costs related to the Safety-Kleen
Acquisition, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Laidlaw Environmental -- Liquidity and Capital
Resources -- Pro Forma for the Safety-Kleen Acquisition."
Income Taxes
Safety-Kleen's effective income tax rate was 38.7% for the twelve weeks
ended March 28, 1998 and 39.1% for the comparable period of fiscal 1997. The
drop in the effective tax rate in the twelve weeks ended March 28, 1998 is due
to the receipt of certain additional tax benefits that were not received during
the comparable period of fiscal 1997.
55
<PAGE> 64
FISCAL 1997 COMPARED WITH FISCAL 1996 AND 1995
Revenues
The following table sets forth total revenue derived from Safety-Kleen's
North American services and European operations for fiscal 1995, 1996 and 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF
INCREASE (DECREASE)
--------------------
FISCAL FISCAL YEARS
---------------------------- --------------------
1995 1996 1997 1995-96 1996-97
------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
North America Industrial Services.... $241.6 $271.8 $ 306.0 13% 13%
Automotive/Retail Repair
Services........................ 239.7 245.0 268.0 2 9
Oil Recovery Services.............. 129.0 150.8 156.3 17 4
Other Service Areas................ 149.8 149.2 167.7 -- 12
------ ------ --------
Total North America............. 760.1 816.8 898.0 7 10
Europe............................... 99.2 106.3 109.9 7 3
------ ------ --------
Consolidated......................... $859.3 $923.1 $1,007.9 7 9
====== ====== ========
</TABLE>
Revenue includes sales of oil related products of $91.4, $103.5 and $105.9
million for fiscal 1995, 1996 and 1997, respectively. Sales of other products
during the same periods were not material.
North American Industrial Services
Fluid Recovery Service. Revenue from Safety-Kleen's North American
Industrial Services includes Fluid Recovery Service revenue of $165.1 million in
fiscal 1997, $143.0 million in fiscal 1996 and $122.8 million in fiscal 1995.
Approximately 11% of the 16% increase in revenue in fiscal 1997 was attributed
to expansion of Safety-Kleen's new lab-pack and pass-by waste programs
introduced during fiscal 1996. The remaining 5% increase consists of an increase
of approximately 3% due to increases in average prices and an increase of
approximately 2% due to volume increases. The 17% revenue increase experienced
in fiscal 1996 reflects volume increases of approximately 15% and price
increases of approximately 2%. This volume improvement is due, in part, to new
product and service offerings.
Industrial Parts Cleaner Service. The North American Industrial Parts
Cleaner Service accounts for the remaining North American Industrial Services
revenue of $140.9 million in fiscal 1997, $128.8 million in fiscal 1996 and
$118.8 million in fiscal 1995. The 9% revenue increase experienced in fiscal
1997 includes increases of 5% due to increases in average prices and 4% due to
volume increases. The 8% revenue increase experienced in fiscal 1996 included
volume increases of approximately 3% and price increases of approximately 5%.
North American Automotive/Retail Repair Services
Approximately $15.3 million of the $23.0 million revenue increase in fiscal
1997 from fiscal 1996 in the Automotive/Retail Repair Services market was
generated from the continued expansion of Safety-Kleen's Vacuum Service business
introduced during the second half of fiscal 1997. Revenue attributable to
Automotive Parts Cleaner Service increased approximately $4.1 million, or 2%,
during fiscal 1997 due to an increase in average prices of 5%, offset by a
volume decline of approximately 3%. The balance of the increase in revenue was
largely due to a higher volume of absorbent sales.
In fiscal 1996 as compared to fiscal 1995, higher revenue from Automotive
Parts Cleaner Services contributed $1.4 million to North American
Automotive/Retail Repair Services revenue increase. The remainder of the revenue
increase came from the addition of new services, including Safety-Kleen's Vacuum
Services business. Average price increases in Safety-Kleen's Automotive Parts
Cleaner Services, which averaged 5% in fiscal 1996, were partially offset by a
4% volume decline.
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<PAGE> 65
North American Oil Recovery Services
The revenue increase of approximately $5.5 million in fiscal 1997 is
primarily due to an increase of $5.7 million, or 13%, in the oil collection
business with average price increases and volume increases each contributing
equally. A drop of 15% and 8% in the average selling prices of base and blended
lube oils, respectively, resulted in a $9.5 million lower revenue in fiscal 1997
than fiscal 1996. This revenue decline was partially offset by an increase of
approximately $8.1 million from an increase in the volume of total lube oil
sales. The remainder of the change in revenue was generated primarily from
increased fuel oil sales as a result of an acquisition made during the second
quarter of fiscal 1996.
The $21.8 million increase in revenue experienced in fiscal 1996 included
approximately $10.0 million of revenue derived from acquisitions. This increase
is attributable to more favorable pricing and higher volume.
North American Other Service Areas
Revenue from Other Service Areas increased $18.5 million, or 12%, during
fiscal 1997. Revenue from Imaging Services increased $7.1 million, or 33%,
during fiscal 1997 due primarily to higher branch service revenue volume.
Revenue from Safety-Kleen's Envirosystems business increased by $8.1 million, or
16%, during fiscal 1997 due mainly to higher volume. The remaining $3.4 million
of higher revenue is primarily due to increased revenue in Safety-Kleen's Paint
Refinishing Services.
In fiscal 1996, revenue from Other Service Areas was flat with fiscal 1995.
Increases in Imaging Services revenue generated by the branch network were
offset by a decline in revenue caused by the elimination of low-margin Imaging
Services broker business.
Europe
The continued weakening of European currencies against the U.S. dollar
decreased revenue by $7.0 million in fiscal 1997, compared to fiscal 1996.
Exclusive of exchange rate change, revenue in Europe increased by $10.5 million,
or 10%, during fiscal 1997. Approximately 3% of this increase is attributable to
price increases and the balance is attributable to volume.
A weakening of European currencies against the U.S. dollar decreased
revenue by approximately $1.8 million in fiscal 1996. Exclusive of exchange rate
effects, revenue in Europe increased approximately 9% in fiscal 1996, as all
major European operations (except the Envirosystems operations in Germany)
showed revenue growth in local currency due mainly to higher volume.
Operating Costs and Expenses
The following table sets forth the gross profit margins of Safety-Kleen's
North American services and European operations for the periods presented:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
North America:
Industrial Services....................................... 30% 31% 31%
Automotive/Retail Repair Services......................... 37 36 33
Oil Recovery Services..................................... 15 13 7
Other Service Areas....................................... 17 21 22
Total North America.................................... 27 27 25
Europe...................................................... 25 25 28
Consolidated................................................ 27 27 26
</TABLE>
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<PAGE> 66
North American Industrial Services
The North American Industrial Services gross margin for fiscal 1997 was
consistent with fiscal 1996 levels as the impact of lower margins earned on the
new services due to startup costs were offset by improved margins earned on the
established businesses.
The North American Industrial Services gross margin for fiscal 1996
improved slightly from fiscal 1995 levels due mainly to lower recycling costs
and improved pricing in the Fluid Recovery Service business caused by the
reduction of price discounts.
North American Automotive/Retail Repair Services
The North American Automotive/Retail Repair Services margin decline of 3%
in fiscal 1997 from fiscal 1996 was largely attributed to service mix as a
greater percentage of the revenue was generated by the Vacuum Services business
and Aqueous Parts Cleaning business. These new businesses generate lower gross
margins as they are currently being expanded throughout North America.
The North American Automotive/Retail Repair Services gross margin in fiscal
1996 declined slightly from fiscal 1995 due to the impact of the new Vacuum
Services business in the U.S. which was operating at approximately break-even at
the gross profit level in fiscal 1996.
North American Oil Recovery Services
The North American Oil Recovery Service margin decline of 6% in fiscal 1997
from fiscal 1996 can be attributed to the decline of $9.5 million in revenue
during fiscal 1997 as a result of lower lube oil prices.
While fiscal 1996 gross profit of the Oil Recovery Services remained
relatively unchanged from fiscal 1995, the gross profit margin declined by 2% in
fiscal 1997 from fiscal 1996. The decrease in margin is attributable principally
to a 2% decline in the average selling price of base lube oil, increased cost of
natural gas used at Safety-Kleen's re-refineries, and lower margins earned on
the $10.0 million of acquired business.
North American Other Service Areas
The improvement in gross margin in fiscal 1997 was generated by improved
gross margins earned by the Imaging and Envirosystems businesses due to improved
volume. The improvement generated from these businesses was partially offset by
a change in revenue mix as a greater percentage of revenue was being generated
from the Imaging business which, while improved, was still generating lower
gross margin rates than the established businesses due to added costs associated
with expanding the business across North America.
The improved margin in Other Services in fiscal 1996 over fiscal 1995
resulted principally from the elimination of low-margin broker business in the
Imaging Services business during fiscal 1996 and lower waste-derived fuel
processing costs and other waste disposal costs.
Europe
The European gross profit improvement realized in fiscal 1997 over fiscal
1996 was due primarily to improved volume across all of Europe's major
operations except Safety-Kleen's German Envirosystem operations which declined
slightly in fiscal 1997.
The European gross profit margin in fiscal 1996 was unchanged from fiscal
1995. Lower gross profit earned in Safety-Kleen's German Envirosystems
operation, due to lower sales, were offset by improved margins in Safety-Kleen's
other major European operations.
While foreign exchange rate changes resulted in a change in revenue, as
previously discussed, the changes did not have a material impact on European
gross margins. See Note 4 of notes to consolidated financial statements of
Safety-Kleen included elsewhere herein for further information regarding
European results of operations and investment.
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<PAGE> 67
Selling and Administrative Expenses
The 5% increase in selling and administrative expenses in fiscal 1997 from
fiscal 1996 is largely due to the impact of the 53rd week and higher costs
associated with Safety-Kleen's upgrading of its computer systems. Safety-Kleen's
selling and administrative expenses as a percentage of revenue declined to 13.7%
in fiscal 1997, from 14.3% in fiscal 1996, due to lower employee related costs
as a percentage of revenue. Approximately $2.6 million of severance costs
incurred in the third quarter of fiscal 1997 were offset by adjustments to pre-
established reserves of a similar amount.
The 8% increase in selling and administrative expenses Safety-Kleen in
fiscal 1996 resulted primarily from additional employees and related employee
expenses, increases in compensation and related benefits and business
acquisitions.
Restructuring -- Special Charges
Safety-Kleen adopted a restructuring plan in fiscal 1993 based on the
conversion of its Parts Cleaner Service to new technology and other strategic
actions intended to focus Safety-Kleen on its core environmental services,
reduce its cost structure and improve the value of its services to its
customers. In conjunction with the adoption of the plan, Safety-Kleen recorded a
restructuring charge of $179.0 million ($106.0 million after-tax or $1.84 per
share). In fiscal 1993, Safety-Kleen also recorded a $50.0 million charge ($30.0
million after-tax or $0.52 per share) representing a change in estimate for
environmental remediation costs. In fiscal 1995, Safety-Kleen recorded a $15.2
million (pre-tax) credit to income to reduce the amount of restructuring
reserves established in fiscal 1993 to their expected required levels. In fiscal
1995, Safety-Kleen also recorded a $12.0 million (pre-tax) charge to income to
increase the reserves for environmental remediation at its facilities in North
America based on its refinement of the estimate for such liabilities and its
ongoing review of spending patterns. In fiscal 1996, Safety-Kleen substantially
completed all of its restructuring activities and reclassified the remaining
reserves to "other accrued expenses" and "other liabilities" on its consolidated
balance sheet.
Interest Expense
Interest expense declined by $1.1 million in fiscal 1997 from fiscal 1996
due to lower average outstanding borrowings as compared to fiscal 1996, offset
partially by higher interest rates. Slightly lower interest rates offset
partially by a slightly higher average outstanding borrowings resulted in a $1.0
million decrease in interest expense in fiscal 1996 as compared to fiscal 1995.
Interest expense excludes $2.1 million of interest capitalized for each of
fiscal 1997, 1996, and 1995. The impact of the interest rate swaps executed in
the United States and Germany in fiscal 1992 and fiscal 1993 and more fully
explained in note 6 to the consolidated financial statements resulted in
interest expense savings of $0.7, $0.1, and $1.6 million in fiscal 1997, 1996
and 1995, respectively.
Merger Related Costs
Safety-Kleen incurred $3.2 million in costs through January 3, 1998 in
conjunction with the Safety-Kleen Acquisition and related transactions. For a
discussion of the costs related to the Safety-Kleen Acquisition, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Laidlaw Environmental -- Liquidity and Capital Resources -- Pro
Forma for the Safety-Kleen Acquisition."
Income Taxes
Safety-Kleen's income tax rate was 37% in fiscal 1997, 40% in fiscal 1996
and 42% in fiscal 1995. The effective tax rate in fiscal 1997 reflected lower
non-deductible expenses in fiscal 1997 and the timing of certain tax benefits
received in fiscal 1997 that were not received in fiscal 1996. The effective tax
rate in fiscal 1996 declined due to the tax effects of the restructuring credits
and remediation charges recorded in fiscal 1995. The effective income tax rate
in fiscal 1995, before the restructuring credits and additional remediation
charges, was 40%, which is consistent with fiscal 1996.
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<PAGE> 68
LIQUIDITY AND CAPITAL RESOURCES -- SAFETY-KLEEN
Safety-Kleen's working capital decreased from $69.0 million at January 3,
1998 to a negative $118.4 million at March 28, 1998. Safety-Kleen reclassified
approximately $213.0 million of debt from long-term to short-term as a result of
the change of control of Safety-Kleen. All debt was repaid following the
Safety-Kleen Acquisition from borrowings under the Senior Credit Facility. In
the first quarter of fiscal 1998, capital spending for equipment at customers
and property, plant and equipment additions totaled $14.4 million. These
expenditures were mainly financed by internally generated cash. Safety-Kleen's
total debt, including both long-term and short-term debt, at March 28, 1998
decreased by $1.3 million from fiscal 1997.
Capital spending in fiscal 1997, 1996 and 1995 for additions of equipment
at customers and property, excluding business acquisitions, totaled $56.0
million, $62.0 million and $78.0 million, respectively. These capital
expenditures were financed by cash from operations. Long-term debt decreased by
$63.0 million in fiscal 1997 and $7.0 million in fiscal 1996, and remained
unchanged during 1995.
For a discussion of the liquidity and capital resources of the Company
following the Safety-Kleen Acquisition, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Laidlaw
Environmental -- Liquidity and Capital Resources -- Pro Forma for the
Safety-Kleen Acquisition."
EFFECTS OF PETROLEUM PRICE CHANGES -- SAFETY-KLEEN
Through its Oil Recovery operations, Safety-Kleen re-refines and markets
petroleum-based products at prices that have generally been positively
correlated to crude oil prices over the long term. However, during the second
half of fiscal 1996, sales prices for Safety-Kleen's base lube oil declined by
15%, even though crude oil prices increased by approximately 20% from mid-year
to year-end. Safety-Kleen believes this lube oil selling price decline reflected
the market's reaction to construction of a new large lube oil refinery in the
U.S. and the expansion of a Canadian lube oil refinery which were expected to
increase the North American lube oil industry's capacity by approximately 10%.
Safety-Kleen expects this added capacity will continue to negatively impact its
base lube oil selling prices unless and until some of the older less-efficient
refineries in North America cease their operations. At the end of fiscal 1997,
Safety-Kleen's selling price of base lube oil had decreased by approximately 10%
from the beginning of the year while the price of crude oil decreased by 27%
during the same period.
Safety-Kleen's various service operations (such as its Parts Cleaner
Service) also consume petroleum-based products, the cost of which are positively
correlated to crude oil prices over the long term. Generally, Safety-Kleen's
earnings are positively affected by higher crude oil prices. The speed at which
Safety-Kleen is able to raise prices for its services and products is restricted
somewhat by committed price contracts.
YEAR 2000 -- SAFETY-KLEEN
Safety-Kleen is currently in the process of evaluating its information
technology infrastructure for Year 2000 compliance. Safety-Kleen does not expect
that the cost to modify its information technology infrastructure to be Year
2000 compliant will be material to its financial condition or results of
operations. Safety-Kleen does not anticipate any material disruption in its
operations as a result of any failure by Safety-Kleen to be in compliance.
Safety-Kleen does not currently have any information concerning the Year 2000
compliance status of its suppliers and customers. In the event that any of
Safety-Kleen's significant suppliers or customers does not successfully and
timely achieve Year 2000 compliance, Safety-Kleen's business or operations could
be adversely affected.
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<PAGE> 69
BUSINESS
Certain statements set forth in "Business" are forward-looking statements.
See "Disclosure Regarding Forward-Looking Statements."
THE COMPANY
The Company is a vertically integrated hazardous and industrial waste
management company that collects, transports, treats, recycles and disposes of
waste by distillation, incineration, landfilling and other methods. The Company
is the leading hazardous and industrial waste management company in North
America (based on fiscal 1997 revenues and facilities) with operations in the
United States, Canada and Europe. The Company categorizes its hazardous and
industrial waste activities into five components: (i) collection network
services, (ii) treatment, disposal and transportation services, (iii) used oil
collection and recovery services, (iv) other specialty services and (v) European
operations. The Company's strategy is to continue to develop vertically
integrated operations and to enhance the Company's profitability by taking
advantage of opportunities to rationalize operations, internalize waste streams
and expand services provided to its existing customer base. The Company serves
over 400,000 customers with operations across North America and Europe through
an extensive network of 284 collection facilities, 11 landfills, eight
incinerators and 13 recycling facilities. In May 1998, the Company completed the
Safety-Kleen Acquisition.
INDUSTRY OVERVIEW
The hazardous and industrial waste industry can be divided into three
categories: (i) the hazardous and industrial waste management industry
(including waste treatment, storage, disposal, transportation, collection,
recycling and recovery), (ii) the industrial services industry (including
industrial cleaning, refinery turnarounds, decommissioning and demolition, tank
management and emergency response services) and (iii) the hazardous and
industrial waste consulting and remediation industry. The Company primarily
competes in the hazardous and industrial waste management services industry.
Management of the Company estimates that total revenues for the United States
and Canadian hazardous and industrial waste management industry were
approximately $8.0 billion in 1997. Management estimates the industrial services
industry generated revenues of approximately $5.0 billion in 1997 and the
hazardous and industrial waste consulting and remediation industry had total
North American revenues of approximately $9.0 billion for 1997.
The hazardous and industrial waste management industry is comprised of four
major product segments: (i) land disposal; (ii) thermal destruction (including
the use of incinerators and kilns, boilers and furnaces); (iii) resource
recovery and (iv) wastewater treatment (including underground injection
systems). In addition, and as a primary component of the hazardous waste
management industry, collection facilities and transportation activities allow
for the collection and transport of hazardous waste materials for treatment or
disposal. Not all hazardous and industrial waste management services companies
are involved in all of the above product segments and several operators have
operations that are not easily classified. The hazardous and industrial waste
industry does not involve the handling and disposal of high-level radioactive or
nuclear waste.
There are three types of participants in the hazardous and industrial waste
management industry: (i) integrated hazardous and industrial waste management
services companies, such as the Company, that provide transportation, treatment
(incineration and/or separation), disposal (landfilling treated solids or
deep-well injection for treated liquids) and resource recovery services, (ii)
companies in unrelated industries that have constructed single incinerators to
handle primarily their own waste and that may or may not have other disposal
facilities (e.g., E. I. Dupont De Nemours and Company and Allied Signal Inc.)
and (iii) companies that have boilers and industrial furnaces (BIFs) and that
are permitted to incinerate hazardous waste as fuels, but that do not have
transportation or disposal capabilities. Within the industry, there are also
hazardous and industrial waste brokers who arrange for the transportation,
treatment and disposal of waste for a fee.
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<PAGE> 70
INDUSTRY TRENDS
General. The current hazardous waste industry was created, to a large
extent, in 1976 with the passage of RCRA. The new regulatory environment
contributed to rapid growth in the hazardous waste industry in the 1980s as high
profit margins attracted new entrants to the industry. The number of new
entrants created an overcapacity which coincided with the waste minimization
efforts of large waste generators that resulted in a decline in prices and
operating margins. Although the business fundamentals for each segment of the
industry vary, in general, operating margins and profits have now stabilized.
Rationalization. In the last four years, the hazardous and industrial
waste management industry has experienced a restructuring which has included the
exit from the industry of such players as Westinghouse Electric Corp., Union
Pacific Corp., Amoco Corp., Burlington Resources Inc. and Consolidated Rail
Corp. Acquirers are now turning their focus away from consolidation and towards
rationalization by closing facilities and reducing excess capacity.
Waste minimization. During the early 1990s, many large generators of
hazardous and industrial waste materials made economic decisions to reduce their
waste outputs or to bring in-house some of the capabilities needed to dispose of
such waste by-products of their manufacturing processes. During the last two
years, much of the economic incentive for continuing or expanding such programs
has lessened as corporations realized that they had already taken advantage of
readily available waste reduction initiatives. Given the achievement of these
efficiencies, it is expected that hazardous and industrial waste generation will
more closely parallel industrial output going forward.
Outsourcing. Companies are increasingly outsourcing waste management and
other environmental compliance tasks to waste management companies. Waste
generators cite the complexities of environmental regulation and reporting,
rising costs and the trend towards limiting the number of vendors with which a
company contracts as important reasons to move towards outsourcing. The greatest
factor, however, appears to be waste generators' desire to focus on their core
business or businesses. Vertical integration and bringing services in-house are
now being replaced by a movement towards cost-cutting through outsourcing
activities that are better and more efficiently performed by specialists.
BUSINESS STRATEGY AND ACQUISITION RATIONALE
The Company's strategy is to continue to vertically integrate its
operations and to enhance the Company's profitability by taking advantage of
opportunities to rationalize operations, internalize waste streams and expand
services provided to its existing customer base. The Company achieves vertical
integration through the combination of its full-service collection and
transportation network with its treatment and disposal services. To implement
its strategy, the Company examines strategic acquisitions on an opportunistic
basis. The Rollins Acquisition combined the Company's full-service collection
and treatment network with Rollins' expertise in solids incineration technology
and provided significant savings from facility and administrative
rationalizations. The Company believes the Safety-Kleen Acquisition combines
complementary assets that enhance the Company's competitive position and provide
opportunities for significant cost savings from synergies related to facility
consolidation, waste internalization and selling, general and administrative
cost savings.
Strategic Fit. The Company's collection network, which links customers to
treatment and disposal facilities such as landfills and incinerators, is one of
the Company's primary operational strengths. This network differentiates the
Company from its competitors and allows for both responsiveness and
accountability in managing a customer's hazardous or industrial waste stream.
The Company believes the Safety-Kleen Acquisition increases vertical integration
of its business by processing waste streams collected by Safety-Kleen. In
addition, the Company believes that the Safety-Kleen Acquisition strengthens its
market position by: (i) providing additional market coverage in key geographic
regions; (ii) introducing a base of smaller-sized customers to complement the
Company's existing base of medium and larger-sized customers; (iii) providing
significant
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<PAGE> 71
expansion into the solvent recycling market; and (iv) increasing profitability
by capitalizing on cost saving opportunities.
Synergies. The Company intends to build upon Safety-Kleen's leading market
presence and quality brand name recognition. The Company believes that the
Safety-Kleen Acquisition provides an opportunity to achieve significant cost
savings through the elimination of existing redundancies between the Company's
and Safety-Kleen's operations. The Company expects that the planned selling,
general and administrative cost savings, the closure of duplicative collection
and processing facilities, the increased utilization of the remaining facilities
and the internalization of various waste streams will generate annual cost
savings of approximately $103.5 million to $165.0 million. The Company expects
to begin achieving cost savings within three months of the Safety-Kleen
Acquisition, and to fully realize these annualized cost savings within twelve
months after consummation of the Safety-Kleen Acquisition. Through the Rollins
Acquisition, the Company has demonstrated its ability to manage the integration
of a large acquisition and to realize substantial cost savings. To date, the
Company believes that it has generated approximately $75.0 million of annual
cost savings in connection with the Rollins Acquisition. There can be no
assurance, however, that the projected cost savings from the Safety-Kleen
Acquisition will be achieved. See "Risk Factors -- Uncertainties in Integrating
Operations and Achieving Cost Savings."
The Company expects to achieve cost savings in the following areas:
- Facility Consolidation. Based on a thorough review of the Company's and
Safety-Kleen's facilities, the Company estimates that it can close 35 to
45 collection facilities and five processing facilities due to geographic
overlap. The Company estimates that the cost savings resulting from its
planned facility consolidation will be approximately $2.0 to $2.5 million
per processing facility and $1.0 to $1.5 million per collection facility.
The cost savings per location assume that waste collection and routing
efficiencies can be achieved by combining the transportation resources of
the overlapping locations and reducing the total number of vehicles and
drivers required to service the existing combined customer base. The
closure of redundant facilities will also result in cost savings related
to the personnel and property costs associated with such facilities. The
Company estimates that this facility consolidation will generate
approximately $45.0 million to $80.0 million of annual cost savings.
- Waste Internalization. During fiscal 1997, Safety-Kleen spent over $50.0
million for outside disposal of waste it collected, consisting of fuel
blend material, as well as waste disposed at hazardous waste
incinerators, landfills and wastewater treatment facilities. Prior to the
Safety-Kleen Acquisition, the Company received an insignificant amount of
Safety-Kleen's waste material for disposal. The Company has already begun
to internalize Safety-Kleen's incinerable and wastewater materials for
disposal at its facilities. The fuel blend material may either be used as
a fuel source or blended with solid waste material for burning at the
Company's incinerator facilities. When used as a fuel source, The Company
will avoid the cost of purchasing conventional fuel from third parties.
The Company estimates that the internalization of these waste streams,
after taking into account incremental costs, will generate approximately
$13.5 million to $25.0 million of annual cost savings.
- Selling, General and Administrative Cost Savings. The Company intends to
incorporate the Safety-Kleen operations into the Company's existing
operational organization, which will result in the elimination of all
duplicative administrative support functions. In connection with the
elimination of duplicative support functions, the Company expects that it
will eliminate 600 to 800 personnel and their associated costs. The
Company estimates that the planned selling, general and administrative
cost consolidation will generate approximately $45.0 million to $60.0
million of annual cost savings.
Potential Divestiture Opportunities. The Company is in the process of
analyzing whether, following consummation of the Safety-Kleen Acquisition, all
of its assets will be consistent with its strategies. To the extent certain
assets do not fit its strategies, the Company may elect to sell these assets and
use the proceeds from such sale to reduce outstanding indebtedness. For example,
the Company is currently considering the desirability of
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<PAGE> 72
disposing of certain of the assets utilized within Safety-Kleen's used oil
collection and recovery services business and its European operations. In fiscal
1997, revenue attributable to Safety-Kleen's used oil collection and recovery
services business and European operations was $156.3 million and $109.9 million,
respectively.
COMPETITIVE STRENGTHS
Low-cost service provider. With over-expansion in the hazardous and
industrial waste industry during the 1980s and the early 1990s, it has become
critical for successful waste management companies to maintain high utilization
of a well-managed fixed asset base. The Company has created a cost structure
which it believes is the lowest in the industry. The Company believes this cost
structure can be further reduced as a result of the Safety-Kleen Acquisition.
Integrated customer service. Waste generators are demanding high quality
service and waste management expertise while reducing the number of vendors they
use for these services. As a result of its integrated, full-service approach to
managing its customers' needs, the Company believes that it is well positioned
to capture incremental business from existing customers.
Geographic footprint. It is critical for waste management providers to
have a broad geographic reach for two reasons. First, it is necessary to provide
full service capabilities to a marketplace that increasingly seeks a single
service provider. Additionally, with fixed cost disposal assets, it is necessary
to collect and feed high volumes of waste to those assets in the most efficient
manner possible. As a result of the Safety-Kleen Acquisition, the Company
believes that it provides the broadest geographic coverage of any hazardous and
industrial waste management company.
Diverse Customer Base. The Company has over 400,000 customers representing
diverse industries. Pro forma for the Safety-Kleen Acquisition, no one customer
represented greater than 5% of the Company's fiscal 1997 revenues. In addition,
a significant amount of the Company's revenue is derived from the collection,
treatment and disposal of industrial waste which is classified as non-hazardous.
Internalization of waste streams. Hazardous and industrial waste
management services companies that are able to internalize or feed waste streams
to their own treatment and disposal facilities are able to boost profitability
significantly. As a result of the Safety-Kleen Acquisition, the Company expects
its internalization of collected waste streams to exceed 80%, which the Company
believes is without parallel in the industry.
OPERATIONS
The Company categorizes its hazardous and industrial waste activities into
five components: (i) collection network services, (ii) treatment, disposal and
transportation services, (iii) used oil collection and recovery services, (iv)
other specialty services and (v) European operations. Prior to the Safety-Kleen
Acquisition, the Company provided collection, treatment, disposal,
transportation and specialty services. As a result of the Safety-Kleen
Acquisition, the Company now provides expanded services including parts
cleaner/fluid recovery services, automotive/retail repair services, oil recovery
services and has expanded its operations into Europe. The Safety-Kleen
Acquisition also significantly augmented the Company's collection and
transportation services, adding 231 branch locations (of which 177 are located
in North America). The following table sets forth, pro forma for
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<PAGE> 73
the Safety-Kleen Acquisition, the allocation of the Company's gross revenue
(before inter-company eliminations) contributed by category of service, and such
revenue expressed as a percentage of the Company's gross revenue:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28, 1998
-----------------
<S> <C>
COLLECTION NETWORK SERVICES
Service Center Operations................................. 17%
Parts Cleaner/Fluid Recovery Services..................... 17
Automotive/Retail Repair Services......................... 14
---
Subtotal............................................... 48
---
TREATMENT, DISPOSAL AND TRANSPORTATION SERVICES
Incineration.............................................. 9
Landfills................................................. 7
Other Disposal............................................ 9
Transportation............................................ 4
---
Subtotal............................................... 29
---
USED OIL COLLECTION AND RECOVERY SERVICES................... 8
OTHER SPECIALTY SERVICES.................................... 9
EUROPEAN OPERATIONS......................................... 6
---
TOTAL GROSS REVENUES........................................ 100%
===
</TABLE>
Collection Network Services
The Company's collection network services provide the Company's customers
with a variety of regionally or locally based services. Historically, the
Company provided such services through its 23 service centers and their 30
satellite locations in North America. Safety-Kleen has historically provided
local services from its 177 North American and 54 European branch locations.
Safety-Kleen's branch locations are similar in size to the satellite locations
utilized by the Company. Facility consolidations providing for cost savings will
arise from the planned elimination of 35 to 45 duplicative operations where
geographic overlap exists between the Company's service centers or satellite
locations and Safety-Kleen's branch locations. Combined, the Company's
collection network services customers range from small independent businesses to
large multi-location concerns.
Service Centers. The Company's service centers (including its satellite
locations) across the United States and Canada work in partnership with the
Company's treatment and disposal facilities to provide an integrated service
delivery system. The Company's service centers link customers to the final
disposal or treatment facility. Waste materials are transported from a customer
site to a service center, where they are temporarily stored or consolidated with
compatible waste streams for more efficient transportation to final treatment
and/or disposal destinations. The Company's service centers in the United States
with Part B permits under RCRA are allowed to store waste for up to one year for
bulking and/or transfer purposes. Through its service center network, the
Company can access its customers quickly in order to collect their waste
streams, thus enabling customers to remain in compliance with on-site storage
regulations. The Company's smaller satellite locations act as local collection
points for the service centers.
The Company has on-site field operations headquartered at its service
centers, including lab-packing services, field services and household hazardous
waste collection programs. To manage hazardous waste material, the Company
typically sends one or more chemists to customer sites to sample, segregate,
prepare and package waste material for transportation. If the amount of the
material is large enough, the waste may be routed directly to one of the
Company's permitted treatment and disposal facilities. Customers with low volume
waste streams can have their streams transported to the nearest service center
where it is consolidated with compatible wastes from other generators until
there is sufficient material for treatment and disposal. After "profiling"
(chemically identifying) the waste materials, the Company's chemists inventory
the waste in such a manner as to ensure that the wastes are stored with other
chemically compatible waste. Each storage location is designed to separate
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chemically incompatible material and to allow for easy access once a full
shipment of similar material has accumulated. Materials are then shipped to the
appropriate disposal sites. This collection and treatment system affords smaller
generators high levels of service and allows them to benefit from the economy of
scale normally available only to high volume customers.
The Company also performs a variety of resource recovery processes at many
of its service centers. Resource recovery involves the distillation of used
solvents to remove contaminants and then the return of the material to the
market as a solvent or for use as fuel. Most of these hazardous materials come
from the aerospace and transportation industries and the metals finishing
industries. Fuel substitution, mainly in the energy intensive cement
manufacturing process, is the most prevalent form of resource recovery.
Service centers are the largest source of waste streams for the Company's
treatment and disposal facilities. A diverse mix of locations allows the service
centers also to serve as hubs for regional sales efforts, local community
hazardous material collection efforts and other geographically specific
initiatives.
Parts Cleaner Service. As a result of the Safety-Kleen Acquisition, the
Company is the leading parts cleaning service provider in the U.S. industrial
market. Sales representatives place parts cleaning equipment and solvent or
aqueous cleaning solutions with customers and make periodic service calls to
clean the equipment and to remove and replace the dirty solvent or aqueous
cleaner with clean material. The dirty solvent is typically recycled and reused.
The Company provides a choice of several models of parts cleaners to customers
for their use as part of the parts cleaner service and also provides service to
customers who own their own parts cleaner equipment.
Fluid Recovery Service. The Company's fluid recovery service consists
primarily of the collection of a wide variety of waste solvents and other liquid
and solid containerized wastes generated by industrial customers in relatively
small quantities, averaging a few 55-gallon drums per pickup. Depending upon the
content, the material collected by the Company in its fluid recovery service is
generally recycled into usable solvent, processed into a waste-derived fuel for
use in the cement manufacturing industry or disposed of through incineration.
Wastewater that is collected as part of the fluid recovery service is treated
and processed until it can be discharged into publicly owned treatment works in
compliance with applicable laws and regulations. Fluid recovery service
operations also provide comprehensive environmental and technical assistance to
industrial, commercial and institutional clients nationwide. These services
consist of lab pack services (the collection of small quantities of laboratory
chemicals), waste drum management, and in-plant services. The list of chemicals
to be removed at a site can be extensive and vary widely in characteristics and
quantities. The Company prepares the paperwork and packages the waste for
shipment, and provides for the transportation and disposal management.
Automotive/Retail Repair Services. The primary component of the Company's
automotive/retail repair services is its parts cleaner service. The Company
furnishes service stations, car and truck dealers, small engine repair shops,
fleet maintenance shops and its other automotive/retail repair customers with
the same high quality parts cleaner service that it provides to its industrial
services customers. The Company supplies on-site automotive parts cleaning
equipment, provides cleaning fluid and removes waste for recycling. The Company
provides the parts cleaner machine, fresh solvent or aqueous cleaning solutions
and the removal of dirty solvent or aqueous cleaner for recycling by way of
regularly scheduled service calls.
The Company's vacuum services involves using specialized vacuum trucks that
remove residual oil and sludge from underground oil/water separators found at
many automotive repair and small industrial locations. The Company provides
vacuum trucks to customers who use in-ground pits to treat waste water before
discharge to sewers. The vacuum trucks clean out all waste, including oil, water
and sludge, that accumulate in the in-ground pits. The Company expects this new
service line to grow substantially over the next few years.
Treatment, Disposal and Transportation Services
Incineration. The Company offers a wide range of technological
capabilities and locations to customers through a collection of incineration
facilities. Incineration is the preferred method for the treatment of organic
hazardous and industrial waste, because it effectively destroys the contaminants
at temperatures in excess of 2,000 degrees Fahrenheit. High temperature
incineration effectively eliminates organic wastes such as herbicides,
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plastics, halogenated solvents, pesticides, pharmaceutical and refinery wastes,
regardless of whether they are gases, liquids, sludges or solids. Federal and
state incineration regulations require a destruction and removal efficiency of
99.99% for most organic wastes and 99.9999% for PCBs and dioxin.
The Company operates three United States-based solids and liquids capable
incinerators with annual capacity of 250,000 tons, two hazardous waste liquid
injection incinerators in Canada, and one in the United States, and two lower
volume specialty incineration facilities in the United States. The Company's
incineration facilities in Bridgeport, New Jersey; Deer Park, Texas; and
Aragonite, Utah, are designed to process liquid organic wastes, sludges, solids,
soil and debris. The Deer Park facility has two kilns and a rotary reactor. The
Company's incineration facilities in Roebuck, South Carolina; Mercier, Quebec;
and Sarnia, Ontario are liquid injection incinerators, designed primarily for
the destruction of liquid organic waste. The Mercier facility also has a system
to blend and destroy pumpable sludges. Typical wastestreams include wastewater
containing concentrated organic levels not amenable to conventional
physical/chemical waste treatment, pesticide and herbicide waste, waste with
high chlorinated organic concentrations and flammable materials.
All but one of the Company's United States incineration facilities have
received Part B permits under RCRA. The facility in Roebuck, South Carolina has
received EPA approval for that portion of the Part B permit under EPA authority;
however, the required state permit which was originally issued in 1987 is
currently under appeal. Part B permits are generally issued for periods of five
or ten years, after which the permit must be reviewed by state and/or federal
regulators before the permit can be renewed for additional terms. The Company's
two Canadian facilities have operating permits issued by provincial regulatory
authorities. Management is not aware of any issues at any of the Company's sites
that would preclude the renewal of any of its Part B permits.
The following tables sets forth the annual capacity of the Company's solids
and liquid capable incinerators and the liquid injection incinerators:
<TABLE>
<CAPTION>
ANNUAL PRACTICAL
CAPACITY(1)
----------------
(TONS)
<S> <C>
SOLIDS AND LIQUIDS CAPABLE INCINERATORS
Aragonite, Utah............................................. 60,000
Bridgeport, New Jersey...................................... 45,000
Deer Park, Texas............................................ 145,000
-------
Subtotal.................................................. 250,000
-------
LIQUID INJECTION INCINERATORS
Mercier, Quebec............................................. 60,500
Sarnia, Ontario............................................. 66,000
Roebuck, South Carolina(2).................................. 33,500
-------
Subtotal.................................................. 160,000
-------
TOTAL............................................. 410,000
=======
</TABLE>
- ---------------
(1) The table does not reflect the annual capacity of the Company's two lower
volume specialty incinerators located in the United States.
(2) Scheduled for closure.
During fiscal 1997, the Company closed its incinerators at Baton Rouge,
Louisiana, and Clive, Utah, reducing utilization of less efficient and redundant
facilities. During the second quarter of fiscal 1998, the Company closed its
incinerator at Coffeyville, Kansas. In addition, the Company plans to close its
incinerator at Roebuck, South Carolina, reducing excess capacity. These four
closures eliminate approximately 244,000 tons of practical capacity from the
off-site commercial incineration market. The industry's total off-site
commercial incinerator practical capacity was estimated at 1.26 million tons in
1996, according to EI Digest.
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Landfills. The Company operates 11 landfills located throughout the United
States and Canada. A total of eight landfills are designed and permitted for the
disposal of hazardous wastes. Three landfills are operated for non-hazardous
industrial waste disposal, and to a lesser extent, municipal solid waste.
Landfill technology is a proven and environmentally sound disposal mechanism for
certain wastes that cannot effectively be destroyed or treated through
alternative methods.
The Company operates eight of the 23 permitted hazardous waste landfills in
North America, with approximately 52 million cubic yards of remaining permitted
capacity (which at current fill rates represents in excess of 50 years of
capacity). Of these facilities, six are located in the United States and two are
located in Canada.
The following table sets forth the permitted available capacity of the
Company's industrial and hazardous waste landfills:
<TABLE>
<CAPTION>
PERMITTED
AVAILABLE CAPACITY
AT AUGUST 31, 1997
------------------
(CUBIC YARDS)
<S> <C>
INDUSTRIAL WASTE LANDFILLS
Altair, Texas............................................... 400,000
Sawyer, North Dakota........................................ 5,500,000
Rosemont, Minnesota......................................... 5,800,000
----------
TOTAL............................................. 11,700,000
==========
HAZARDOUS WASTE LANDFILLS
Pinewood, South Carolina.................................... 3,800,000
Westmorland, California..................................... 12,000,000
Buttonwillow, California.................................... 11,100,000
Sarnia, Ontario............................................. 2,000,000
Tooele County, Utah......................................... 11,100,000
Waynoka, Oklahoma........................................... 8,600,000
Ryley, Alberta.............................................. 1,000,000
Deer Trail, Colorado........................................ 2,200,000
----------
TOTAL............................................. 51,800,000
==========
</TABLE>
The Company's six hazardous waste landfills in the United States all
possess operating permits issued pursuant to RCRA Subtitle C. These permits are
generally issued for periods of five or ten years, after which the permit must
be reviewed by state and/or federal regulators before the permit can be renewed
for additional terms. Management is not aware of any issues at any of the
Company's sites that would preclude the renewal of its hazardous waste landfill
permits. In fiscal 1997, approximately 0.9 million cubic yards of hazardous
wastes were disposed of in these landfills. The Company's Sarnia, Ontario
hazardous waste landfill has provincial permits authorizing its operation.
Management is not aware of any issue that would preclude renewal of these
permits.
The Company also operates three non-hazardous industrial landfills. All
three landfill facilities have received permits authorizing the acceptance of
commercial industrial waste, including wastes from foundries, demolition and
construction, machine shops, automobile manufacturing, printing, metal
fabrications and recycling. Management is not aware of any issues at any of
these landfills that would preclude renewal of these permits.
Other Treatment and Disposal Services. The Company provides a number of
other complementary treatment and disposal services including wastewater
treatment, PCB management services, harbor sediment dredging, treatment, and
placement services and other specialized offerings.
Wastewater treatment is provided from four facilities and consists of four
basic business lines: hazardous wastewater treatment, mobile treatment, sludge
dewatering/drying and non-hazardous wastewater treatment. These services include
the reduction, treatment and disposal of both hazardous and non-hazardous
wastewater,
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sludges and solids for both bulk and drummed waste. The Company removes
hazardous components from hazardous industrial liquids and/or
chemically/physically makes hazardous industrial liquids non-hazardous through
blending and treatment technology. Specialized techniques reduce residues by
recycling/reusing spent products. Batch treatment technologies also enable the
Company to handle hard-to-treat wastewater streams.
The Company also provides PCB management services. The Company recycles PCB
contaminated oils and reclaims metals from PCB contaminated equipment. The
Company accomplishes this recycling and reclamation through a de-chlorination
process operated from seven facilities mainly in the eastern United States and
Canada.
The Company provides harbor and channel sediment dredging, treatment and
placement services in addition to other specialty services including remedial
construction and consulting, analytical services, biological treatment, and
paint, oil and solvent recovery. The Company also provides field services for
industrial customers at their sites and at government installations, federal and
state Superfund sites, laboratories and schools across North America. These
activities range from typical environmental remediation and construction to
specialized services. The Company's INSITE program, an environmental outsourcing
program, allows companies to achieve their environmental goals while focusing on
their core business.
Transportation. The Company's transportation operations facilitate the
movement of materials between locations, which is key to the operation of the
Company's network of hazardous and industrial waste treatment and disposal
facilities. Transportation may be accomplished by truck, rail, or other mode,
with company-owned assets or in conjunction with third party transportation
specialists.
Specially designed containment systems, vehicles and other equipment
permitted for hazardous waste transport, along with drivers trained in
transportation skills and hazardous waste procedures, provide for the movement
of customer waste streams.
Used Oil Collection and Recovery Services
As a result of the Safety-Kleen Acquisition, the Company is the world's
largest recycler of used oil, currently re-refining approximately 130 million
gallons of used oil and oily water per year. The Company collects used
lubricating oils from automobile and truck dealers, automotive garages, oil
change outlets, service stations, industrial plants and other businesses, which
it then re-refines into high-quality base lubricating oil that can be sold at
significantly higher prices than industrial fuels. The Company operates oil
re-refining plants in Breslau, Ontario and East Chicago, Indiana. The plants in
Breslau and East Chicago have annual re-refining capacities of 40 and 92 million
gallons of used oil per year, respectively. Used oil collected in excess of the
capacity of the Company's re-refining facilities is either processed into
industrial fuels or sold unprocessed for direct use as a fuel in certain
industrial applications for which such used oil is suitable. Recently, the
profitability of this business has been adversely affected by declining oil
prices, which adversely affects the prices of re-refined oil. The Company is
currently evaluating the sale of certain of these assets.
Other Specialty Services
The Company provides a number of other specialty services which either
accommodate specific needs of the customer base or allow for increased
utilization of the existing asset base and facility network. These additional
services include paint refinishing services, dry cleaner services, automotive
recovery services, imaging services, its T.E.A.M. (as defined below) service and
compliance services.
The Company supplies paint refinishing services to new and used car
dealers, auto body repair and paint shops and fiberglass product manufacturers.
The Company provides a machine specially designed to clean paint spray guns.
Company representatives place a machine and solvent with each customer, maintain
the machine and regularly remove the contaminated solvent and replace it with
clean solvent. The Company either recycles the contaminated solvent into clean
solvent for reuse or blends it into fuel used by cement kilns. The Company also
collects waste paint and paint booth filters, which are blended into fuel for
cement kilns. Company representatives also provide clean buffing pads and remove
dirty pads during regularly scheduled service calls. The dirty pads are washed,
dried, inspected and returned to the Company's distribution system. The Company
believes that clean air
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and water regulations will create opportunities for further market penetration,
new services and product line extensions.
The Company collects and recycles contaminated dry cleaner wastes
consisting primarily of used filter cartridges and sludge containing
perchloroethylene and mineral spirits. While the market for this business has
matured, the Company believes it can achieve further market penetration and can
take advantage of new markets for services evolving from regulatory issues.
As part of its automotive recovery services, the Company provides services
for recycling used oil filters, absorbent products and waste, waste gas, gas
filters and discarded fluorescent lamps.
The Company supplies on-site silver recovery equipment and collects and
recycles photo processing waste for businesses that use silver-based
photography, including graphic arts printers, photographers and diagnostic
x-ray. Through this service, the Company provides health care, printing,
photoprocessing and other businesses with on-site and off-site recycling of
photochemical solutions, as well as film, plate and silver recovery services.
The Company provides a Total Environmental Activity Management service to
small businesses (T.E.A.M.). T.E.A.M. is a fluids and waste management service
which covers all aspects of the operations of the business. Each T.E.A.M. is
composed of an environmental specialist, engineering specialist and a financial
specialist who undertake an environmental/process evaluation. The detailed
report prepared by the T.E.A.M. includes an evaluation of the process,
environmental compliance, health and safety and costs for regulatory remediation
and compliance. In the last quarter of fiscal 1997, the Company completed 25
evaluations. There are currently three T.E.A.M.s and it is anticipated that
there will be 18 T.E.A.M.s by the end of 1998 with each T.E.A.M. expected to
perform four evaluations per month.
The Company also offers integrated customer compliance services to include
Material Safety Data Sheets ("MSDS") Fax on Demand, an electronic MSDS
management program; DOT Shipping Paper Services, which provides appropriate
shipping papers for hazardous waste shipments; regulatory training; spill and
poison control hotlines; and on-site facility assessments. Integrated Customer
Compliance offers single services and bundled full service programs in
accordance with customer requests. For example, the Company offers various
regulatory compliance services including electronic data management, on-site and
off-site training and compliance audits.
European Operations
As a result of the Safety-Kleen Acquisition, the Company operates in seven
countries in Western Europe and provides certain services identical to those
provided in North America. The Company primarily provides automotive/retail
repair and paint refinishing services in the United Kingdom, the Republic of
Ireland, Belgium, France, Italy, Spain and Germany. The Company also provides
selected industrial services in Germany and the United Kingdom. The Company has
a total of 54 branch locations in Europe. The Company is currently evaluating
the sale of these European operations. See "Risk Factors -- International
Operations."
SALES AND MARKETING
The Company's sales and marketing staff is deployed geographically
throughout North America to service more than 400,000 customers. Approximately
2,800 of the Company's employees are involved in the Company's North American
sales and marketing effort. The Company's customers represent diverse
industries, including automotive manufacturers and suppliers, chemical and
petrochemical, computer and micro-processor manufacturers, primary metals,
paper, furniture, aerospace and pharmaceutical, and are located throughout the
United States, Canada and Europe.
The sales and marketing group for the Company's incineration and landfill
services is structured around three separate groups of sales professionals,
which together total approximately 225 individuals. Approximately 25 of these
professionals manage large corporate accounts on an ongoing basis, consisting of
approximately 250 major corporations which, collectively, generated over $300.0
million in revenues in fiscal 1997. Approximately 175 of these professionals
serve as technical sales representatives who are located throughout North
America based upon geographic coverage needs and the future waste generating
potential of a particular region. Furthermore, approximately 25 of these
professionals serve as facility sales managers and are on-site at the
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Company's facilities. Facility service managers are responsible for generating
revenues at each of these profit centers in addition to supporting technical
sales representatives in the field who have specific client-driven technical
needs.
The Company's sales and marketing for its parts cleaner/fluid recovery,
automotive/retail repair and used oil collection and recovery services is
conducted through its 284 collection facilities, 19 accumulation centers, 13
solvent recycling centers, eight distribution centers, two fuel blending
facilities and two oil re-refineries. This unique network offers a local
presence and flexibility in scheduling that is unmatched in the industry, and is
a significant competitive advantage. The Company's sales and marketing group for
all other services is conducted through its collection network which is located
throughout North America.
In addition, telemarketing is used to reach low volume waste generators who
may not otherwise be reached. All sales personnel are compensated on a base
salary and sales commission basis.
COMPETITION
The Company operates in a highly competitive industry. The Company believes
that it and Chemical Waste Management, Inc. are the largest competitors within
the hazardous and industrial waste industry. The Company also competes with
local and regional companies of varying sizes, as well as counties and
municipalities that maintain their own waste collection to disposal operations.
The key competitive factors within the hazardous and industrial waste management
industry include the breadth of services offered, price, quality, reliability of
service and technical proficiency in handling hazardous and industrial waste
properly. Knowledgeable customers are sensitive to the reputation and financial
strength of the companies they use to collect, treat, recycle and dispose of
their hazardous and industrial waste primarily because such customers, as the
original generator of such hazardous waste, remain liable under federal and
state environmental laws for improper disposal of such waste. The Company
believes that its technical proficiency and reputation of financial strength are
important considerations to its customers in selecting and continuing to use the
Company's services. See "Risk Factors -- Competition and Technological
Advances."
PROPERTIES
As a result of the Safety-Kleen Acquisition, the Company operates in 45
states, seven Canadian provinces, the United Kingdom, the Republic of Ireland,
Belgium, France, Italy, Spain, Germany and Puerto Rico. The Company provides
hazardous and industrial waste services from 284 collection facilities (more
than half of which are owned), operates eleven landfills, eight incinerators,
eight transportation centers, 19 accumulation centers, 13 solvent recycling
centers, two fuel blending facilities and two oil re-refineries.
The Company estimates that 35 to 45 collection facilities and five
processing facilities can be closed due to geographic overlap among facilities.
See "-- Business Strategy and Acquisition Rationale."
The Company leases space for its executive offices at 1301 Gervais Street,
Suite 300, Columbia, South Carolina 29201.
EMPLOYEES
As of August 31, 1997, 4,500 employees provided the Company's hazardous and
industrial waste services, of whom 1,500 were executive, supervisory, clerical
and sales personnel. Approximately 12% of the Laidlaw Environmental's employees
were represented by various collective bargaining groups. The acquisition of
Safety-Kleen has added approximately 7,300 additional employees. Less than 1% of
Safety-Kleen's employees were represented by various collective bargaining
groups. As a result of the Safety-Kleen Acquisition, the Company expects that it
will eliminate all duplicative administrative support functions, which will
result in the reduction of 600 to 800 personnel and close redundant collection
facilities and processing facilities which will result in the elimination of 400
to 500 personnel.
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REGULATIONS
The collection and disposal of solid and hazardous wastes are subject to
the laws and regulations promulgated by United States, Canadian and other
foreign, state, territorial, federal, provincial or local courts, executive
offices, legislatures, governmental agencies or ministries, commissions or
administrative, regulatory or self-regulatory authorities or instrumentalities
which regulate health, safety, the environment, zoning and land-use.
Environmental laws and regulations require hazardous waste disposal facilities
to obtain permits, which generally outline the procedures under which the
facilities must be operated. Governmental authorities have the power to enforce
compliance with these regulations, and violations of permit conditions or of the
regulations, even if unintentional, may result in fines, shutdowns, remedial
work or revocation of the permit. Regulations vary but generally govern
collection, storage and disposal activities and the location and use of
facilities and impose restrictions to prohibit or minimize air and water
pollution.
The Company's business is significantly affected by federal, state,
provincial and local environmental law, including RCRA, the Toxic Substances
Control Act, CERCLA, the Clean Water Act and the Clean Air Act, and
corresponding state laws and related regulations and enforcement practices.
Safety standards under the Occupational Safety and Health Act are also
applicable to the Company's business. See "Risk Factors -- Environmental
Regulation and Liabilities."
RCRA provides for the establishment of a national hazardous waste
management program through a comprehensive regulatory system. Among other
things, it defines hazardous wastes and provides standards for generators,
transporters and disposers of hazardous wastes, and for the issuance of permits
for sites where such material is treated, stored and disposed. These regulations
also require the Company's facilities to demonstrate financial assurance for
sudden and accidental and, in the case of land based treatment facilities,
non-sudden and gradual pollution occurrences. Financial assurance for future
closure and post-closure expenses must also be maintained. The Company believes
that each of the facilities has all necessary operating permits and that each
permit will be renewed at the end of its existing term. However, any such
issuance or renewal could include conditions requiring further capital
expenditures or corrective actions. Although the Company also believes that each
of its operating facilities complies in all material respects with the
applicable requirements of RCRA and Canadian law for the Canadian facilities, it
may be necessary to expend considerable time, effort and money to keep existing
or acquired facilities of the Company in compliance with applicable
requirements, including new regulations, to maintain existing permits and
approvals and to obtain the permits and approvals necessary to increase their
capacity.
CERCLA imposes liability for natural resource damages and the cleanup of
sites from which there is a release or threatened release of hazardous
substances into the environment on, among others, the current and former owners
and operators of such sites. Hundreds of substances are defined as "hazardous"
under CERCLA and the release to the environment of such substances, even in
minute amounts, can result in substantial liability. The statute provides for
the remediation of contaminated facilities and imposes costs on the responsible
parties. The expense of conducting such a cleanup can be significant.
Notwithstanding the Company's efforts to comply with applicable regulations and
to avoid any unregulated release of hazardous substances into the environment,
releases of such substances may occur as a result of the Company's operations.
Given the substantial costs involved in a CERCLA cleanup and the difficulty of
obtaining insurance for environmental impairment liability, such liability could
have a material impact on the Company's business, financial condition and future
prospects.
The Clean Water Act regulates the discharge of pollutants into surface
waters and sewers from a variety of sources, including disposal sites and
treatment facilities. The Company is required to obtain discharge permits and
conduct sampling and monitoring programs. The Clean Air Act regulates the
emissions of pollutants into the atmosphere. These regulations also impact the
Company's operations. The Company believes each of its operating facilities
complies in all material respects with the applicable requirements.
The South Coast Air Quality Management District ("SCAQMD"), the air
district for the greater Los Angeles, California area, has amended its rule
setting the allowable volatile organic compound ("VOC") content of materials
used for remote reservoir repair and maintenance cleaning. The amended rule
will, in effect, ban remote reservoir parts cleaning with solutions containing
VOCs in excess of fifty grams per liter as of January 1, 1999, except in certain
applications. Substantially all of the Company's parts cleaners currently placed
with
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SCAQMD customers utilize solvents containing VOCs in excess of fifty grams per
liter. The Company offers aqueous parts cleaning systems which meet the 1999
SCAQMD requirements and is working with its SCAQMD customers to identify which
customers will need to convert their solvent parts cleaners to an alternative
cleaning solvent or solution prior to January 1, 1999. In addition, the Company
will continue to actively work with the SCAQMD to identify appropriate
exemptions and develop alternatives to the 1999 VOC limits for materials used
for remote reservoir parts cleaning. The Company expects other Clean Air Act
nonattainment municipalities to consider adopting similar rules.
ENVIRONMENTAL LIABILITIES AND CAPITAL EXPENDITURES
The Company estimates capital spending of approximately $80.0 million per
year, commencing in fiscal 1998. This includes capital spending to achieve and
maintain compliance with RCRA, the Clean Air Act and other environmental laws
and regulations affecting the Company's operations.
In addition to these capital expenditures, the Company will incur costs in
connection with closure activities at certain of its sites. When the Company
discontinues using or changes the use of a hazardous waste management unit,
formal closure procedures must be followed, and such procedures must be approved
by federal or state environmental authorities. In some cases, costs are incurred
to fulfill closure, post-closure and corrective obligations work at the site. In
addition at certain of the Company's other operating sites, remedial cleanup
work is required as part of the RCRA Corrective Action Program or other state
and federal programs. The Company has recorded liabilities of $321.3 million as
of February 28, 1998, for remedial cleanup work, Superfund site liability,
closure, post-closure and corrective obligations and certain other environmental
expenses related to its operating and previously closed sites.
With respect to various operating facilities, the Company is required to
provide financial assurance with respect to certain statutorily required
closure, post-closure and corrective action obligations totaling $550.0 million
as of May 1, 1998. The Company intends to provide the required financial
assurance through a combination of letters of credit, insurance policies,
insurance bonds, corporate guarantees and trusts, as allowed by the applicable
regulatory authorities.
LEGAL PROCEEDINGS
OVERVIEW
The business of the Company is regulated by federal, state, provincial and
local provisions that have been enacted or adopted, regulating the discharge of
materials into the environment or primarily for the purpose of protecting the
environment. The nature of the Company's businesses results in frequently
becoming a party to judicial or administrative proceedings involving all levels
of governmental authorities and other interested parties. See "Risk
Factors -- Risk of Pending and Future Legal Proceedings." The issues that are
involved generally relate to applications for permits and licenses by the
Company and their conformity with legal requirements and alleged technical
violations of existing permits and licenses. The Company does not believe that
these issues will be material to the Company's operations or financial
condition. During the twelve month period ending April 30, 1998, subsidiaries of
the Company were involved in 11 proceedings in which sanctions were sought for
alleged violations of environmental laws. The Company believes that each of
these proceedings involved sanctions which may exceed $100,000. Based upon
presently available information, the Company does not believe that liabilities
arising from its involvement in these matters will in the aggregate be material
to the Company's operations or financial condition.
In the United States, CERCLA imposes financial liability on persons who are
responsible for the release of hazardous substances into the environment.
Present and past owners and operators of sites which release hazardous
substances, as well as generators and transporters of the waste material, are
jointly and severally liable for remediation costs and Environmental damage. As
of April 30, 1998, the Company had been notified that it was a potentially
responsible party in connection with approximately 37 locations at which
hazardous substances may have been released as a result of the Company's
operations. The Company continually reviews its status with respect to each
location and the extent of its alleged contribution to the volume of waste at
the location, the available evidence connecting the Company to that location and
the numbers and financial soundness of other
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potentially responsible parties at the location. Based upon presently available
information, the Company does not believe that potential liabilities arising
from its involvement with these locations will individually or in the aggregate
be material to the Company's operations or financial condition.
Laidlaw Environmental
Ville Mercier Facility. On May 10, 1991, representatives of the Ministry
of the Environment of the Province of Quebec conducted a search on property of a
subsidiary of the Company in Ville Mercier pursuant to a search warrant issued
on the basis of allegations that the subsidiary, prior to its acquisition, had
during the years 1973, 1974 and 1975, illegally buried between 500 and 600
barrels of industrial waste in the ground on the site. As a result of that
search and the finding of barrels of industrial waste, the subsidiary
immediately undertook an investigation and submitted a restoration plan to the
Ministry of the Environment and in fact, commenced the restoration activity. On
May 24, 1991, the Minister of the Environment issued an order under the
provisions of the Environment Quality Act, ordering the subsidiary to collect
all the contaminants dumped, emitted, issued or discharged into the environment.
This order was issued without notice to the subsidiary at a time when the
subsidiary was already carrying out its restoration plan. The subsidiary has
filed a motion in the Superior Court in the Province of Quebec and the District
of Montreal seeking an order to, among other things, cancel and annul the order
on the basis, that the burial of the barrels between 1973 and 1975 did not
constitute an actual and current discharge, emission or deposit of contaminants
into the environment justifying the 1991 order under the law and that the order
did not identify the contaminants that the subsidiary was required to remove,
their location or a time frame in which this should be accomplished. Management
believes that the restoration plan submitted by the subsidiary as amended after
consultation with the Ministry of the Environment has been implemented and that
any contamination resulting from the barrels of industrial waste has been
remediated.
By letter dated June 19, 1992, and unrelated to the barrels of industrial
waste referred to above, the Quebec Ministry of the Environment requested the
subsidiary to advise the Ministry, within 30 days of receipt of the request, of
its intentions concerning the carrying out of certain characterization studies
of soil and water and restoration work with respect to certain areas of the
Ville Mercier property. In 1968, the Quebec government issued two permits to an
unrelated company to dump organic liquids into lagoons on the Ville Mercier
property. By 1971, groundwater contamination had been identified. In 1972, the
Quebec government provided an alternate water supply to Ville Mercier. In the
same year, the permit authorizing the dumping of liquids was terminated and a
permit to operate an organic liquids incinerator on the property was granted to
an entity which was indirectly acquired by the Company in 1989. In 1973, the
Quebec government contracted with the incinerator operator to incinerate the
pumpable liquids in the lagoons. In 1980, the incinerator operator removed,
solidified and disposed of the non-pumpable material from the lagoons in a
secure cell and completed the closure of the lagoons at its own expense. In
1983, the Quebec government constructed, and continues to operate, a groundwater
pumping and treatment facility near the lagoons. The Company believes that its
subsidiary is not the party responsible for the lagoon and groundwater
contamination. By letter dated July 17, 1992, the subsidiary responded by first
denying any responsibility for the decontamination and restoration of its site
and secondly by proposing that the Quebec Ministry of the Environment and the
subsidiary form a working group to find the most appropriate technical solution
to the contamination problem. On November 16 and 25, 1992, the Minister of the
Environment, pursuant to the provisions of the Environment Quality Act, served
the subsidiary with two Notices alleging that the subsidiary was responsible for
the presence of contaminants on its property and that of its neighbor and
ordering the subsidiary to take all the necessary measures to excavate,
eliminate or treat all of the contaminated soils and residues located within the
areas defined in the Notices and to recover and treat all of the contaminated
waters resulting from the aforementioned measures. The Notices further provided
that failing the receipt by the Department of Environment, within ten days of
the date of service of the Notices, of an undertaking by the subsidiary to carry
out the aforementioned measures, the Minister of the Environment would proceed
to do the work and would claim from the subsidiary the direct and indirect costs
relating to such work. By letter dated November 25, 1992, the subsidiary
responded by reiterating its position that it had no responsibility for the
contamination associated with the discharges of wastes into the former Mercier
Lagoons between 1968 and 1972 and proposing to submit the question of
responsibility to the Courts for determination as expeditiously as possible
through the cooperation of the parties' respective attorneys. Concurrently, the
subsidiary undertook to prepare and submit to the Department of the Environment
a technical plan to address the contamination on the site
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<PAGE> 83
identified in the notices. This plan was developed with the assistance of highly
qualified experts from Quebec and elsewhere in North America drawing upon all
available information and was submitted to the Minister of the Environment. By
letter dated December 7, 1992, the subsidiary submitted to the Minister of the
Environment a document entitled "Detailed Scope of Work for the Groundwater
Contamination Panel Ville Mercier, Quebec." This proposal by the subsidiary was
refused by the Minister of the Environment by letter dated December 22, 1992 on
the grounds that it did not meet the terms of the above mentioned Notices issued
against the subsidiary. The Minister published a request for tenders for the
preparation of plans and specifications with respect to the excavation and
storage of the contaminated soils. The Minister also retained six independent
experts to review the subsidiary's technical plan. This panel of experts
subsequently submitted to the Minister of the Environment its recommended
methodology to address the contamination on the site.
The Minister of the Environment convened a public hearing which reviewed
the report submitted to the Minister by the experts he retained and recommended
to the Minister what remedial plan should be instituted to address the
contamination on the site.
The subsidiary filed legal proceedings seeking a court determination of the
liability associated with the contamination of the former Mercier lagoons. The
subsidiary asserted that it has no responsibility for the contamination on the
site. The Minister claimed that the subsidiary is responsible for the
contamination and should reimburse the Province of Quebec for costs incurred to
the present in the amount of $17.8 million Canadian and should be responsible
for future remediation costs.
Laidlaw and Laidlaw Transportation, Inc., an indirect wholly-owned
subsidiary of Laidlaw ("LTI"), have contractually agreed to indemnify and hold
harmless the Company and its subsidiaries for any damages resulting from the
remediation of contaminated soils and water arising from the former lagoon sites
and operation of the incinerator at Mercier, Quebec but only to the extent that
the aggregate cash expenditure with respect to such damages exceeds in the
aggregate (i) $1.0 million during such year and (ii) an amount equal to the
product of $1.0 million times the number of years that have elapsed since May
1997; however, there shall be no indemnification for any cash expenditures
incurred more than six years after May 1997.
Financial Assurance. A subsidiary of the Company (the "SC Subsidiary")
owns and operates a hazardous waste landfill near the Town of Pinewood in Sumter
County, South Carolina. South Carolina law requires that hazardous waste
facilities provide evidence of financial assurance for potential Environmental
cleanup and restoration in form and amount to be determined by the South
Carolina Department of Health and Environmental Control ("DHEC").
In its order dated May 19, 1994, the Board of DHEC (the "Board") decided
that over a ten year period LESSC must establish a cash funded trust in the
amount of $133.0 million adjusted for inflation as financial assurance for
potential Environmental cleanup and restoration. In August 1994, The SC
Subsidiary paid approximately $14.0 million cash into the trust fund as a first
installment. The cash funded trust now stands at approximately $17.0 million.
The SC Subsidiary appealed to the South Carolina Circuit Court contesting the
legality of the Board's determination.
In June 1995, DHEC promulgated, and the South Carolina legislature
approved, regulations governing financial assurance for Environmental cleanup
and restoration giving owner/operators of hazardous waste facilities the right
to choose from among six options for providing financial assurance. The options
include insurance, a bond, a letter of credit, a cash trust fund and a corporate
guaranty with a financial test.
In June 1995 under authority of the new regulations, the SC Subsidiary
submitted financial assurance for potential Environmental cleanup and
restoration composed of a combination of the existing State Permitted Sites Fund
(this is a state of South Carolina fund created by statute and funded by
hazardous waste disposal taxes) in the amount of approximately $8.0 million and
the balance of a total package of $135.0 million by way of a corporate guaranty
by the Company in the amount of approximately $127.0 million. The SC Subsidiary
also left in place the existing cash trust fund in the amount of approximately
$17.0 million. DHEC accepted the SC Subsidiary's financial submittal. On
September 15, 1995, DHEC issued a declaratory ruling finding the new regulations
applicable to financial assurance requirements for the SC Subsidiary. A group of
parties opposed to the ruling appealed the declaratory ruling to the South
Carolina Circuit Court. The opposing parties include
75
<PAGE> 84
Citizens Asking for a Safe Environment, Energy Research Foundation, County of
Sumter, Sierra Club, County of Clarendon, The Sumter County Legislative
Delegation, the South Carolina Department of Natural Resources and the South
Carolina Public Service Authority. In June 1996, the SC Subsidiary submitted and
DHEC accepted a similar financial assurance package for the state fiscal year
ended June 30, 1997. In June 1997, the SC Subsidiary submitted a financial
assurance package consisting of the State Permitted Sites Fund (approximately
$9.0 million), the cash trust fund in the amount of approximately $17.0 million
and the balance of a total package of approximately $135.0 million in insurance
coverage. This submittal is pending acceptance by DHEC.
The SC Subsidiary's appeal of the May 19, 1994 DHEC order and the opposing
parties' appeal of the September 15, 1995, DHEC declaratory ruling were
consolidated in the South Carolina Circuit Court in the case captioned Laidlaw
Environmental Services of South Carolina, Inc. et al., Petitioners vs. South
Carolina Department of Health and Environmental Control and South Carolina Board
of Health and Environmental Control, Respondents -- Energy Research Foundation,
et al., Intervenors, Docket Numbers C/A 94-CP-43-175, 94-CP-43-178,
94-CP-40-1412 and 94-CP-40-1859. A decision was issued by the Circuit Court on
August 19, 1997 finding the regulation legally valid and applicable to financial
assurance requirements of the Pinewood landfill. Opposing parties have appealed
the decision to the South Carolina Court of Appeals. A decision adverse to the
Company could result in the reinstatement of the May 19, 1994 DHEC order. The
Company believes that the regulations promulgated in June 1995 are legally valid
and applicable to financial assurance requirements for the Pinewood landfill.
Tax Matters. Laidlaw's United States subsidiaries petitioned the United
States Tax Court (captioned as Laidlaw Transportation, Inc. and Subsidiaries et
al. v. Commissioner of Internal Revenue, Docket No. 9361-94 and 9362-94) with
respect to their consolidated federal income tax returns (which until May 15,
1997 included certain of the Company's United States subsidiaries) for the
fiscal years ended August 31, 1986, 1987 and 1988. The principal issue involved
related to the timing and deductibility for tax purposes of interest
attributable to loans owing to related foreign persons. Judge John O. Colvin
issued an opinion on June 30, 1998 concluding that advances from Laidlaw's
related foreign entity, were equity rather than debt and that interest
deductions claimed were disallowed. Based on this opinion, taxes of $49.6
million (plus interest of approximately $91.4 million as of May 31, 1998) would
be payable. The Company expects Laidlaw to appeal this opinion.
Similar claims have been asserted with respect to the consolidated federal
income tax returns for the fiscal years ended August 31, 1989, 1990 and 1991. A
petition has been filed with the United States Tax Court with respect to these
years (captioned as Laidlaw Transportation, Inc. and Subsidiaries v.
Commissioner of Internal Revenue, Docket No. 329-98).The income taxes at issue
for these years is approximately $143.5 million (plus interest of approximately
$145.3 million as of May 31, 1998). The Company also anticipates that similar
claims will be asserted for the fiscal years ended August 31, 1992, 1993 and
1994. Should Laidlaw's United States subsidiaries ultimately be required to pay
all claims on these issues, both presently asserted and expected to be asserted,
for the fiscal years 1986 through 1994, the cost (including interest as of May
31, 1998) would be approximately $500 million. Laidlaw is reviewing all of the
above issues with counsel and the Company expects that Laidlaw will vigorously
contest the claimed deficiencies.
Pursuant to the February 6, 1997 Stock Purchase Agreement among the
Company, Laidlaw Transportation, Inc. ("LTI") and Laidlaw, Laidlaw and LTI are
responsible for any tax liabilities resulting from these matters.
Reference is also made to the Company's Annual Report on Form 10-K for the
year ended August 31, 1997.
SAFETY-KLEEN
East Chicago Feed Tank. In September 1997, Safety-Kleen discovered that
its East Chicago, Indiana main feed tank had become contaminated with PCBs
resulting in approximately 4 million gallons of contaminated oil. Safety-Kleen
immediately notified the EPA and the Indiana Department of Environmental
management ("IDEM") of the problem. Safety-Kleen believes that the IDEM and EPA
will allow it to treat this contaminated material on-site. If the IDEM or EPA
determined that off-site treatment is required, the cost of such treatment could
be material to the results of operations in that period. It is also possible
that the Company may incur fines or penalties with respect to this matter in
excess of $100,000.
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<PAGE> 85
SUBSIDIARY GUARANTORS
The Subsidiary Guarantors represent all of the domestic wholly-owned
subsidiaries of the Company. None of the foreign or non-wholly-owned domestic
subsidiaries of the Company are guarantors of the Notes.
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<PAGE> 86
MANAGEMENT
The following sets forth certain information with respect to the directors
and executive officers of the Parent:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Kenneth W. Winger........................ 59 President, Chief Executive Officer and
Director of the Parent and the Company
James R. Bullock......................... 53 Chairman of the Board of the Parent
John R. Grainger......................... 48 Director of the Parent
Leslie W. Haworth........................ 54 Director of the Parent
John W. Rollins, Sr...................... 81 Director of the Parent
John W. Rollins, Jr...................... 55 Director of the Parent
David E. Thomas, Jr...................... 40 Director of the Parent
Henry B. Tippie.......................... 71 Director of the Parent
James L. Wareham......................... 58 Director of the Parent
Grover C. Wrenn.......................... 55 Director of the Parent
Michael J. Bragagnolo.................... 51 Executive Vice President and Chief
Operating Officer of the Parent and the
Company
Henry H. Taylor.......................... 53 Vice President, General Counsel and
Secretary of the Parent and Secretary of
the Company
Paul R. Humphreys........................ 39 Senior Vice President of Finance and
Chief Financial Officer of the Parent and
the Company
</TABLE>
James R. Bullock became Chairman of the Board of the Parent on May 15,
1997. Mr. Bullock has been President and Chief Executive Officer of Laidlaw
since October 1993 and for more than a year prior thereto, President and Chief
Executive Officer of Cadillac Fairview Corporation Limited. Mr. Bullock also is
a director of Laidlaw.
Kenneth W. Winger became President and Chief Executive Officer and a
Director of the Parent and the Company on May 15, 1997. Mr. Winger served as
President and Chief Operating Officer of the company which is now known as
Safety-Kleen (US), Inc. from July 1995 until May 1997. He served as Executive
Vice President for Business Development of Safety-Kleen (US), Inc., a former
subsidiary of the Company, from January 1995 until July 1995. Prior to that, Mr.
Winger served as Senior Vice President for Corporate Development with Laidlaw
from May 1991 to January 1995.
John R. Grainger became a Director of the Parent on May 15, 1997. Mr.
Grainger has been Executive Vice President and Chief Operating Officer of
Laidlaw since September 1997 and President and Chief Operating Officer of
Laidlaw Transit, Inc. since May 1992. Mr. Grainger currently serves as Chairman
of the Human Resources and Compensation Committee.
Leslie W. Haworth became a Director of the Parent on May 15, 1997. Mr.
Haworth has been Senior Vice President and Chief Financial Officer of Laidlaw
for more than five years. Mr. Haworth currently serves as Chairman of the Audit
Committee.
John W. Rollins, Sr. became a Director of the Parent on May 15, 1997. Mr.
Rollins has been Chairman of the Board and Chief Executive Officer of Rollins
Truck Leasing Corp. for more than five years. Mr. Rollins was Chairman of the
Board and Chief Executive Officer of Rollins from 1988 until May 15, 1997. Mr.
Rollins also is a director of Matlack Systems, Inc., Rollins, Inc., RPC, Inc.
and Dover Downs Entertainment, Inc. Mr. Rollins' son is John W. Rollins, Jr.
John W. Rollins, Jr. became a Director of the Parent on May 15, 1997. Mr.
Rollins has been President and Chief Operating Officer and a director of Rollins
Truck Leasing Corp. for more than five years and Chairman of the Board of
Matlack Systems, Inc. for more than five years. Mr. Rollins was Senior Vice
Chairman of the Board of Rollins from 1988 until May 15, 1997. Mr. Rollins also
is a director of Dover Downs Entertainment, Inc.
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<PAGE> 87
Mr. Rollins is a member of the Human Resources and Compensation Committee. Mr.
Rollins' father is John W. Rollins, Sr.
David E. Thomas, Jr. has been a Director of the Parent since June 1997. Mr.
Thomas has been Senior Managing Director and the Head of the Investment Banking
Group of Raymond James since July 1996 and from 1991 until July 1996 was
Managing Director of Raymond James. Mr. Thomas also is a director of Reynolds,
Smith and Hills, Inc. Mr. Thomas is a member of the Human Resources and
Compensation Committee.
Henry B. Tippie has been a Director of the Parent since May 15, 1997. For
more than five years, he has served as Chairman of the Board and President of
Tippie Services and for more than five years, Chairman of the Executive
Committee and Vice Chairman of the Board of Rollins Truck Leasing Corp. Mr.
Tippie was Chairman of the Executive Committee of Rollins from 1988 until May
15, 1997. Mr. Tippie also is a director of Matlack Systems, Inc., Dover Downs
Entertainment, Inc., RPC, Inc. and Rollins Inc. Mr. Tippie is a member of the
Audit Committee.
James L. Wareham has been a Director of the Parent since June 1997. Mr.
Wareham has been President of AK Steel Corporation since March 1997 and from
1992 until 1996, Chief Executive Officer of Wheeling-Pittsburgh Steel
Corporation. Mr. Wareham is a member of the Audit Committee.
Grover C. Wrenn has been a Director of the Parent since July 1997. Mr.
Wrenn has been Chairman and Chief Executive Officer of Better Health Network,
Inc. since June 1996; Chief Executive Officer of EnSys Environmental Products,
Inc. from April 1995 through December 1996; and President and Chief Executive
Officer of Applied Bioscience International from 1991 through March 1995. Mr.
Wrenn also is a director of Strategic Diagnostics, Inc. and Pharmakinetics
Laboratories, Inc.
Michael J. Bragagnolo became Executive Vice President and Chief Operating
Officer of the Parent and the Company on May 15, 1997. He joined Safety-Kleen
(US), Inc. in January 1997 as Executive Vice President after serving as
Executive Vice President of U.S. Operations for Laidlaw Waste Systems, Inc.
since 1992.
Paul R. Humphreys became Senior Vice President, Finance and Chief Financial
Officer of the Parent and the Company on May 15, 1997. He joined Safety-Kleen
(US), Inc. in January 1995 as Vice President of Finance. He had previously
served as Manager of Finance for Laidlaw for more than five years.
Henry H. Taylor became Vice President, General Counsel and Secretary of the
Parent and the Company on May 15, 1997. He previously served as Vice President
of Legal and Regulatory Affairs and Secretary of Laidlaw Environmental Services
(US), Inc. since September 1995. Mr. Taylor joined Safety-Kleen (US), Inc. in
May 1990 as Vice President of Legal Affairs.
The Parent's Board of Directors has established an Executive Committee, a
Human Resources and Compensation Committee and an Audit Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From May 15, 1997 until August 31, 1997, the Human Resources and
Compensation Committee held primary responsibility for determining executive
compensation levels. John R. Grainger, John W. Rollins, Jr. and David E. Thomas,
Jr. are the members of the Human Resources and Compensation Committee. Mr.
Grainger is an officer of Laidlaw.
Mr. Bullock and Mr. Haworth also are officers of Laidlaw which indirectly
owns approximately 35% of the outstanding Parent Common Stock. In the ordinary
course of business, the Parent, the Company and Laidlaw or affiliates of Laidlaw
from time to time have entered into various business transactions and
agreements. The following is a summary of the material agreements, arrangements
and transactions between the Parent or its affiliates and Laidlaw or its
affiliates since September 1, 1996.
Stock Purchase Agreement. On May 15, 1997, pursuant to the terms of a
Stock Purchase Agreement, dated as of February 6, 1997 (the "Stock Purchase
Agreement"), among the Parent, Laidlaw and LTI, the Company acquired certain
direct and indirect subsidiaries of Laidlaw (the "Acquired Subsidiaries") for
consideration of (i) $400,000,000 in cash (less certain assumed bond
indebtedness described in the Stock Purchase Agreement, a
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<PAGE> 88
portion of which was paid at the closing of the transactions contemplated by the
Stock Purchase Agreement (the "Rollins Closing")), consisting of a payment of
$225,000,000, less the amount of such bond indebtedness, from the Parent to LTI
and a repayment of $175,000,000 owed to Laidlaw by a Canadian subsidiary of the
Company with funds contributed by the Parent, (ii) 120,000,000 shares of Parent
Common Stock issued to LTI and (iii) the PIK Subordinated Debenture. The terms
and conditions of the Rollins Acquisition are set forth in the Stock Purchase
Agreement and certain exhibits and schedules to the Stock Purchase Agreement.
As a result of the Rollins Acquisition, Laidlaw became the majority
stockholder of the Parent and substantially all of the management of the Parent
consisted of former officers and directors of the Acquired Subsidiaries. Due to
these factors, the Acquired Subsidiaries were treated as the acquirer for
accounting purposes and the Rollins Acquisition was recorded as a reverse
acquisition.
Laidlaw Indemnities. Pursuant to the terms of the Stock Purchase
Agreement, Laidlaw and LTI agreed to jointly and severally indemnify and hold
harmless, subject to certain limitations, the Parent and its affiliates from and
against any and all Damages (as defined in the Stock Purchase Agreement)
suffered by the Parent resulting from or in respect of (i) various tax
obligations and liabilities, (ii) pre-closing insurance claims, (iii) any breach
or default in the performance by Laidlaw or LTI of (a) their covenants and
agreements in the Stock Purchase Agreement to be performed on or after the date
of the Rollins Closing or (b) any representation or warranty which survives the
Rollins Closing (to the extent that damages therefrom exceed $2,000,000) and
(iv) any environmental liability or environmental claim arising as a result of
any act or omission by Laidlaw or LTI, including any release, occurring prior to
the Rollins Closing, but only to the extent such liability or claim (a) was
known to Laidlaw or certain of its affiliates and not disclosed in writing to
the Parent or (b) relates to the Marine Shale Processors or Mercier, Quebec
facilities and exceeds (x) an aggregate of $1,000,000 in the particular year and
(y) an aggregate since the Rollins Closing of $1,000,000 times the number of
years elapsed since the Rollins Closing, but only to the extent of cash
expenditures incurred within six years after the date of the Rollins Closing.
The PIK Subordinated Debenture. On May 15, 1997, the Parent issued the PIK
Subordinated Debenture to Laidlaw. See "Description of Other Indebtedness -- The
Parent -- PIK Subordinated Debenture".
Service Arrangements. Laidlaw and its affiliates have provided certain
financial and management services to the Parent and its subsidiaries. Such
services have included providing general liability and workers' compensation
insurance, income tax management and treasury services. Each of the service
arrangements has been on arms-length terms comparable to those available in
transactions with unaffiliated parties. During fiscal 1997, the Parent paid
Laidlaw $9.8 million on account of such services.
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<PAGE> 89
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid to the Parent's Chief
Executive Officer and each of the three other most highly compensated executive
officers (the "Named Executive Officers") for services rendered to the Company
and the Parent during fiscal 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------- ----------------------------------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#)(1) COMPENSATION($)(2)
- --------------------------- ------ --------- -------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Kenneth W. Winger,.......... 1997 $120,167 $100,000 250,000 $7,560
President, Chief Executive
Officer and Director of
the Company and the
Parent(3)
Michael J. Bragagnolo,...... 1997 78,861 46,670 150,000 3,121
Executive Vice President
and Chief Operating
Officer of the Company and
the Parent(4)
John W. Rollins, Sr.,....... 1997 8,130 -- 10,000 8,174
Former Chairman of the 1996 180,000 -- -- --
Board and Chief Executive 1995 300,000 -- -- --
Officer of the Company and
the Parent(5)
John V. Flynn, Jr.,......... 1997 398,973 -- 28,000 138
Former President and 1996 401,981 -- 18,000 --
Chief Operating 1995 287,500 -- 54,000 --
Officer of the Company and
the Parent(6)
</TABLE>
- ---------------
(1) The options granted to Messrs. Winger and Bragagnolo were granted pursuant
to the Employee Option Plan, subject to stockholder approval which was
granted at the Parent's November 25, 1997 annual meeting of stockholders
(the "Annual Meeting"). The options granted to John W. Rollins, Sr. were
granted pursuant to the Director Option Plan and were approved by the
stockholders at the Annual Meeting.
(2) Amounts shown for fiscal 1997 consist of (i) for Mr. Winger premiums on life
insurance policies of $1,810 and matching 401(k) contributions of $5,750,
(ii) for Mr. Bragagnolo matching 401(k) contributions, (iii) for Mr. Rollins
director fees and (iv) for Mr. Flynn matching 401(k) contributions.
(3) Mr. Winger became President and Chief Executive Officer on May 15, 1997.
(4) Mr. Bragagnolo became Executive Vice President and Chief Operating Officer
on May 15, 1997.
(5) Mr. Rollins resigned from his positions as Chairman of the Board and Chief
Executive Officer on May 15, 1997. Mr. Rollins' compensation for 1995 and
1996 are for the fiscal years ended September 30. His compensation for 1997
reflects compensation received by him from October 1, 1996 through August
31, 1997.
(6) Mr. Flynn resigned from his positions as President and Chief Operating
Officer on May 15, 1997. Mr. Flynn's compensation for 1995 and 1996 are for
the fiscal years ended September 30. His compensation for 1997 reflects
compensation received by him from October 1, 1996 through August 31, 1997.
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<PAGE> 90
The following table sets forth certain information regarding options
granted during fiscal 1997 to each of the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
------------------------------------------------------ ---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR
OPTIONS/SARS EMPLOYEES IN BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($)(1) 10%($)(1)
- ---- ------------ ------------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. Winger(2)......... 250,000 22.8% $3.1875 07/08/07 $501,150 $1,270,000
Michael J. Bragagnolo(2)..... 150,000 13.0 3.1875 07/08/07 300,690 762,000
John W. Rollins, Sr.(3)...... 10,000 N/A 3.1875 07/08/07 20,046 50,800
John V. Flynn, Jr.(4)........ 28,000 2.4 2.625 08/14/99 6,963 14,238
</TABLE>
- ---------------
(1) These amounts, based on assumed appreciation rates of 5% and 10% as
prescribed by the Commission's rules, are not intended to forecast possible
future appreciation, if any, of the price of the Parent Common Stock. These
numbers do not take into account certain provisions of the options providing
for termination of the option following termination of employment,
nontransferability or phased-in vesting. The Parent did not use an
alternative formula for a grant date valuation as it is not aware of any
formula which will determine with reasonable accuracy a present value based
on future unknown or volatile factors. Future compensation resulting from
option grants is based solely on the performance of the Parent Common Stock.
(2) Options granted under the Employee Option Plan.
(3) Options granted under the Director Option Plan.
(4) Options granted on October 7, 1996.
The following table sets forth certain information with respect to options
held at the end of fiscal 1997 for each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTION/SARS AT OPTIONS/SARS AT FY-END($)
NAME FY-END(#) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------------------------------- ---------------------------------
<S> <C> <C>
Kenneth W. Winger.................. -0-/250,000 -0-/$359,375
Michael J. Bragagnolo.............. -0-/150,000 -0-/$215,625
John W. Rollins, Sr................ -0-/10,000 -0-/$ 14,375
John V. Flynn, Jr.................. 100,000/-0- $200,000/-0-
</TABLE>
DEFINED BENEFIT PLANS
Until May 30, 1997, the Parent had a non-contributory qualified, defined
benefit plan in which all full-time employees of the Company were eligible to
participate (the "Rollins Pension Plan"). Retirement benefits under the plan
were computed utilizing 1.25% of earnings up to covered compensation, as that
term was defined in the plan, and 1.7% of earnings above covered compensation
and years of service to age 65. Compensation utilized to compute benefits under
the Rollins Pension Plan included regular salaries or wages, commissions,
bonuses, overtime earnings and short-term disability income protection benefits.
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Until May 30, 1997, the Parent also maintained a non-qualified, defined
benefit plan (the "Rollins Excess Benefit Plan"), which covered those
participants of the Rollins Pension Plan whose benefits were limited by the
Internal Revenue Code of 1986, as amended (the "Code"). A participant in the
Rollins Excess Benefit Plan was entitled to a benefit equaling the difference
between the amount of the benefit that would have been payable to him under the
Rollins Pension Plan but for the Code limitation and the amount of the benefit
actually payable to him under the Rollins Pension Plan.
Retirement benefits under the Rollins Pension Plan and the Rollins Excess
Benefit Plan were not subject to any reduction for Social Security benefits or
other offset amounts, could be paid in certain alternative forms having
actuarially equivalent values and were fully vested after the completion of five
years of credited service or, if earlier, upon reaching age 55.
Effective as of July 31, 1997, the Rollins Pension Plan and Rollins Excess
Benefit Plan were divided into separate plans covering union and non-union
employees. The portion of the plans covering non-union employees was terminated
effective as of July 31, 1997. The combined annual benefit at retirement under
the Rollins Pension Plan and the Rollins Excess Benefit Plan for each of the
Named Executive Officers who participated therein as of August 31, 1997 was:
John V. Flynn, Jr., $9,561.
Effective as of October 14, 1997, the Parent adopted a Supplemental
Executive Retirement Plan (the "SERP") for certain eligible employees. A SERP is
an unfunded plan which provides for benefit payments in addition to those
payable under a qualified retirement plan.
The following table shows the estimated annual benefits payable upon
retirement at normal retirement dates under the SERP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
FINAL SERVICE YEARS
AVERAGE -----------------------------------------------
PAY 15 20 25 30 35
- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
150,000.. 22,500 30,000 37,500 45,000 52,500
200,000.. 33,750 45,000 56,250 67,500 78,750
250,000.. 45,000 60,000 75,000 90,000 105,000
300,000.. 56,250 75,000 93,750 112,500 131,250
350,000.. 67,500 90,000 112,500 135,000 157,500
400,000.. 78,750 105,000 131,250 157,500 183,750
450,000.. 90,000 120,000 150,000 180,000 210,000
500,000.. 101,250 135,000 168,750 202,500 236,250
</TABLE>
For the Parent's and the Company's current executive officers, the
compensation shown in the column labeled "Salary" and "Bonus" of the Summary
Compensation Table is covered by the SERP. As of August 31, 1997, Messrs. Winger
and Bragagnolo had credited service under the SERP of six and two years,
respectively. Benefits under the SERP are computed based on a straight-life
annuity. The amounts in this table are subject to deduction for a portion of
Social Security benefits. Mr. Rollins, Sr. and Mr. Flynn do not participate in
the SERP.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Pursuant to a letter dated January 15, 1997, John V. Flynn, Jr., former
President and Chief Operating Officer of the Parent, resigned from such
positions effective as of May 15, 1997 in exchange for (i) at the option of Mr.
Flynn, either (a) remaining an employee for two years at an annual salary of
$400,000 or (b) receiving as severance a lump sum payment equal to the total
amount then remaining unpaid under clause (a) and (ii) receiving, for so long as
Mr. Flynn remains an employee of the Parent, use of a Parent car (until such
time as Mr. Flynn is employed by another company) and such health and welfare,
life insurance, disability, pension and other benefits as are made available to
other employees of the Parent. The letter also specified that, for a period of
three
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years after May 15, 1997, Mr. Flynn would not participate in a business which
competes with the Company in the hazardous or industrial waste incineration
business.
Pursuant to the terms of the Stock Purchase Agreement, all employees,
including Mr. Flynn, received immediate vesting of all options outstanding under
the Parent's then existing stock option plans.
COMPENSATION OF DIRECTORS
Currently, each director of the Parent who is not an employee of the Parent
or the Company is paid an annual retainer of $20,000 (the "Annual Retainer")
plus $750 for each meeting attended. Pursuant to the Parent's Nonemployee
Director Stock Plan, 50% of the Annual Retainer for each nonemployee director is
paid in shares of Parent Common Stock. Each quarter the smallest number of whole
shares of Parent Common Stock which when multiplied by the fair market value of
such shares would equal no more than 50% of the nonemployee director's retainer
fee payable for such quarter is calculated, and the dollar amount equivalent
thereto is withheld from the director's quarterly retainer check. A certificate
evidencing the number of shares of Parent Common Stock so determined for each of
the fiscal quarters beginning in the prior calendar year is delivered to the
director at the first Board of Directors meeting held during each calendar year.
Each nonemployee director becomes vested in the Parent Common Stock so awarded
(i) at the end of the vesting period applicable to the award if the non-employee
director continues to be a member of the Board through the vesting period or
(ii) upon his death, disability or retirement or (iii) if the nonemployee
director ceases to be a director as a result of a change in control of the
Parent. Each such award is subject to a separate vesting period, and all awards
become nonforfeitable and transferable on the first anniversary of the award.
Directors of the Parent who are also employees of the Parent or the Company
receive no separate compensation for serving as directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David E. Thomas, Jr., a Director of the Parent, is the Senior Managing
Director and the Head of the Investment Banking Group of Raymond James &
Associates ("Raymond James"). Pursuant to the terms of a letter agreement dated
January 3, 1997, the Parent engaged Raymond James as the Parent's financial
advisor in connection with the Safety-Kleen Acquisition and agreed to (i) pay
Raymond James a fee of $800,000, (ii) reimburse Raymond James for its reasonable
out-of-pocket expenses (up to a maximum of $25,000) and (iii) indemnify Raymond
James against certain liabilities, including certain liabilities under the
federal securities laws.
For a discussion of certain other related party transactions, see
"Management -- Compensation Committee Interlocks and Insider Participation."
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<PAGE> 93
PRINCIPAL SHAREHOLDERS
All of the outstanding capital stock of the Company is owned by the Parent.
The following table sets forth as of July 13, 1998, the number of shares of
Common Stock of the Parent beneficially owned by each of the 5% stockholders of
the Parent, each of its directors, the Named Executive Officers and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OWNED PERCENT OF CLASS
---- ------------ ----------------
<S> <C> <C>
Laidlaw..................................................... 124,045,410 35%
Kenneth W. Winger........................................... -0- n/a
Michael J. Bragagnolo....................................... -0- n/a
James R. Bullock(1)(2)...................................... -0- n/a
John R. Grainger(1)......................................... -0- n/a
Leslie W. Haworth(1)........................................ 5,000 n/a
John W. Rollins, Jr.(3)..................................... 357,862 *
John W. Rollins, Sr.(4)..................................... 3,697,576 2.05%
David E. Thomas, Jr......................................... -0- n/a
Henry B. Tippie(5).......................................... 2,294,689 1.27%
James L. Wareham............................................ 1,000 n/a
Grover C. Wrenn............................................. 15,000 n/a
John V. Flynn, Jr........................................... -0- n/a
All directors and current executive officers as a group (13
persons).................................................. 6,350,127 3.52%
</TABLE>
- ---------------
* Signifies less than 1%
(1) Messrs. Bullock, Grainger and Haworth are officers of Laidlaw.
(2) Does not include 25,000 shares owned by Mr. Bullock's wife, as to which
shares Mr. Bullock disclaims any beneficial ownership.
(3) Includes 191,737 shares held by Mr. Rollins as co-trustee. Does not include
6,191 shares owned by Mr. Rollins' wife, as to which shares Mr. Rollins
disclaims any beneficial ownership.
(4) Does not include 182,749 shares owned by Mr. Rollins' wife and 101,975
shares held by his wife as custodian for his minor children, as to which
shares Mr. Rollins disclaims any beneficial ownership.
(5) Includes 969,689 shares held by Mr. Tippie as co-trustee; 26,000 shares held
by him as trustee; and 30,000 shares owned by a partnership over which he
has sole voting power. Does not include 23,000 shares owned by Mr. Tippie's
wife and 21,000 shares held by his wife as trustee for his children, as to
which shares Mr. Tippie disclaims any beneficial ownership.
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DESCRIPTION OF OTHER INDEBTEDNESS
THE COMPANY
SENIOR CREDIT FACILITY
In connection with the Safety-Kleen Acquisition, the Company obtained the
Senior Credit Facility pursuant to a credit agreement dated April 3, 1998 as
amended on May 15, 1998 (the "Loan Agreement") among the Company, as borrower,
Safety-Kleen (Canada) Ltd. and The Toronto-Dominion Bank ("TD"), as
administrative agent, and a syndicate of banks and other financial institutions
(the "Lenders") pursuant to which the Lenders agreed, subject to certain
conditions, to provide aggregate borrowing and letters of credit availability to
the Company to, among other things, (i) finance the Safety-Kleen Acquisition,
(ii) refinance existing indebtedness of the Company and Safety-Kleen, (iii) fund
certain capital expenditures, working capital and permitted acquisitions, as
well as transaction fees and expenses associated with the Safety-Kleen
Acquisition and (iv) provide for up to $200 million of letters of credit. The
Parent and all wholly-owned domestic subsidiaries of the Company (including
Safety-Kleen and its wholly-owned domestic subsidiaries) (the "Credit Agreement
Guarantors") have unconditionally guaranteed the repayment of the Senior Credit
Facility. At May 31, 1998, there was an aggregate of $1.33 billion of Term Loans
outstanding and $208 million of borrowings outstanding under the Revolver. At
May 31, 1998, the Company had $192 million of additional borrowing availability
(excluding letters of credit) under the Revolver.
Terms of the Senior Credit Facility. The Senior Credit Facility consists
of the following: (i) a $550,000,000 six-year Senior Secured Revolving Credit
Facility with a $200,000,000 letter of credit sublimit and $400,000,000 sublimit
for loans (the "Revolver" or "Facility A"), (ii) a $455,000,000 six-year Senior
Secured Amortizing Term Loan ("Facility B"), (iii) a $70,000,000 six-year Senior
Secured Amortizing Term Loan to Laidlaw Environmental Services (Canada) Ltd.
("Facility C"), (iv) a $400,000,000 Minimally Amortizing seven-year Senior
Secured Term Facility ("Facility D"), and (v) a $400,000,000 Minimally
Amortizing eight-year Senior Secured Term Loan ("Facility E") (Facility B,
Facility C, Facility D and Facility E, collectively, the "Term Loans").
Secured Senior Credit Facility. The Senior Credit Facility is secured by
all of the tangible assets of the Company, the Parent and the Credit Agreement
Guarantors. All of the capital stock of the Company and its subsidiaries,
including the acquired Safety-Kleen subsidiaries, are pledged as part of such
security for the Senior Credit Facility.
Maturity and Amortization. Facility A has no scheduled amortization. The
Terms Loans were require aggregate principal repayments of $78.0 million in each
of years one and two, $104.3 million in each of years three, four, five and six,
$380.0 million in year seven and $372.0 million in year eight. See "Use of
Proceeds."
Interest. Borrowings under the Senior Credit Facility bear interest at a
floating rate based upon, at the option of the Company, (i) the higher of the TD
prime rate and the federal funds rate plus 0.50% per annum, or (ii) the London
Interbank Offered Rate ("LIBOR") as determined by TD for the respective interest
period, in each case plus a margin based upon the total leverage ratio of the
Company. The Company also will pay administration fees, commitment fees and
certain expenses and provide certain indemnities, all of which the Company
believes to be customary for commitments of this type.
Covenants. The Loan Agreement contains conditions precedent,
representations and warranties, negative, affirmative and financial covenants
(including financial covenants, restricting debt, guaranties, liens, mergers and
consolidations, sales of assets and payment of dividends, and establishing a
total leverage ratio test, a fixed charge coverage test, an interest coverage
ratio test and a maximum contingent obligation to operating cash flow ratio
test), events of default and other provisions customary for such financings.
Events of Default. The Loan Agreement contains events of default customary
for a transaction of this type including, without limitation, nonpayment of
principal, interest or other fees when due, breach of representations,
warranties or covenants, breach of other material agreements, material
undischarged judgments or fines, ERISA, bankruptcy or insolvency, change of
control, and cross default to other indebtedness of the Company and any of its
subsidiaries. If (a) at any time Laidlaw ceases to be a primary stockholder of
the Parent, (b) at any time when the Consolidated Total Leverage Ratio (as
defined in the Senior Credit Facility) is greater than 2.50 to 1.00, Laidlaw
ceases to own at least 20% of the outstanding Common Stock of the Parent, (c) at
any time the Parent
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<PAGE> 95
ceases to own 100% of the outstanding common stock of Laidlaw Environmental, (d)
at any time Laidlaw Environmental ceases to own 100% of the outstanding common
stock of Safety-Kleen (Canada) Ltd., a wholly-owned subsidiary of Laidlaw
Environmental (the "Canadian Borrower") or (e) at any time there ceases to be at
least one member of the Board of Directors of the Parent who is a designee of
Laidlaw, an event of default shall occur.
Conditions. Under the Senior Credit Facility, the Company is required to
obtain interest rate protection satisfactory to TD in respect of at least 40% of
its floating rate debt for a period of at least two years.
COMPANY IRBS
The Company has two outstanding series of industrial revenue bonds (the
"Company IRBs") issued in connection with certain of its facilities.
The Tooele County, Utah Hazardous Waste Disposal Revenue Bonds (Laidlaw
Inc./USPCI Clive Project) Series 1995, par amount $10 million. These bonds have
an interest rate of 6.75% and a maturity date of August 1, 2010. The interest
payment dates for the bonds are August 1 and February 1. The initial optional
redemption for the bonds is August 1, 2005. These bonds do not provide an
optional prepayment right to the noteholders. As of May 31, 1998, only $8.7
million of these bonds have been utilized by the Company.
The Industrial Development Board of the Metropolitan Government of
Nashville and Davidson County Industrial Development Revenue Refunding and
Improvement Bond Series 1993 (OSCO Treatment Systems, Inc. Project), par amount
$15.7 million. These bonds have an interest rate of 6% and a maturity date of
May 1, 2003. The interest payment dates for the bonds are May 1 and November 1.
These bonds do not provide an optional prepayment right to the noteholders. As
of May 31, 1998, only $7.0 million of these bonds have been utilized by the
Company.
THE PARENT
PIK SUBORDINATED DEBENTURE
On May 15, 1997, the Parent issued the PIK Subordinated Debenture. The
principal of the PIK Subordinated Debenture is payable on May 15, 2009, subject
to earlier mandatory or optional prepayment and any acceleration of its maturity
date upon default.
The PIK Subordinated Debenture bears interest at the fixed rate of 5% per
annum. Until May 15, 1999 (the "Mandatory PIK Interest Payment Period"),
interest on the outstanding principal balance of the PIK Subordinated Debenture
accrues at the 5% rate, but will be paid in shares of Parent Common Stock. After
the Mandatory PIK Interest Payment Period, at the election of the Parent any
payment due under the PIK Subordinated Debenture (except upon an optional early
redemption), including any accrued interest or principal, may be paid in shares
of Parent Common Stock. The number of shares of Parent Common Stock for each
such payment shall be equal to the dollar amount in accrued interest or
principal due divided by the average of the daily closing prices of a share of
Parent Common Stock on the NYSE -- Composite Transactions for the ten
consecutive trading days selected by the Parent commencing not more than 20
trading days before, and ending not later than, the date such payment is due.
Interest on the outstanding principal balance of the PIK Subordinated Debenture
is payable semiannually on November 15 and May 15, beginning on November 15,
1997 and continuing until the payment in full of the PIK Subordinated Debenture.
Beginning on May 15, 2002, and continuing until the business day prior to
the repayment of the PIK Subordinated Debenture, the PIK Subordinated Debenture
is convertible, in whole or in part, at the option of the holder, into shares of
Parent Common Stock of the Parent. The conversion will be at a price equal to
the conversion price (the "Conversion Price") of $3.75 per share, subject to
adjustment under certain circumstances.
During the period commencing on May 15, 2002, and continuing until
maturity, the Parent has the option to prepay the PIK Subordinated Debenture, in
whole or in part, only in cash, at the face amount of the PIK Subordinated
Debenture if the last reported sales price of a share of Parent Common Stock, as
reported by the New York Stock Exchange, equals or exceeds 120% of the
Conversion Price for a period of at least ten consecutive trading days prior to
the date of such proposed payment.
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<PAGE> 96
Subject to the subordination provisions of the PIK Subordinated Debenture,
the maturity of the PIK Subordinated Debenture may be accelerated if a "Default"
occurs. Under the PIK Subordinated Debenture a "Default" includes (i) a failure
by the Parent to pay the principal or accrued interest of the PIK Subordinated
Debenture on its maturity date or any interest payment date, respectively, (ii)
the voluntary or involuntary bankruptcy of the Parent or other insolvency
proceedings involving the Parent and (iii) the acceleration of the maturity of
the amounts outstanding under the Senior Credit Facility as a result of a
default thereunder.
The PIK Subordinated Debenture ranks junior in right of payment to the
amounts outstanding under the Senior Credit Facility and to substantially all
other indebtedness of the Parent except (i) amounts owed (other than to banks,
insurance companies and other financing institutions and obligations under
capitalized leases) for goods, materials, services or operating lease rental
payments in the ordinary course of business or for compensation to employees and
(ii) any liability for federal, state, provincial, local or other taxes owed or
owing by the Parent. The PIK Subordinated Indenture is subordinated to the
Parent Guarantee of the Notes.
PARENT IRBS
The Parent has two outstanding series of industrial revenue bonds (the
"Parent IRBs") issued in connection with certain facilities of the Company.
The Tooele County, Utah Pollution Control Refunding Revenue Bonds 1997
Series A, par amount $45.7 million. These bonds have an interest rate of 7.55%
and a maturity date of July 1, 2027. The interest payment dates for the bonds
are July 1 and January 1. The provisions provide for an optional prepayment at
the option of the Parent, subject to prepayment penalties. As of May 31, 1998,
the full amount of these bonds have been utilized by the Parent.
The California Pollution Control Financing Authority 6.7% Pollution Control
Refunding Revenue Bonds 1997 Series A, par amount $19.5 million. These bonds
have an interest rate of 6.7% and a maturity date of July 1, 2007. The interest
payment dates are July 1 and January 1. The terms of the bonds provide for an
optional redemption which is triggered by an extraordinary event. As of May 31,
1998, the full amount of these bonds have been utilized by the Parent.
PARENT PROMISSORY NOTE
On May 15, 1997, as part of the Rollins Acquisition, the Parent issued a
$60 million note (the "Parent Promissory Note"). The Parent Promissory Note
matures on May 15, 2003. Interest is payable at a fluctuating rate of six month
LIBOR (the "Contract Rate"), as calculated in accordance with the terms of the
Parent Promissory Note. From and after the maturity date, the Parent Promissory
Note will bear interest at a rate per annum equal to the Contract Rate plus five
percent. Interest is due and payable on May 30 and November 30 of each year. A
late charge of 2% of the amount of the payment will be charged on any payment
not received within fifteen days after it is due. The Parent is required to make
a $10.0 million principal reduction on each of May 15, 2001 and May 15, 2002.
The Parent will be in default upon the occurrence of any of the following
events of default: (i) Parent fails to make any payment under the Parent
Promissory Note when due; (ii) Laidlaw fails to maintain an investment grade
rating by both Standard & Poor's, Inc. and Moody's Institutional Services, Inc.;
(iii) Parent and Laidlaw fail to comply with certain obligations under the Stock
Purchase Agreement; (iv) Parent is in default under any credit agreement, or
refinancing thereof, entered into in connection with the Rollins Acquisition;
(v) default under any indentures secured by indebtedness of the Parent or
Laidlaw having an aggregate principal amount of at least Cdn. $10 million; (vi)
involuntary bankruptcy of the Parent or Laidlaw; or (vii) voluntary bankruptcy,
insolvency, reorganization or other similar proceeding in respect of the Parent
or Laidlaw.
The Parent Promissory Note has priority in payment over any indebtedness of
the Parent to Laidlaw and any affiliated entities. The holder of the Parent
Promissory Note has agreed that the Parent Promissory Note is subordinate to the
Senior Credit Facility of the Company.
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DESCRIPTION OF THE NOTES
Except as otherwise indicated, the following description relates both to
the Existing Notes and the New Notes to be issued in exchange for Existing Notes
in connection with the Exchange Offer. The form and terms of the New Notes are
the same as the form and terms of the Existing Notes, except that the New Notes
have been registered under the Securities Act and therefore will not bear
legends restricting the transfer thereof.
GENERAL
The Existing Notes were, and the New Notes will be, issued under the
"Indenture" among the Company, the Parent, as a Guarantor, and the Subsidiary
Guarantors and The Bank of Nova Scotia Trust Company of New York, as trustee
(the "Trustee"), a copy of the form of which is available upon request from the
Company. Upon the issuance of the New Notes, the Indenture will be subject to
and governed by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified in
its entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "-- Certain Definitions"
below.
As of the date hereof, all of the Company's Subsidiaries are Restricted
Subsidiaries. However, under certain circumstances, the Company is able to
designate current and future Subsidiaries as Unrestricted Subsidiaries, subject
to certain limitations. Unrestricted Subsidiaries are not subject to any of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes mature on June 1, 2008, are limited initially in aggregate
principal amount to $325,000,000 and are unsecured senior subordinated
obligations of the Company. The Indenture provides for the issuance of up to
$75,000,000 aggregate principal amount of additional Notes having identical
terms and conditions to the Notes offered hereby (the "Additional Notes"),
subject to compliance with the covenants contained in the Indenture. Any
Additional Notes will be part of the same issue as the Notes and will vote on
all matters with the Notes. Unless otherwise indicated, references herein to the
Notes does not include the Additional Notes. No offering of any such Additional
Notes is being or shall be deemed to be made by this Prospectus. In addition,
there can be no assurance as to when or whether the Company will issue any such
Additional Notes or as to the aggregate principal amount of such Additional
Notes.
Each Note will bear interest at the rate of 9 1/4% per annum, payable
semiannually in arrears on June 1 and December 1 in each year, commencing
December 1, 1998, until the principal thereof is paid or duly provided for, to
the person in whose name the New Note (or any predecessor Note) is registered at
the close of business on the May 15 or November 15 next preceding such interest
payment date. Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months.
The principal of and premium, if any, and interest on the Notes is payable,
and the Notes are exchangeable and transferable, at the office or agency of the
Company in The City of New York maintained for such purposes (which initially is
the office of the Trustee located at One Liberty Plaza, 23rd Floor, New York,
New York 10006); provided, however, that, at the option of the Company, interest
may be paid by check mailed to the address of the Person entitled thereto as
such address appears in the security register. The Existing Notes are, and the
New Notes will be issued only in registered form without coupons and only in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange or redemption of
Notes, but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note. The New Notes will bear interest from the most recent
date to which interest has been paid on the Existing Notes or, if no interest
has been paid on the Existing Notes, from May 29, 1998. Accordingly, if the
relevant record date for interest payment occurs after the
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<PAGE> 98
consummation of the Exchange Offer registered holders of New Notes on such
record date will receive interest accruing from the most recent date to which
interest has been paid or, if no interest has been paid, from May 29, 1998. If,
however, the relevant record date for interest payment occurs prior to the
consummation of the Exchange Offer registered holders of Existing Notes on such
record date will receive interest accruing from the most recent date to which
interest has been paid or, if no interest has been paid, from May 29, 1998.
Existing Notes accepted for exchange will cease to accrue interest from and
after the date of consummation of the Exchange Offer, except as set forth in the
immediately preceding sentence. Holders of Existing Notes whose Existing Notes
are accepted for exchange will not receive any payment in respect of interest on
such Existing Notes otherwise payable on any interest payment date the record
date for which occurs on or after the consummation of the Exchange Offer.
Any Existing Notes that remain outstanding after the consummation of the
Exchange Offer and New Notes issued in connection with the Exchange Offer will
be treated as a single class of securities under the Indenture.
The Notes are not be entitled to the benefit of any sinking fund.
INVESTMENT GRADE RATING -- FALL-AWAY COVENANTS
If the Notes achieve an Investment Grade rating and no Default or Event of
Default shall have occurred and be continuing, upon the request of the Company,
all of the covenants described under "-- Certain Covenants" (with limited
exceptions) will no longer be applicable to the Company and its Subsidiaries.
Accordingly, the Notes will thereafter be entitled to substantially no covenant
protection.
SUBORDINATION
The Notes are unsecured senior subordinated obligations of the Company. The
Notes are, to the extent set forth in the Indenture, subordinate in right of
payment to the prior payment in full of all Senior Indebtedness, whether
outstanding on the Closing Date or thereafter incurred. Upon any payment or
distribution of assets of the Company to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, whether voluntary or involuntary, the holders of
Senior Indebtedness will first be entitled to receive payment in full, in cash
or cash equivalents, of all amounts due or to become due on or in respect of
such Senior Indebtedness (including interest accruing after the commencement of
any such proceeding at the rate specified in the applicable Senior Indebtedness
whether or not such interest is an allowed claim in such proceeding) before the
Holders of Notes are entitled to receive any payment of principal of and
premium, if any, and interest on the Notes or on account of the purchase or
redemption or other acquisition of Notes by the Company or any Subsidiary of the
Company. In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Note receives any payment or distribution of assets of the Company
of any kind or character (excluding equity or subordinated securities of the
Company provided for in a plan of reorganization or readjustment that, in the
case of subordinated securities, are subordinated in right of payment to all
Senior Indebtedness to at least the same extent as the Notes are so
subordinated), before all the Senior Indebtedness is paid in full, then such
payment or distribution will be held in trust for the holders of Senior
Indebtedness and will be required to be paid over or delivered forthwith to the
trustee in bankruptcy or other Person making payment or distribution of assets
of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay the Senior Indebtedness in
full.
The Company may not make any payments on account of the Notes or on account
of the purchase or redemption or other acquisition of Notes if a default in the
payment of principal of (or premium, if any) or interest on Designated Senior
Indebtedness has occurred and is continuing or a default in the payment when due
of any other obligation under Designated Senior Indebtedness has occurred and is
continuing (a "Senior Payment Default"). In addition, if any default (other than
a Senior Payment Default) has occurred and is continuing with respect to any
Designated Senior Indebtedness permitting the holders thereof (or a trustee or
agent on behalf thereof) to accelerate the maturity thereof (a "Senior
Nonmonetary Default") and the Company and the Trustee have received written
notice thereof from the agent under the Senior Credit Facility or from an
authorized Person on behalf of any holder of Designated Senior Indebtedness,
then the Company may not make any payments on
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account of the Notes or on account of the purchase or redemption or other
acquisition of Notes for a period (a "blockage period") commencing on the date
the Company and the Trustee receive such written notice (a "Blockage Notice")
and ending on the earliest of (x) 179 days after the date on which the
applicable Blockage Notice is received unless a Senior Payment Default has
occurred and is continuing at the end of such 179-day period, (y) the date, if
any, on which the Designated Senior Indebtedness to which such default relates
is discharged or such default is waived or otherwise cured and (z) the date, if
any, on which such blockage period has been terminated by written notice to the
Company or the Trustee from the agent under the Senior Credit Facility or from
the Person who gave the Blockage Notice. However, the Company may make payments
on the Notes without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from a representative of the
Designated Senior Indebtedness affected by such Senior Payment Default or Senior
Nonmonetary Default. In any event, not more than one blockage period may be
commenced during any period of 360 consecutive days, and there must be a period
of at least 181 consecutive days in each period of 360 consecutive days when no
blockage period is in effect. No Senior Nonmonetary Default that existed or was
continuing on the date of the commencement of any blockage period with respect
to the Designated Senior Indebtedness initiating such blockage period will be,
or can be, made the basis for the commencement of a subsequent blockage period,
unless such default has been cured or waived for a period of not less than 90
consecutive days. In the event that, notwithstanding the foregoing, the Company
makes any payment to the Trustee or the Holder of any Note prohibited by these
blockage provisions, then such payment will be held in trust for the holders of
Senior Indebtedness and will be required to be paid over and delivered forthwith
to the holders of the Senior Indebtedness remaining unpaid, to the extent
necessary to pay in full all the Senior Indebtedness.
Whenever the Company is prohibited from making any payment on or in respect
of the Notes, the Company will also be prohibited from making, directly or
indirectly, any legal defeasance or covenant defeasance of the Notes as
described under "-- Legal Defeasance and Covenant Defeasance" and from making
any payment of any kind on account of the redemption, purchase or other
acquisition of the Notes.
The Guarantees are, to the extent set forth in the Indenture, subordinated
in right of payment to the prior payment in full of all senior indebtedness of
the Parent and the Guarantors, as the case may be, upon terms substantially
comparable to the subordination of the Notes to all Senior Indebtedness.
The subordination provisions described above will cease to be applicable to
the Notes upon any defeasance or covenant defeasance of the Notes as described
under "-- Legal Defeasance and Covenant Defeasance."
As a result of the subordination provisions described above, in the event
of an insolvency, bankruptcy, reorganization or liquidation of the Company,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and assets which would otherwise
be available to pay obligations in respect of the Notes will be available only
after all Senior Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes. See
"Risk Factors -- Subordination; Ranking of the Notes and Guarantees."
At May 31, 1998, the Company had approximately $1.5 billion of Senior
Indebtedness outstanding and the Company would have had borrowing availability
of $192.0 million (excluding letters of credit) under the Senior Credit
Facility, all of which would be secured Senior Indebtedness, if borrowed. The
terms of the Indenture permit the Company and its Restricted Subsidiaries to
incur additional Senior Indebtedness, subject to certain limitations, including
Indebtedness that may be secured by Liens on property of the Company and its
Restricted Subsidiaries. See the discussion below under "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock" and
"-- Certain Covenants -- Liens." As of May 31, 1998, the Parent had an aggregate
of approximately $125.2 million of Indebtedness outstanding ranking senior to
the Notes. The terms of the Indenture do not restrict the ability of the Parent
to incur additional Indebtedness ranking senior to the Notes. In addition, the
Notes are effectively subordinated to all existing and future indebtedness and
other liabilities (including trade payables) of the Company's subsidiaries that
are not Guarantors (the "Non-Guarantor Subsidiaries"). As of May 31, 1998, the
Existing Notes and the application of the net proceeds therefrom, the
Non-Guarantor Subsidiaries would have had $106.5 million of third-party
indebtedness and accounts payable outstanding. See "Risk
Factors -- Subordination; Ranking of the Notes and Guarantees."
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GUARANTEES
Payment of the principal of and premium, if any, and interest on the Notes,
when and as the same become due and payable, are guaranteed, jointly and
severally, on an unsecured senior subordinated basis by the Guarantors referred
to below. The Guarantees are, to the extent set forth in the Indenture,
subordinated in right of payment to the prior payment in full of all senior
indebtedness of the Guarantors, upon terms substantially comparable to the
subordination of the Notes to all Senior Indebtedness. The obligations of each
Subsidiary Guarantor under its Subsidiary Guarantee is limited so as not to
constitute a fraudulent conveyance under applicable law. See "Risk
Factors -- Limitation on Subsidiary Guarantees and Parent Guarantee; Fraudulent
Conveyance Concerns."
As of the date hereof, the Guarantors include the Parent and each Domestic
Restricted Subsidiary other than three non-wholly-owned domestic subsidiaries.
The Indenture requires that each Domestic Restricted Subsidiary be a Guarantor,
as well as each other Restricted Subsidiary that guarantees any other
Indebtedness of the Company or of a Domestic Restricted Subsidiary.
Subject to the provisions of the following paragraph, the Indenture
provides that no Guarantor may consolidate with or merge with or into any other
Person or convey, sell, assign, transfer, lease or otherwise dispose of its
properties and assets substantially as an entirety to any other Person unless:
(a) the Person formed by or surviving such consolidation or merger (if other
than such Guarantor) or to which such properties and assets are transferred
assumes all of the obligations of such Guarantor under the Indenture and its
Guarantee, pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, (b) immediately after giving effect to such
transaction, no Default or Event of Default has occurred and is continuing and
(c) immediately after giving effect to such transaction, the Person formed by or
surviving such consolidation or merger (if other than such Guarantor) or to
which such properties and assets are transferred could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of the covenant described under "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock."
The Indenture provides that, in the event of (a) a conveyance, sale,
assignment, transfer or other disposition of all of the Capital Stock of a
Subsidiary Guarantor to any Person (by way of merger, consolidation or
otherwise), (b) a conveyance, sale, assignment, transfer or other disposition of
all or substantially all of the assets of such Subsidiary Guarantor to any
Person (by way of merger, consolidation or otherwise) or (c) the designation of
such Subsidiary Guarantor as an Unrestricted Subsidiary, in any such case in
compliance with the terms of the Indenture, then such Subsidiary Guarantor will
be deemed automatically and unconditionally released and discharged from all of
its obligations under its Subsidiary Guarantee without any further action on the
part of the Trustee or any Holder of the Notes; provided that the Net Cash
Proceeds of such conveyance, sale, assignment, transfer or other disposition (if
any) are applied in accordance with the covenant described under "-- Certain
Covenants -- Asset Sales."
MAKE-WHOLE REDEMPTION
The Notes will be redeemable at the election of the Company, as a whole or
from time to time in part, on not less than 30 nor more than 60 days' prior
notice to the Holders at any time prior to June 1, 2003 at a redemption price
equal to the greater of (i) 100% of the principal amount of such Notes or (ii)
the sum of the present values of 104.625% of the principal amount of such Notes
and the scheduled payments of interest thereon through and including June 1,
2003 discounted to such redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
plus 50 basis points, together with accrued and unpaid interest, if any, to the
redemption date.
If less than all the Notes or Additional Notes, if any, are to be redeemed,
the particular Notes to be redeemed will be selected not more than 60 days prior
to the redemption date by the Trustee by lot or such other method as the Trustee
deems fair and appropriate.
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OPTIONAL REDEMPTION
The Notes will be redeemable at the election of the Company, as a whole or
from time to time in part, on not less than 30 nor more than 60 days' prior
notice to the Holders at the redemption prices (expressed as percentages of
principal amount) set forth below, together with accrued and unpaid interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period beginning on June 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2003.... 104.625%
2004.... 103.083
2005.... 101.542
2006
and
thereafter... 100.000
</TABLE>
In addition, at any time or from time to time prior to June 1, 2001, the
Company may redeem, on one or more occasions, up to 35% of the sum of (i) the
initial aggregate principal amount of the Notes and (ii) the initial aggregate
principal amount of any Additional Notes with the net proceeds of one or more
Public Equity Offerings at a redemption price equal to 109.25% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided that,
immediately after giving effect to any such redemption at least $211.3 million
aggregate principal amount of the Notes (including any Additional Notes) remains
outstanding; provided further that such redemptions occur within 90 days of the
date of closing of the related Public Equity Offering.
If less than all the Notes or Additional Notes, if any, are to be redeemed,
the particular Notes to be redeemed will be selected not more than 60 days prior
to the redemption date by the Trustee by lot or such other method as the Trustee
deems fair and appropriate.
REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
If a Change of Control occurs at any time, then each Holder will have the
right to require that the Company purchase such Holder's Notes and Additional
Notes, if any, in whole or in part at a purchase price in cash equal to 101% of
the principal amount of such Notes and Additional Notes, if any, plus accrued
and unpaid interest, if any, to the date of purchase, pursuant to the offer
described below (the "Change of Control Offer") and the other procedures set
forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each Holder
of Notes and Additional Notes by first-class mail, postage prepaid, at its
address appearing in the security register, stating, among other things, (i) the
purchase price and the purchase date, which will be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed or such
later date as is necessary to comply with requirements under the Exchange Act;
(ii) that any Note or Additional Note not tendered will continue to accrue
interest; (iii) that, unless the Company defaults in the payment of the purchase
price, any Notes or Additional Notes accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Change of Control
purchase date; and (iv) certain other procedures that a Holder must follow to
accept a Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes and Additional Notes that might be tendered by Holders of the Notes
and Additional Notes, if any, seeking to accept the Change of Control Offer. The
Senior Credit Facility will restrict such a purchase of Notes and Additional
Notes, if any, by the Company prior to repayment in full of Indebtedness
outstanding under the Senior Credit Facility and a Change of Control Offer would
require the approval of the lenders thereunder. In addition, certain events
involving a Change of Control may be an event of default under the Senior Credit
Facility or other indebtedness of the Company that may be incurred in the
future. Accordingly, the right of the Holders of the Notes and Additional Notes,
if any, to require the Company to repurchase the Notes and Additional Notes, if
any, may be of limited value if the Company cannot obtain the
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required approval under the Senior Credit Facility. There can be no assurance
that in the event of a Change in Control the Company will be able to obtain the
necessary consents from the lenders under the Credit Facility to consummate a
Change of Control Offer. The failure of the Company to make or consummate the
Change of Control Offer or pay the applicable Change of Control purchase price
when due would result in an Event of Default and would give the Trustee and the
Holders of the Notes and Additional Notes, if any, the rights described under
"-- Events of Default and Remedies."
The existence of a Holder's right to require the Company to purchase such
Holder's Notes or Additional Notes upon a Change of Control may deter a third
party from acquiring the Company in a transaction that constitutes a Change of
Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford Holders of Notes or Additional
Notes, if any, the right to require the Company to repurchase such Notes or
Additional Notes, if any, in the event of a highly leveraged transaction or
certain transactions with the Company's management or its affiliates, including
a reorganization, restructuring, merger or similar transaction involving the
Company (including, in certain circumstances, an acquisition of the Company by
management or its affiliates) that may adversely affect Holders of the Notes or
Additional Notes, if such transaction is not a transaction defined as a Change
of Control. See "--Certain Definitions" below for the definition of "Change of
Control."
The Company will comply with any applicable tender offer rules, including
Rule 14e-l under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
CERTAIN COVENANTS
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. The Company
will not, and will not permit any Restricted Subsidiary to, create, issue,
assume, guarantee or in any manner become directly or indirectly liable for the
payment of, or otherwise incur (collectively, "incur") any Indebtedness
(including Acquired Indebtedness), other than Permitted Indebtedness, or issue
any Disqualified Stock, except that the Company or a Restricted Subsidiary may
incur Indebtedness or issue Disqualified Stock if, at the time of such
incurrence or issuance, the Fixed Charge Coverage Ratio for the four full fiscal
quarters (taken as one accounting period) immediately preceding the incurrence
of such Indebtedness or the issuance of such Disqualified Stock for which
internal financial statements are available would have been equal to at least
2.0 to 1.0 if such incurrence is on or prior to the second anniversary of the
Closing Date and 2.25 to 1.0 if thereafter.
In making the foregoing calculation for any four-quarter period which
includes the Closing Date, pro forma effect will be given to the issuance of the
Existing Notes and the application of the net proceeds therefrom, as if such
transactions had occurred at the beginning of such four-quarter period. In
addition (but without duplication), in making the foregoing calculation, pro
forma effect will be given to: (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred and the
application of such proceeds occurred at the beginning of such four-quarter
period, (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company or its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired at
the beginning of such four-quarter period, (iii) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any other company, entity or business acquired or disposed of by
the Company or any Restricted Subsidiary, as the case may be, since the first
day of such four-quarter period, as if such acquisition or disposition occurred
at the beginning of such four-quarter period. In making a computation under the
foregoing clause (i) or (ii), (A) interest on Indebtedness bearing a floating
interest rate will be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period (taking into
account any Hedging Obligations applicable to such Indebtedness if such Hedging
Obligations have a remaining term at the date of determination in excess of 12
months), (B) if such Indebtedness bears, at the option of the Company, a fixed
or floating rate of interest, interest thereon will be computed by applying, at
the option of the Company, either the fixed or floating rate and (C) the amount
of Indebtedness under a revolving credit facility will be computed based upon
the average daily balance of such Indebtedness during such four-quarter period.
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INCURRENCE OF CONTINGENT OBLIGATIONS. The Company will not, and will not
permit any Restricted Subsidiaries to, create, issue, assume, guarantee or in
any manner become directly or indirectly liable for the payment of, or otherwise
incur, any Contingent Obligations if, at the time of such incurrence, all
Contingent Obligations outstanding at the date of such incurrence in the
aggregate equal or exceed an amount equal to 17% of the total assets of the
Company and its Restricted Subsidiaries (on a consolidated basis determined in
accordance with all GAAP).
RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, make any Restricted Payment
unless at the time of, and immediately after giving effect to, the proposed
Restricted Payment: (i) no Default or Event of Default has occurred and is
continuing, (ii) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph
of the covenant described under " -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock," and (iii) the aggregate amount
of all Restricted Payments declared or made after the Closing Date does not
exceed the sum of:
(A) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period (taken as one accounting period)
beginning on the first day of the Company's fiscal quarter during which the
Closing Date occurs and ending on the last day of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income is a loss, minus 100% of such
amount), plus
(B) the aggregate net cash proceeds received by the Company after the
Closing Date from the issuance or sale (other than to a Subsidiary) of, or
as a capital contribution in respect of, Qualified Equity Interests of the
Company, plus
(C) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination will be conclusive), received by the Company after
the Closing Date from the issuance or sale (other than to a Subsidiary) of
debt securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, plus the aggregate net cash
proceeds received by the Company at the time of such conversion or
exchange, plus
(D) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Closing Date of any
Indebtedness of the Company for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash, or the fair value of
any other property, distributed by the Company upon such conversion or
exchange); plus
(E) $25.0 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take any of the following actions so long as, with respect to
clauses (ii), (v), (vii), (viii), (ix), (x) and (xi) no Default or Event of
Default has occurred and is continuing or would occur:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provision;
(ii) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary), of Qualified Equity Interests of the
Company;
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance or sale
(other than to a Subsidiary) of, new Subordinated Indebtedness, so long as
the Company or a Restricted
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Subsidiary would be permitted to refinance such original Subordinated
Indebtedness with such new Subordinated Indebtedness pursuant to clause
(xii) of the definition of Permitted Indebtedness;
(v) the repurchase of any Subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a "change of control" in accordance with
provisions similar to the "Change of Control" covenant; provided that,
prior to or simultaneously with such repurchase, the Company has made the
Change of Control Offer as provided in such covenant with respect to the
Notes and has repurchased all Notes validly tendered for payment in
connection with such Change of Control Offer;
(vi) the payment of dividends or the making of loans or other advances
by the Company to the Parent to be used by the Parent to pay federal,
state, local and foreign taxes payable by the Parent and directly
attributable to (or that arise as result of ) the operations of the Company
and its Restricted Subsidiaries; provided, however, that (A) the amount of
such dividends shall not exceed the amount that the Company and its
Restricted Subsidiaries would be required to pay in respect of such
federal, state, local and foreign taxes were the Company to pay such taxes
as a stand-alone taxpayer and (B) such dividends, loans or other advances
pursuant to this clause (vi) are used by the Parent for such purposes
within 20 days of the receipt thereof by the Parent;
(vii) the payment of dividends or the making of loans or advances by
the Company to the Parent in an aggregate amount not to exceed $5.0 million
in any fiscal year for customary costs and expenses incurred by the Parent
in its capacity as a holding company or for services rendered by the Parent
on behalf of the Company;
(viii) the payment of, or the payment of a dividend or the making of a
loan or other advance to the Parent to enable the Parent to pay, interest
and principal due under the PIK Subordinated Debenture provided that such
payment of interest or principal (A) is made in cash by the Company or the
Parent, as the case may be, (B) is made at the original Stated Maturity of
such interest or principal, (C) is an amount that is no greater than actual
amount of interest or principal due at such Stated Maturity and (D)
immediately after giving effect to such payment, loan or advance, the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of the covenant
described under " -- Certain Covenants -- Incurrence of Indebtedness and
the Issuance of Disqualified Stock;"
(ix) the payment of, or the payment of a dividend or the making of a
loan or other advance to the Parent to enable the Parent to pay, interest
and principal due under the Parent Promissory Note and the Parent IRBs or
any Indebtedness incurred to refinance the Parent Promissory Note or the
Parent IRBs, as the case may be, in compliance with clause (x) below,
provided that such payment of interest or principal (A) is made in cash by
the Company or the Parent, as the case may be, (B) is made at the original
Stated Maturity of such interest or principal and (C) is an amount that is
no greater than actual amount of interest or principal due at such Stated
Maturity;
(x) the payment of a dividend or the making of a loan or other advance
to the Parent to enable the Parent to refinance the Parent Promissory Note
and the Parent IRBs provided that (A) the principal amount of any such
refinancing Indebtedness incurred by the Parent does not exceed the
principal amount of the Parent Promissory Note or Parent IRBs, as the case
may be, refinanced, plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Parent
Promissory Note or Parent IRBs, as the case may be, or the amount of any
premium reasonably determined by the Parent as necessary to accomplish such
refinancing, plus the amount of the expenses of the Parent reasonably
estimated to be incurred in connection with such refinancing, (B) any such
refinancing Indebtedness is unsecured, (C) such refinancing Indebtedness
has a Weighted Average Life equal to or greater than the Weighted Average
Life of the Parent Promissory Note or the Parent IRBs, as the case may be,
and (D) such refinancing Indebtedness has a final Stated Maturity no
earlier than the final Stated Maturity of the Parent Promissory Note or the
Parent IRBs, as the case may be, provided, however, that if such dividend,
loan or other advance to the Parent is financed by the Company with
Indebtedness incurred pursuant to clause (i) of the definition of Permitted
Indebtedness, then the foregoing clauses (A), (B), (C) and (D) shall not be
applicable in connection with such dividend, loan or advance to the Parent;
and
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(xi) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness owed by the Company to
any Wholly-Owned Foreign Restricted Subsidiary.
The payments described in clauses (ii), (iii), (v) and (viii) of this paragraph
will be Restricted Payments that will be permitted to be taken in accordance
with this paragraph (b) but will reduce the amount that would otherwise be
available for Restricted Payments under the clause (iii) of paragraph (a) of
this covenant and the payments described in clauses (i), (iv), (vi), (vii),
(ix), (x) and (xi) of this paragraph (b) will be Restricted Payments that will
be permitted to be taken in accordance with this paragraph (b) and will not
reduce the amount that would otherwise be available for Restricted Payments
under clause (iii) of paragraph (a) of this covenant.
(c) For the purpose of making any calculations under the Indenture, (i) if
a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
will be deemed to have made an Investment in amount equal to the greater of fair
market value or net book value of the net assets of such Restricted Subsidiary
at the time of such designation as determined by the Board of Directors of the
Company, whose good faith determination will be conclusive, (ii) any property
transferred to or from an Unrestricted Subsidiary will be valued at fair market
value at the time of such transfer, as determined by the Board of Directors of
the Company, whose good faith determination will be conclusive and (iii) subject
to the foregoing, the amount of any Restricted Payment, if other than cash, will
be determined by the Board of Directors of the Company, whose good faith
determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under
paragraph (a) of this covenant includes an Investment in an Unrestricted
Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the
aggregate amount of all Restricted Payments calculated under the first paragraph
of this covenant will be reduced by the lesser of (x) the net asset value of
such Subsidiary at the time it becomes a Restricted Subsidiary and (y) the
initial amount of such Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under this covenant will
be reduced by the amount of any net reduction in such Investment (resulting from
the payment of interest or dividends, loan repayment, transfer of assets or
otherwise), to the extent such net reduction is not included in the Company's
Consolidated Net Income; provided that the total amount by which the aggregate
amount of all Restricted Payments may be reduced may not exceed the lesser of
(x) the cash proceeds received by the Company and its Restricted Subsidiaries in
connection with such net reduction and (y) the initial amount of such
Investment.
ASSET SALES. The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (a) the consideration received by
the Company or such Restricted Subsidiary for such Asset Sale is not less than
the fair market value of the assets sold (as determined by the Board of
Directors of the Company, whose good faith determination will be conclusive and
evidenced by a resolution of the Board of Directors) and (b) the consideration
received by the Company or the relevant Restricted Subsidiary in respect of such
Asset Sale consists of at least 75% cash or Cash Equivalents; provided that the
amount of (x) any liabilities (as shown on the most recent balance sheet of the
Company or such Restricted Subsidiary) of the Company or any of its Restricted
Subsidiaries (other than liabilities that are by their terms subordinated to the
Notes or any guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability and (y) any securities, notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash
or Cash Equivalents received), shall be deemed to be cash or Cash Equivalents,
as the case may be, for purposes of this provision.
If the Company or any Restricted Subsidiary engages in an Asset Sale, the
Company may, at its option, within 360 days after such Asset Sale, (i) apply all
or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under the Senior Credit Facility or to the repayment of other Senior
Indebtedness of the Company or a Restricted Subsidiary or (ii) invest (or enter
into a legally binding agreement to invest) all or a portion of such Net Cash
Proceeds in properties and assets to replace the properties and assets that were
the subject of the Asset Sale or in properties and assets that will be used in
businesses of the Company or its Restricted Subsidiaries, as the case may be, as
such businesses are conducted prior to such Asset Disposition or in
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businesses reasonably related or ancillary thereto (in any such case as
determined by the Board of Directors in good faith). If any such legally binding
agreement to invest such Net Cash Proceeds is terminated, the Company may,
within 90 days of such termination or within 360 days of such Asset Sale,
whichever is later, invest such Net Cash Proceeds as provided in clause (i) or
(ii) (without regard to the parenthetical contained in such clause (ii)) above.
Notwithstanding the foregoing, if the Company or any Restricted Subsidiary
engages in an Asset Sale of Designated Assets, (x) the Company may, at its
option, within 360 days after such Asset Sale of Designated Assets, (1) apply
all or a portion of the Net Cash Proceeds to the repayment of amounts
outstanding under the Senior Credit Facility or to the repayment of other Senior
Indebtedness of the Company or a Restricted Subsidiary or (2) invest (or enter
into a legally binding agreement to invest) all or a portion of such Net Cash
Proceeds as set forth in clause (ii) above and (y) the Company or the relevant
Restricted Subsidiary shall not be required to receive, as set forth in clause
(b) of the immediately preceding paragraph, 75% of the consideration in respect
of such Asset Sale of Designated Assets in the form of cash or Cash Equivalents.
The amount of such Net Cash Proceeds not so used as set forth above in this
paragraph constitutes "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $15.0 million, the
Company will, within 30 days thereafter, make an offer to purchase from all
Holders of Notes and Additional Notes, if any, on a pro rata basis, the maximum
principal amount (expressed as a multiple of $1,000) of the Notes and Additional
Notes, if any, that may be purchased with the Excess Proceeds (an "Asset Sale
Offer"). The offer price as to each Note and Additional Note, if any, will be
payable in cash in an amount equal to 100% of the principal amount of such Note
and Additional Note, if any, and, plus in each case accrued and unpaid interest,
if any, to the date of repurchase. To the extent that the aggregate principal
amount of Notes and Additional Notes, if any, tendered pursuant to such Asset
Sale Offer is less than the Excess Proceeds, the Company may use the portion of
the Excess Proceeds not required to be used to repurchase the Notes and
Additional Notes for general corporate purposes. If the aggregate principal
amount of Notes and Additional Notes, if any, validly tendered and not withdrawn
by holders thereof exceeds the Excess Proceeds, the Notes and Additional Notes
to be purchased will be selected on a pro rata basis (based upon the principal
amount of Notes). Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds will be reset to zero.
LIENS. The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, affirm or suffer to exist any Lien of any kind securing any
Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption,
guarantee or other liability with respect thereto by any Restricted Subsidiary)
upon any property or assets (including any intercompany notes) of the Company or
any Restricted Subsidiary now owned or acquired after the Closing Date, or any
income or profits therefrom, unless the Notes are directly secured equally and
ratably with (or prior to in the case of Subordinated Indebtedness) the
obligation or liability secured by such Lien, and except for any Lien securing
Acquired Indebtedness created prior to the incurrence of such Indebtedness by
the Company or any Restricted Subsidiary, provided that any such Lien only
extends to the assets that were subject to such Lien securing such Acquired
Indebtedness prior to the related acquisition by the Company or the Restricted
Subsidiary.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock, (b) pay
any Indebtedness owed to the Company or any other Restricted Subsidiary, (c)
make loans or advances to the Company or any other Restricted Subsidiary or (d)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) the Indenture, the Senior Credit Facility, as originally executed
and any other agreement in effect on the Closing Date to the extent listed on a
schedule attached to the Indenture, (ii) applicable law, (iii) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Restricted Subsidiary, (iv) any agreement or other instrument of
a Person acquired by the Company or any Restricted Subsidiary in existence at
the time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, (v) any encumbrance or restriction contained in contracts
for sales of assets (including the Capital Stock of any Restricted Subsidiary)
permitted by the covenant described under " -- Certain
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Covenants -- Asset Sales" with respect to the assets to be sold pursuant to such
contract and (vi) any encumbrance or restriction existing under any agreement
that extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (i) and (iv); provided
that the terms and conditions of any such encumbrances or restrictions are not
materially less favorable to the Holders of Notes than those under or pursuant
to the agreement so extended, renewed, refinanced or replaced.
LIMITATION ON LAYERING INDEBTEDNESS. The Company and each Guarantor will
not, directly or indirectly, incur or otherwise permit to exist any Indebtedness
that is subordinate in right of payment to any Indebtedness of the Company or
such Guarantor, as the case may be, unless such Indebtedness is also pari passu
with, or subordinate in right of payment to, the Notes or the Guarantee issued
by such Guarantor, as the case may be, or subordinate in right of payment to the
Notes or such Guarantee, as the case may be.
CONSOLIDATION, MERGER AND SALE OF ASSETS. The Company may not consolidate
with or merge with or into any other Person (whether or not the Company is the
surviving Person) or, directly or indirectly, sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of its properties or
assets (determined on a consolidated basis for the Company and its Subsidiaries
taken as a whole) to any other Person or Persons, in one transaction or a series
of related transactions, unless each of the following conditions is satisfied:
(a) Either (i) the Company is the surviving corporation or (ii) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person that acquires by sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a consolidated basis (the "Surviving Entity")
(A) is a corporation, partnership, limited liability company or trust duly
organized and validly existing under the laws of the United States, any
state thereof or the District of Columbia and (B) expressly assumes, by a
supplemental indenture in form reasonably satisfactory to the Trustee, all
of the Company's obligations under the Indenture and the Notes.
(b) Immediately after giving effect to such transaction or series of
transactions on a pro forma basis, no Default or Event of Default has
occurred and is continuing.
(c) Immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Consolidated Net Worth of the
Company (or of the Surviving Entity if the Company is not the continuing
obligor under the Indenture) is equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction or series of
transactions.
(d) Immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the transaction
or series of transactions occurred at the beginning of the most recently
ended four full fiscal quarter period for which internal financial
statements are available), the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture) could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the first paragraph of the covenant described under
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Disqualified Stock."
(e) If the Company is not the continuing obligor under the Indenture,
each Guarantor, unless it is the other party to the transaction described
above, has by supplemental indenture confirmed that its Guarantee applies
to the Surviving Entity's obligations under the Indenture and the Notes.
(f) The Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries that constitutes all or substantially all of the properties and
assets of the Company on a consolidated basis, will be deemed to be the transfer
of all or substantially all of the properties and assets of the Company.
In the event of any transaction or series of related transactions described
in and complying with the conditions listed in the first paragraph of this
covenant in which the Company is not the continuing obligor under
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the Indenture, the Surviving Entity will succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture, and
thereafter the Company will, except in the case of a lease, be discharged from
all its obligations and covenants under the Indenture and Notes.
TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions with, or for the benefit
of, any Affiliate of the Company or any of its Restricted Subsidiaries, unless
(a) such transaction or series of related transactions is on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could have been obtained in an arm's length transaction with
third parties who are not Affiliates and (b) either (i) with respect to any
transaction or series of related transactions involving aggregate payments in
excess of $5.0 million, but less than $10.0 million, the Company delivers a
resolution of the Board of Directors of the Company set forth in an officers'
certificate to the Trustee certifying that such transaction or series of related
transactions comply with clause (a) above and that such transaction or
transactions have been approved by the Board of Directors (including a majority
of the Disinterested Directors) of the Company or (ii) with respect to a
transaction or series of related transactions involving aggregate payments equal
to or greater than $10.0 million the Company delivers (x) an officers'
certificate to the Trustee certifying that such transaction or series of related
transactions have been approved by the Board of Directors (including a majority
of the Disinterested Directors) of the Company and (y) a written opinion from a
nationally recognized accounting or investment banking firm to the effect that
such transaction or series of related transactions are fair to the Company or
such Restricted Subsidiary from a financial point of view.
The foregoing covenant will not restrict any of the following:
(A) Transactions among the Company and/or its Restricted Subsidiaries.
(B) The Company from paying reasonable and customary regular
compensation or fees to, or entering into customary expense reimbursement,
indemnification or similar arrangements with, directors of the Company or
any Restricted Subsidiary who are not employees of the Company or any
Restricted Subsidiary.
(C) Transactions permitted by the provisions of the covenant described
" -- Certain Covenants -- Restricted Payments."
(D) Transactions among the Company, the Parent and Laidlaw pursuant to
the Stock Purchase Agreement.
(E) Any payments made by the Company or a Restricted Subsidiary to the
Parent or Laidlaw or transactions entered into among the Company, any
Restricted Subsidiary, the Parent and/or Laidlaw pursuant to customary
financial and management service arrangements (including, without
limitation, general liability and workers' compensation insurance, income
tax management and treasury services); provided, however, that each such
payment or transaction is (a) in the ordinary course of business consistent
with past practice prior to the date of the Indenture and (b) upon fair and
reasonable terms no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than could have been obtained in a
comparable arm's length transaction with a Person that is not an Affiliate
of the Company or such Restricted Subsidiary.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue, convey, sell, assign, transfer,
lease or otherwise dispose of any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares of
such Capital Stock) except (a) to the Company or a Wholly Owned Restricted
Subsidiary or (b) in a transaction or series of related transactions consisting
of a sale provided that immediately after giving effect to such sale, neither
the Company nor any of its Subsidiaries owns any shares of Capital Stock of such
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) and such sale complies with the covenant described
under "-- Certain Covenants -- Asset Sales".
The Company will not permit any Restricted Subsidiary that is a Guarantor
to issue Preferred Stock.
PAYMENTS FOR CONSENT. The Indenture provides that neither the Company nor
any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to
be paid any consideration, whether by way of interest, fee
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or otherwise, to any Holder for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes unless
such consideration is offered to be paid or is paid to all Holders that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. All of the
Company's Domestic Restricted Subsidiaries (other than three non-wholly-owned
domestic subsidiaries of the Company) are Guarantors. As described above, the
Indenture permits, under certain circumstances, the release and discharge of the
Guarantee issued by a Guarantor. Other than a guarantee by a Foreign Restricted
Subsidiary of the payment of Indebtedness of another Foreign Restricted
Subsidiary, the Company will not permit any Restricted Subsidiary that is not a
Guarantor, directly or indirectly, to guarantee, assume or in any other manner
become liable for the payment of any Indebtedness of the Company or any
Indebtedness of any other Restricted Subsidiary, unless (a) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for a guarantee of payment of the Notes by such Restricted Subsidiary
and (b) with respect to any guarantee of Subordinated Indebtedness by a
Restricted Subsidiary, any such guarantee is subordinated to such Restricted
Subsidiary's guarantee with respect to the Notes at least to the same extent as
such Subordinated Indebtedness is subordinated to the Notes, provided that the
foregoing provision will not be applicable to any guarantee by any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary.
Any guarantee by a Restricted Subsidiary of the Notes pursuant to the
preceding paragraph may provide by its terms that it will be automatically and
unconditionally released and discharged upon: (a) any sale, exchange or transfer
to any Person of all of the Company's and the Restricted Subsidiaries' Capital
Stock in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by the Indenture), (b) the
release or discharge of the guarantee that resulted in the creation of such
guarantee of the Notes, except a discharge or release by or as a result of
payment under such guarantee or (c) the designation of such Restricted
Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the
Indenture.
UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company
nor any Restricted Subsidiary is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of the covenant
described under " -- Certain Covenants -- Restricted Payments," (iv) neither the
Company nor any Restricted Subsidiary has a contract, agreement, arrangement,
understanding or obligation of any kind, whether written or oral, with such
Subsidiary other than those that might be obtained at the time from Persons who
are not Affiliates of the Company and (v) neither the Company nor any Restricted
Subsidiary has any obligation to subscribe for additional shares of Capital
Stock or other equity interest in such Subsidiary, or to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of the covenant
described under " -- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Disqualified Stock" (treating any Indebtedness of such Unrestricted
Subsidiary as the incurrence of Indebtedness by a Restricted Subsidiary).
LIMITATION ON CONDUCT OF BUSINESS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, conduct any business other than
the business the Company and its Restricted Subsidiaries was conducting on the
Closing Date or businesses reasonably related or ancillary thereto, except to
such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
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REPORTS. The Company will be required to file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15(d) of
the Exchange Act provided, however, that so long as the Parent is a Guarantor of
the Notes, the reports, information and other documents required to be filed and
provided as described hereunder may, at the Company's option, be filed by and be
those of the Parent rather than the Company; provided further, however, that if
the Parent conducts any business or holds any significant assets other than the
capital stock of the Company at the time any such report or other document
containing financial statements of the Parent is filed, the Parent shall include
in such report or other (a) document summarized financial information (as
defined in Rule 1-02(bb) of Regulation S-X promulgated by the SEC) with respect
to the Company or (b) condensed consolidating financial statements in a columnar
format with separate columns that contain financial information for (i) the
Parent on a stand-alone basis, (ii) the Company on a stand-alone basis, (iii)
the Guarantor Subsidiaries and (iv) the Non-Guarantor Subsidiaries. The Company
will also be required (x) to supply to the Trustee and each Holder of Notes, or
supply to the Trustee for forwarding to each such Holder, without cost to such
Holder, copies of such reports and documents within 15 days after the date on
which the Company (or the Parent, as the case may be) files such reports and
documents with the Commission or the date on which the Company (or the Parent,
as the case may be) would be required to file such reports and documents if the
Company (or the Parent, as the case may be) were so required and (y) if filing
such reports and documents with the Commission is not accepted by the Commission
or is prohibited under the Exchange Act, to supply at the Company's cost copies
of such reports and documents to any prospective Holder of Notes promptly upon
written request.
CERTAIN INVESTMENT GRADE COVENANTS
In the event the Notes are rated Investment Grade, at the election of the
Company, each of the covenants described above under "-- Certain Covenants"
(other than "-- Consolidation, Merger and Sale of Assets" (except paragraph (c)
and (d) thereof) "-- Reports") shall be of no further force and effect and shall
cease to apply to the Company and, if applicable, the Restricted Subsidiaries.
In addition, the Indenture contains, among other things, the following
covenants, each of which will apply to the Company and the Restricted
Subsidiaries once the Notes are rated Investment Grade.
LIMITATION ON LIENS SECURING INDEBTEDNESS. The Company shall not, and
shall not permit any Restricted Subsidiary to, create, incur or assume any Lien
(other than any Permitted Lien) on any properties or assets of the Company or
any Restricted Subsidiary to secure the payment of Indebtedness of the Company
or any Subsidiary if immediately after the creation, incurrence or assumption of
such Lien, the aggregate outstanding principal amount of all Indebtedness of the
Company and the Subsidiaries that is secured by Liens (other than Permitted
Liens) on any properties or assets of the Company and any Restricted
Subsidiaries (other than (x) Indebtedness that is so secured equally and ratably
with (or on a basis subordinated to) the Notes and (y) the Notes), plus the
aggregate amount of all Attributable Debt of the Company and the Restricted
Subsidiaries with respect to all Sale and Leaseback Transactions outstanding at
such time (other than Sale and Leaseback Transactions permitted by the second
paragraph under "-- Limitation on Sale and Leaseback Transactions"), would
exceed 10% of Consolidated Net Tangible Assets, unless the Company secures the
outstanding Notes equally and ratably with (or prior to) all Indebtedness
secured by such Lien, so long as such Indebtedness shall be so secured.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction involving any properties or assets of the Company or any Restricted
Subsidiary, as the case may be, unless, after giving effect to such Sale and
Leaseback Transaction, the aggregate amount of all Attributable Debt of the
Company and the Restricted Subsidiaries with respect to all Sale and Leaseback
Transactions outstanding at such time (other than Sale and Leaseback
Transactions permitted by the next paragraph), plus the aggregate principal
amount of all Indebtedness of the Company and the Subsidiaries that is secured
by Liens (other than Permitted Liens) on properties or assets of the Company or
any Restricted Subsidiary, as the case may be, (other than (x) Indebtedness that
is so secured equally and ratably with (or on a basis subordinated to) the Notes
and (y) the Notes), would not exceed 10% of Consolidated Net Tangible Assets.
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The restriction in the foregoing paragraph shall not apply to any Sale and
Leaseback Transaction if (a) the lease is for a period of not in excess of three
years, including renewal of rights, (b) the lease secures or relates to
industrial revenue or similar financing, (c) the transaction is solely between
the Company and a Restricted Subsidiary or between or among Restricted
Subsidiaries or (d) the Company or such Restricted Subsidiary, within 270 days
after the sale is completed, applies an amount equal to or greater of (i) the
Net Cash Proceeds of the sale of the properties or assets of the Company or any
Restricted Subsidiary, as the case may be, which are the subject of the Sale and
Leaseback Transaction or (ii) the fair market value of the properties or assets
of the Company or any Restricted Subsidiary, as the case may be, which are the
subject of the Sale and Leaseback Transaction (as determined in good faith by
the Board of Directors of the Company) either to (A) the retirement (or open
market purchase) of Notes, other long-term Indebtedness of the Company ranking
on a parity with or senior to the Notes or long-term Indebtedness of a
Restricted Subsidiary or (B) the purchase by the Company or any Restricted
Subsidiary of other properties and assets that will be used in the business of
the Company or its Restricted Subsidiaries (or businesses reasonably related or
ancillary thereto) having a value at least equal to the value of the properties
or assets of the Company or the Restricted Subsidiary, as the case may be, which
are the subject of the Sale and Leaseback Transaction.
EVENTS OF DEFAULT AND REMEDIES
Each of the following will be "Events of Default" under the Indenture:
(a) Default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days
(whether or not prohibited by the subordination provisions of the
Indenture).
(b) Default in the payment of the principal of or premium, if any, on
any Note when due (whether or not prohibited by the subordination
provisions of the Indenture).
(c) Failure to perform or comply with the provisions of the covenant
described under " -- Certain Covenants -- Consolidation, Merger and Sale of
Assets" or to make or consummate a Change of Control Offer or Asset Sale
Offer in accordance with provisions of the covenants described under
" -- Repurchase at the Option of the Holders Upon Change of Control" and
"-- Certain Covenants -- Asset Sales", respectively.
(d) Default in the performance, or breach, of any covenant or
agreement of the Company or any Guarantor contained in the Indenture or any
Guarantee (other than as contemplated by clauses (a), (b) and (c) above)
and continuance of such default or breach for a period of 60 days after
written notice has been given (x) to the Company by the Trustee or (y) to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding.
(e) The occurrence of an event of default under any mortgage, bond,
indenture, loan agreement or other document evidencing Indebtedness of the
Company or any Restricted Subsidiary, which Indebtedness has an aggregate
outstanding principal amount of $25.0 million or more, and such default (i)
results in the acceleration of such Indebtedness prior to its Stated
Maturity or (ii) constitutes a failure to make any payment with respect to
any such Indebtedness when due and payable after the expiration of any
applicable grace period.
(f) Failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $25.0 million, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days.
(g) Any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee, or gives notice to such effect (other than by reason
of the termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture), and such condition has continued for a
period of 30 days after written notice of such failure requiring the
Guarantor and the Company to remedy the same has been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the Holders
of 25% in aggregate principal amount of the Notes then outstanding.
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(h) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such Holders will, declare the principal of and premium, if any, and
accrued and unpaid interest on all of the outstanding Notes immediately due and
payable and, upon any such declaration, all such amounts will become due and
payable immediately. If an Event of Default specified in clause (h) above occurs
and is continuing, then the principal and premium, if any, and accrued and
unpaid interest on all the outstanding Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (i) the Company has paid or deposited
with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes,
(B) all unpaid principal of and premium, if any, on any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at the
rate borne by the Notes and, (D) all sums paid or advanced by the Trustee under
the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and (ii) all Events of Default,
other than the non-payment of amounts of principal of (or premium, if any, on)
or interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived. No such rescission will affect any
subsequent default or impair any right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Notes because of an Event of Default specified in
clause (e) of this covenant shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned by
the holders of such Indebtedness or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of the
Notes, and not other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
No Holder has any right to institute any proceeding with respect to the
Indenture or any remedy thereunder, unless the Holders of at least 25% in
aggregate principal amount of the outstanding Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding
within 60 days after receipt of such notice and the Trustee, within such 60-day
period, has not received directions inconsistent with such written request by
Holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a Holder for the
enforcement of the payment of the principal of, premium, if any, or interest on
such Note on or after the respective due dates expressed in such Note.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the Holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the Holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each Holder of the Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of and
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the Holders of the Notes if a committee of its trust officers in good faith
determines that withholding such notice is in the interests of the Holders of
the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Guarantors of their respective
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.
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LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at its option and at any time, terminate the obligations
of the Company and any Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of and premium, if any, and interest on
such Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes, maintain an office or agency for
payments in respect of the Notes and segregate and hold such payments in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee and (iv)
the defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company and
any Guarantor with respect to certain covenants set forth in the Indenture and
described under "-- Certain Covenants" above, and any omission to comply with
such obligations would not constitute a Default or an Event of Default with
respect to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Notes, money in an amount, or U.S.
Government Obligations (as defined in the Indenture) that through the scheduled
payment of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of and
premium, if any, on and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (h) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such defeasance or covenant defeasance
may not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Company or any
Guarantor is a party or by which it is bound; (d) in the case of defeasance, the
Company must deliver to the Trustee an opinion of counsel stating that the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling, or since the date hereof there has been a change in applicable
federal income tax law, to the effect, and based thereon such opinion must
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had not
occurred; (e) in the case of covenant defeasance, the Company must have
delivered to the Trustee an opinion of counsel to the effect that the Holders of
the Notes outstanding will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such covenant defeasance had not occurred; and
(f) the Company must have delivered to the Trustee an officers' certificate and
an opinion of counsel, each stating that all conditions precedent provided for
relating to either the defeasance or the covenant defeasance, as the case may
be, have been complied with.
SATISFACTION AND DISCHARGE
Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the Indenture when (a) either (i) all the Notes
theretofore authenticated and delivered (other than destroyed, lost or stolen
Notes that have been replaced or paid and Notes that have been subject to
defeasance under "-- Legal Defeasance and Covenant Defeasance") have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (A) have become due and payable, (B)
will become due and payable at maturity within one year or (C) are to be called
for redemption within one year under arrangements reasonably satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, and the Company has irrevocably deposited or
caused to be deposited with the Trustee funds in trust for the purpose in an
amount sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal and
premium, if any, and
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interest on the Notes to the date of such deposit (in the case of Notes that
have become due and payable) or to the Stated Maturity or redemption date, as
the case may be; (b) the Company has paid or caused to be paid all sums payable
under the Indenture by the Company; and (c) the Company has delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent provided in the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the Indenture and any Guarantee may be made
by the Company, any affected Guarantor and the Trustee with the consent of the
Holders of a majority in aggregate outstanding principal amount of the Notes;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each outstanding Note affected thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date); or
(b) reduce the percentage in aggregate principal amount of outstanding
Notes required to consent to any amendment of, or waiver of compliance
with, any provision of or defaults under the Indenture; or
(c) waive a Default or Event or Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes
issued under the Indenture, if any)); or
(d) release any Guarantor from any of its obligations under its
Guarantee or the Indenture, except in accordance with the terms of the
Indenture; or
(e) amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer or Asset Sale Offer in accordance with
the provisions of the covenant described under "-- Repurchase at the Option
of the Holders Upon Change of Control" and "-- Certain Covenants -- Asset
Sales", respectively; or
(f) amend, change or modify any of the provisions of the Indenture
relating to the subordination of the Notes or the Guarantees in a manner
adverse to the Holders; or
(g) amend, change or modify any of the foregoing modification and
amendment provisions.
The Holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Without the consent of any Holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes: (a) to evidence the
succession of another Person to the Company and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Notes or
to add any Guarantor of the Notes; or (b) to add to the covenants of the Company
for the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company; or (c) to add additional Events of Default; or (d)
to provide for uncertificated Notes in addition to or in place of the
certificated Notes; or (e) to evidence and provide for the acceptance of
appointment under the Indenture by a successor Trustee; or (f) to secure the
Notes or any Guarantee; or (g) to cure any ambiguity, to correct or supplement
any provision in the Indenture that may be defective or inconsistent with any
other provision in the Indenture, or to make any other provisions with respect
to matters or questions arising under the Indenture, provided that such actions
pursuant to this clause (g) do not adversely affect the interests of the
Holders; or (h) to comply with any requirements of the Commission in order to
effect and maintain the qualification of the Indenture under the Trust Indenture
Act.
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CONCERNING THE TRUSTEE
The Bank of Nova Scotia Trust Company of New York, the Trustee under the
Indenture, is the initial paying agent and registrar for the Notes. An affiliate
of the Trustee is acting as managing agent and as co-documentation agent under
the Senior Credit Facility.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the Holders of a majority in outstanding
principal amount of the Notes have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent Person would exercise under the circumstances in the conduct of such
Person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by, and construed
in accordance with, the laws of the State of New York.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one or more registered New Notes in global form without coupons (each a
"Global Note"). Each Global Note will be deposited on the date of the closing of
the exchange of the New Notes for the Existing Notes (the "Exchange Offer
Closing Date") with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the Trustee.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and Cedel. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect, custodial relationship with
a Direct Participant (collectively, the "Indirect Participants"). DTC may hold
securities beneficially owned by other persons only through the Direct
Participants or Indirect Participants and such other persons' ownership interest
and transfer of ownership interest will be recorded only on the records of the
Direct Participant and/or Indirect Participant, and not on the records
maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants with an interest in the Global Notes, and (ii) DTC will maintain
records of the ownership interests of such Direct Participants in the Global
Notes and the transfer of ownership interests by and between Direct
Participants. DTC will not maintain records of the ownership interests of, or
the transfer of ownership interests by and between, Indirect Participants or
other owners of beneficial interests in the Global Notes. Direct Participants
and Indirect Participants must maintain their own records of the ownership
interests of, and the transfer of ownership interests by and between, Indirect
Participants and other owners of beneficial interests in the Global Notes.
Investors in the Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC.
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The laws of some states require that certain persons take physical delivery
in definitive, certificated form, of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Note to such
persons. Because DTC can act only on behalf of Direct Participants, which in
turn act on behalf of Indirect Participants and others, the ability of a person
having a beneficial interest in a Global Note to pledge such interest to persons
or entities that are not Direct Participants in DTC, or to otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificates evidencing such interests.
Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Notes are registered (including Notes represented
by Global Notes) as the owners thereof for the purpose of receiving payments and
for any and all other purposes whatsoever. Payments in respect of the principal,
premium, Liquidated Damages, if any, and interest on Global Notes registered in
the name of DTC or its nominee will be payable by the Trustee to DTC or its
nominee as the registered Holder under the Indenture. Consequently, neither the
Company, the Trustee nor any agent of the Company, or the Trustee has or will
have any responsibility or liability for (i) any aspect of DTC's records or any
Direct Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global Note or (ii) any other matter relating to the
actions and practices of DTC or any of its Direct Participants or Indirect
Participants.
Payments with respect to the principal of, premium, if any, and interest
on, any New Notes represented by a Global Note registered in the name of DTC or
its nominee on the applicable record date will be payable by the Trustee to or
at the direction of DTC or its nominee in its capacity as the registered holder
of the Global Note representing such New Notes under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the persons in
whose names the New Notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payment and for any and all
other purposes whatsoever. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of interest in the Global Note (including principal, premium,
if any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the Global Note as shown
on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of interests in the Global Note will be
governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
If the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC, then, upon surrender by DTC of
its Global Notes, certificated Notes will be issued to each person that DTC
identifies as the beneficial owner of the New Notes represented by the Global
Notes. Upon any such issuance, the Trustee is required to register such
certificated Notes in the name of such person or persons (or the nominee of any
thereof), and cease the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related New Notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal
amounts, of the New Notes to be issued).
Except in the limited circumstances described above, owners of beneficial
interests in Global Notes will not be entitled to receive physical delivery of
certificated Notes. The Notes are not issuable in bearer form.
The Notes will be issued only in fully registered form in denominations of
$1,000 and integral multiples thereof. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other government charge payable
in connection therewith.
The Company will initially appoint the Trustee at its corporate trust
office as paying agent and registrar for the Notes. In such capacities, the
Trustee will be responsible for, among other things, (i) maintaining a record of
the aggregate holdings of Notes and accepting Notes for exchange and
registration of transfer; (ii) ensuring that
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payments of principal, premium, if any, and interest in respect of the Notes
received by the Trustee from the Company are duly paid to DTC or its nominees
and (iii) transmitting to the Company any notices from holders.
The Company will cause to be kept at the office of the registrar a register
in which, subject to such reasonable regulations as it may prescribe, the
Company will provide for the registration of the Notes and registration of
transfers of the Notes. The Company may vary or terminate the appointment of any
paying agent or registrar, or appoint additional or other such agents or approve
any change in the office through which any such agent acts; provided that there
shall at all times be a paying agent and registrar in the Borough of Manhattan,
The City of New York, New York. The Company will cause notice of any
resignation, termination or appointment of the Trustee or any paying agent or
registrar, and of any change in the office through which any such agent will
act, to be provided to Holders of the Notes.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person is merged with or into the Company or becomes a Restricted
Subsidiary or (b) assumed in connection with the acquisition of assets from such
Person; provided that any Indebtedness of such Person that is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon
consummation of the transaction by which such Person is merged with or into the
Company, becomes a Restricted Subsidiary or such assets are acquired from such
Person will not be Acquired Indebtedness.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's Capital
Stock. For the purposes of this definition, "control," when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or a
Restricted Subsidiary, directly or indirectly, in one transaction or a series of
related transactions, of (a) any Capital Stock of any Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Company or a Restricted Subsidiary), (b) all
or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries representing a division or line of business or (c) any
other properties or assets of the Company or any Restricted Subsidiary, other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" does not include any transfer of properties or assets (i)
that is governed by the provisions of the Indenture described under "-- Certain
Covenants -- Consolidation, Merger and Sale of Assets," (ii) between or among
the Company and its Restricted Subsidiaries pursuant to transactions that do not
violate any other provision of the Indenture, (iii) to any Person to the extent
it constitutes a Restricted Payment that is permitted under the covenant
described under"-- Certain Covenants -- Restricted Payments," (iv) consisting of
inventory or wornout, obsolete or permanently retired equipment and facilities,
(v) the gross proceeds of which (exclusive of indemnities) do not exceed $5.0
million in connection with any transfer or (vi) that constitutes a Permitted
Investment.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof (excluding any subsequent
renewal or other extension options held by the lessee), discounted from the
respective due dates thereof to such date of determination at the rate of
interest per annum implicit in the terms of such lease, as determined in good
faith by the Company, compounded annually. The net amount of rent required to be
paid under any such lease for any such period shall
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be the amount of the rent payable by the lessee with respect to such period,
after excluding amounts required to be paid on account of maintenance and
repairs, reconstruction, insurance, taxes, assessments, water rates and similar
charges and contingent rents (such as those based on sales). In the case of any
lease which is terminable by the lessee upon the payment of a penalty, such net
amount shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Senior Credit Facility.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" of any Person means any and all shares, partnership
interests, participations, rights in or other equivalents of, or interests in,
the equity of such Person, but excluding any debt securities convertible into
such equity.
"Cash Equivalents" means (a) any evidence of Indebtedness with a maturity
of one year or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the Untied States of America is pledged in support
thereof); (b) certificates of deposit or acceptances or Eurodollar time deposits
with a maturity of one year or less of, and overnight bank deposits with, any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500
million; (c) commercial paper with a maturity of one year or less issued by a
Person rated at least A-1 by S&P or at least P-1 by Moody's; (d) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (a) entered into with a bank meeting the
qualifications described in clause (b) above; (e) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority or any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's; (f) securities with
maturities of one year or less from the date of acquisition backed by standby
letters of credit issued by any financial institution satisfying the
requirements of clause (b) of this definition and (g) funds which invest in any
of the foregoing.
"Change of Control" means the occurrence of any of the following events:
(a) Any Person or "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person will be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the voting power of all
classes of Voting Stock of the Company;
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; or
(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with the
provisions of the covenant described under "--Certain
Covenants--Consolidation, Merger and Sales of Assets."
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"Closing Date" means May 29, 1998, the date on which the Existing Notes
were originally issued under the Indenture.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes (as if the final maturity of the Notes was June
1, 2003) to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such Notes.
"Independent Investment Banker" means TD Securities (USA) Inc. or, if such firm
is unwilling or unable to select the Comparable Treasury Issue, another
independent banking institution of national standing selected by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for Government
Securities" or (ii) if such release (or any successor release) is not published
or does not contain such prices on such Business Day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations or (B) if the
Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (d) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period (a) Fixed Charges for such
period, plus (b) the federal, state, local and foreign income tax expense of the
Company and its Restricted Subsidiaries for such period, plus (c) the
depreciation and amortization expense of the Company and its Restricted
Subsidiaries for such period, plus (d) any other non-cash charges for such
period and minus non-cash credits for such period, other than non-cash charges
or credits resulting from changes in prepaid assets or accrued liabilities in
the ordinary course of business; provided that income tax expense, depreciation
and amortization expense and non-cash charges and credits of a Restricted
Subsidiary will be included in Consolidated EBITDA only to the extent (and in
the same proportion) that the net income of such Restricted Subsidiary was
included in calculating Consolidated Net Income for such period.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the net income (but not the
net loss) of any Person (other than the Company or a Restricted Subsidiary), in
which the Company or any Restricted Subsidiary has an equity interest, except
that the aggregate amount of dividends or other distributions actually paid to
the Company or any Restricted Subsidiary in cash during such period will be
included in such Consolidated Net Income, (d) the net income (or loss) of any
Person acquired by the Company or any Restricted Subsidiary in a "pooling of
interests" transaction attributable to any period prior to the date of such
acquisition, and (e) the net income (but not the net loss) of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is at the date of
determination restricted, directly or indirectly, except that the aggregate
amount of such net income that could be paid to the Company or a Restricted
Subsidiary thereof by loans, advances, intercompany transfers, principal
repayments or otherwise will be included in such Consolidated Net Income.
"Consolidated Net Tangible Assets" means, with respect to any Company, at
any date of determination, the aggregate amount of assets (less applicable
reserves and other properly deductible items) after deducting therefrom (a) all
current liabilities (excluding current maturities of long-term debt and Capital
Lease Obligations) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly balance sheet of the Company and its
consolidated Restricted Subsidiaries and computed in accordance with GAAP.
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"Consolidated Net Worth" means, at any date of determination, the
stockholders' equity of the Company and its Restricted Subsidiaries as set forth
on the most recently available quarterly or annual consolidated balance sheet of
the Company and its Restricted Subsidiaries, less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company or
any of its Restricted Subsidiaries and less, to the extent included in
calculating such stockholders' equity of the Company and its Restricted
Subsidiaries, the stockholders' equity attributable to Unrestricted
Subsidiaries, each item to be determined in conformity with GAAP (excluding the
effects of foreign currency adjustments under Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 52).
"Contingent Obligations" means, at any date of determination, (a) all
obligations of the Company and its Restricted Subsidiaries (and any Unrestricted
Subsidiaries for which the Company provides credit support or other similar
arrangements) in respect of performance bonds and letters of credit in the
nature of performance bonds and similar obligations and (b) all guarantees of
the Company and its Restricted Subsidiaries (and any Unrestricted Subsidiaries
for which the Company provides credit support or other similar arrangements) of
the obligations referred to in clause (a).
"Currency Agreements" means, with respect to any Person, any spot or
forward foreign exchange agreements and currency swap, currency option or other
similar financial agreements or arrangements entered into by such Person or any
of its Restricted Subsidiaries in the ordinary course of business and designed
to protect against or manage exposure to fluctuations in foreign currency
exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Assets" means the assets and properties acquired by the Company
in the Safety-Kleen Acquisition relating to (a) the European operations of
Safety-Kleen referred to in footnote 4 to the audited consolidated financial
statements of Safety-Kleen incorporated by reference into Safety-Kleen's Annual
Report on Form 10-K for the year ended January 3, 1998 and (b) the oil recovery
services provided by Safety-Kleen and described in the table under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Revenues" incorporated by reference into
Safety-Kleen's Annual Report on Form 10-K for the year ended January 3, 1998.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Senior Credit Facility and (ii) any other issue of Senior Indebtedness or
refinancing thereof permitted by the definition of Senior Indebtedness, having a
principal amount of at least $25.0 million.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (a) is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to one year after the final Stated Maturity of the Notes, (b) is redeemable at
the option of the holder thereof at any time prior to one year after such final
Stated Maturity or (c) at the option of the holder thereof, is convertible into
or exchangeable for debt securities at any time prior to one year after such
final Stated Maturity; provided that any Capital Stock that would not constitute
Disqualified Stock but for provisions therein giving holders thereof the right
to cause the issuer thereof to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
Stated Maturity of the Notes will not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the provisions
contained in the covenants described under "-- Certain Covenants -- Asset Sales"
and "-- Repurchase at the Option of Holders Upon Change of Control" and such
Capital Stock specifically provides that the issuer will not repurchase or
redeem any of such stock pursuant to such provision prior to the Company's
repurchase of such of the Notes as are required to be repurchased pursuant to
the
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covenants described under "-- Certain Covenants -- Asset Sales" and
"-- Repurchase at the Option of Holders Upon Change of Control."
"Domestic Subsidiary" means any Subsidiary whose jurisdiction of
incorporation, organization or formation is the United States, any state thereof
or the District of Columbia.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations thereunder.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
payments (if any) pursuant to Interest Rate Agreements (including amortization
of discounts), (iii) the interest portion of any deferred payment obligation,
(iv) amortization of debt issuance costs and (v) the interest component of
Capitalized Lease Obligations, plus (b) cash dividends paid on Preferred Stock
and Disqualified Stock by the Company and any Restricted Subsidiary (to any
Person other than the Company and its Restricted Subsidiaries), plus (c) all
interest on any Indebtedness of any Person guaranteed by the Company or any of
its Restricted Subsidiaries, plus (d) all payments, loans or advances made
pursuant to clause (viii) or (ix) of paragraph (b) of the covenant described
under "-- Certain Covenants -- Restricted Payments" in respect of interest
payments on the Indebtedness described in such clauses; provided, however, that
Fixed Charges will not include (i) any gain or loss from extinguishment of debt,
including the write-off of debt issuance costs and (ii) the fixed charges of a
Restricted Subsidiary to the extent (and in the same proportion) that the net
income of such Subsidiary was excluded in calculating Consolidated Net Income
pursuant to clause (e) of the definition thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
Consolidated EBITDA for such period to (b) Fixed Charges for such period.
"Foreign Subsidiary" means any Subsidiary other than a Domestic Subsidiary.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the date of the Indenture.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of all or any part of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limitation, the payment of
amounts drawn down under letters of credit.
"Guarantee" means a guarantee of the Notes by the Parent and one or more
Restricted Subsidiaries in accordance with the provisions of the Indenture.
"Guarantor" means the Parent and any Restricted Subsidiary that issues a
Guarantee.
"Hedging Obligations" means the obligations of any Person under (a)
Interest Rate Agreements and (b) Currency Agreements.
"Holder" means the Person in whose name a Note is, at the time of
determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed, (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person (other than obligations in respect of performance
bonds and letters of credit in the nature of performance bonds), (d) every
obligation of such Person issued or assumed as the deferred purchase price of
property or services, (e) every Capitalized Lease Obligation of such Person, (f)
all Disqualified Stock of such Person valued at its maximum fixed repurchase
price (including, without duplication,
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accrued and unpaid dividends), (g) all obligations of such Person under or in
respect of Hedging Obligations and (h) every obligation of the type referred to
in clauses (a) through (g) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed. For purposes
of this definition, the "maximum fixed repurchase price" of any Disqualified
Stock that does not have a fixed repurchase price will be calculated in
accordance with the terms of such Disqualified Stock as if such Disqualified
Stock were repurchased on any date on which Indebtedness is required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value will be determined in good faith by the board of directors of the issuer
of such Disqualified Stock. Notwithstanding the foregoing, trade accounts
payable and accrued liabilities arising in the ordinary course of business and
any liability for federal, state or local taxes or other taxes owed by such
Person will not be considered Indebtedness for purposes of this definition.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
and other related agreements and designed to protect against or manage exposure
to fluctuations in interest rates and either (a) entered into in the ordinary
course of business or (b) relating to Indebtedness permitted under the
Indenture.
"Investment" in any Person means (a) any direct or indirect advance, loan
or other extension of credit or capital contribution (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others) to, or any purchase, acquisition or ownership of
any Capital Stock, Indebtedness or other securities issued by such Person, the
acquisition (by purchase or otherwise) of all or substantially all of the
business or assets of such Person, or the making of any investment of cash or
other property in such Person, (b) the designation of any Restricted Subsidiary
as an Unrestricted Subsidiary, (c) the transfer of any assets or properties from
the Company or a Restricted Subsidiary to an Unrestricted Subsidiary, other than
the transfer of assets or properties made in the ordinary course of business and
(d) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary. Investments exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
"Investment Grade" means a rating of the Notes by both S&P and Moody's,
each such rating being in one of such agency's four highest generic rating
categories that signifies investment grade (i.e. BBB- (or the equivalent) or
higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided, in
each case, such ratings are publicly available; provided further that in the
event Moody's or S&P is no longer in existence, for purposes of determining
whether the Notes are rated "Investment Grade," such organization may be
replaced by a nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) designated by the Company, notice of which
designation shall be given to the Trustee.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investor Service, Inc. and its successors.
"NationsBank Facility" means either (a) the working capital facility made
available pursuant to the letter agreement dated March 31, 1998 between
NationsBank of Texas, N.A., as lender, and the Company, as borrower or (b) any
other agreement or agreements between the Company or any Restricted Subsidiary
and a financial institution or institutions providing for the making of loans or
advances on a revolving basis and/or the issuance of letters of credit and/or
the creation of bankers' acceptances to fund the Company's general corporate
requirements.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations, but only as and when received, in the form of,
or stock or other assets when disposed of for, cash or Cash Equivalents (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Restricted Subsidiary), net of (a) brokerage commissions and
other fees and expenses (including fees and expenses of legal counsel,
accountants and investment banks) related to such Asset Sale, (b) provisions for
all taxes payable or required to
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be accrued in accordance with GAAP as a result of such Asset Sale, (c) payments
made to retire Indebtedness where payment of such Indebtedness is secured by a
Lien on the assets that are the subject of such Asset Sale, (d) amounts required
to be paid to any Person (other than the Company or any Restricted Subsidiary)
owning a beneficial interest in the assets that are subject to the Asset Sale,
and (e) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
against any liabilities associated with such Asset Sale and retained by the
seller after such Asset Sale, including pension and other postemployment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale and (f) all
distributions and other payments made to minority interest holders in Restricted
Subsidiaries or joint ventures as a result of such Asset Sale.
"Parent IRBs" means (i) the Tooele County, Utah Pollution Control Refunding
Revenue Bonds 1997 Series A, par amount $45.7 million, which bear interest at a
rate equal to 7.55% per annum and mature on July 1, 2027 and (ii) the California
Pollution Control Financing Authority 6.7% Pollution Control Refunding Revenue
Bonds 1997 Series A, par amount $19.5 million, which bear interest at a rate
equal to 6.7% per annum and mature on July 1, 2007.
"Parent Promissory Note" means the promissory note in the principal amount
of $60.0 million issued by the Parent on May 15, 1997 in connection with the
Rollins Acquisition.
"Pari Passu Indebtedness" means any Indebtedness of the Company or any
Guarantor, whether outstanding at the date of the Indenture or incurred
thereafter, that ranks pari passu in right of payment with the Notes or any
Guarantee, as the case may be.
"Permitted Holder" means Laidlaw, Inc., any successor thereto, and any of
their Affiliates.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary under the
Senior Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed $1.775 billion, less (x) any amounts applied to
the permanent reduction of any term loans under the Senior Credit Facility
and (y) any amounts applied to the permanent reduction of the Senior Credit
Facility pursuant to the covenant described under " -- Certain
Covenants -- Asset Sales".
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Closing Date, other than Indebtedness described under
clause (i) above.
(iii) Indebtedness owed by the Company to any Wholly-Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary (provided that such Indebtedness is held
by the Company or such Wholly-Owned Restricted Subsidiary); provided,
however, that if the Company is the obligor on such Indebtedness, such
Indebtedness is unsecured and subordinated in all respects to the Company's
obligations under the Notes and provided, further, however, that if any
such Wholly-Owned Restricted Subsidiary ceases to be (for any reason) a
Wholly-Owned Restricted Subsidiary, then this clause (iii) shall no longer
be applicable to Indebtedness owed by the Company or any Restricted
Subsidiary to such Restricted Subsidiary that was formerly a Wholly-Owned
Restricted Subsidiary.
(iv) Indebtedness represented by the Notes (other than the Additional
Notes) and the Guarantees.
(v) Indebtedness of the Company or any Restricted Subsidiary in
respect of Hedging Obligations incurred in the ordinary course of business.
(vi) Capital Lease Obligations of the Company or any Restricted
Subsidiary, provided that the aggregate amount of Indebtedness under this
clause (vi) does not exceed $15.0 million at any one time outstanding.
(vii) Indebtedness of the Company or any Restricted Subsidiary under
purchase money mortgages or secured by purchase money security interests so
long as (x) such Indebtedness is not secured by any property or assets of
the Company or any Restricted Subsidiary other than the property and assets
so acquired and (y) such Indebtedness is created within 90 days of the
acquisition of the related property; provided that the
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aggregate amount of Indebtedness under this clause (vii) does not exceed
$15.0 million at any one time outstanding.
(viii) guarantees by the Company or any Restricted Subsidiary of
Indebtedness that was permitted to be incurred by the provisions of the
covenant described under " -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock" and, with respect to
guarantees by any Restricted Subsidiary, made in accordance with the
provisions of the covenant described under " -- Certain
Covenants -- Guarantees of Indebtedness by Restricted Subsidiaries."
(ix) Indebtedness of the Company or any Restricted Subsidiary, not
otherwise permitted by the first paragraph under the covenant described
under " -- Incurrence of Indebtedness and Issuance of Disqualified Stock"
and any other clause of this definition, in an aggregate principal amount
not to exceed an amount equal to 5% of the total assets of the Company and
its Restricted Subsidiaries (on a consolidated basis determined in
accordance with GAAP).
(x) Indebtedness of one or more Foreign Subsidiaries under one or more
credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $50 million.
(xi) Indebtedness of the Company or any Restricted Subsidiary under
the NationsBank Facility in an aggregate principal amount at any one time
outstanding not to exceed $25.0 million.
(xii) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness incurred pursuant to clause (ii) and (iv) above,
including any successive refinancings thereof, so long as (A) any such new
Indebtedness is in a principal amount that does not exceed the principal
amount so refinanced, plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing, plus the amount of the
expenses of the Company reasonably estimated to be incurred in connection
with such refinancing, (B) in the case of any refinancing of Subordinated
Indebtedness of the Company or any Guarantors, such new Indebtedness is
subordinated to the Notes or the Guarantees, as the case may be, at least
to the same extent as the Indebtedness being refinanced and (C) such
refinancing Indebtedness has a Weighted Average Life equal to or greater
than the Weighted Average Life of the Indebtedness being refinanced and has
a final Stated Maturity no earlier than the final Stated Maturity of the
Indebtedness being refinanced.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents.
(b) Investments by the Company or any Restricted Subsidiary in another
Person, if as a result of such Investment such other Person (i) becomes a
Restricted Subsidiary or (ii) is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Company
or a Restricted Subsidiary.
(c) Investments by the Company or any of the Restricted Subsidiaries
in any one of the other of them.
(d) Investments existing on the Closing Date.
(e) Investments made as a result of the receipt of non-cash
consideration in an Asset Sale permitted under the covenant described under
" -- Certain Covenants -- Asset Sales."
(f) Investments consisting of loans and advances to officers and
employees of the Company or any of its Restricted Subsidiaries for
reasonable travel, relocation and business expenses in the ordinary course
of business.
(g) Investments the payment for which consists exclusively of Capital
Stock (exclusive of Disqualified Stock) of the Company.
(h) Other Investments that do not exceed in the aggregate at any one
time outstanding the greater of (i) $50.0 million or (ii) an amount equal
to 1% of the total assets of the Company and its Restricted Subsidiaries
(on a consolidated basis determined in accordance with GAAP).
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"Permitted Liens" means (a) Liens in existence on the date on which the
Notes achieve an Investment Grade rating; (b) any Lien on any properties or
assets of the Company or any Restricted Subsidiary acquired (including by way of
merger or consolidation) by the Company or any Restricted Subsidiary after the
date on which the Notes achieve an Investment Grade rating, which Lien is
created, incurred or assumed contemporaneously with such acquisition, or within
270 days thereafter, to secure or provide for the payment or financing of any
part of the purchase price thereof, or any Lien upon any properties or assets of
the Company or any Restricted Subsidiary acquired after the date of the
Indenture existing at the time of such acquisition (whether or not assumed by
the Company or any Restricted Subsidiary), provided that every such Lien
referred to in this clause (b) shall attach only to the properties or assets of
the Company or any Restricted Subsidiary so acquired; (c) any Lien or any
properties or assets of the Company or any Restricted Subsidiary in favor of the
Company or any Restricted Subsidiary; (d) any Lien on properties or assets of
the Company or any Restricted Subsidiary incurred in connection with the
issuance of tax-exempt governmental obligations (including, without limitation,
industrial revenue bonds and similar financings); (e) any Lien granted by any
Restricted Subsidiary on its properties or assets to the extent such Lien is not
prohibited by any agreement to which such Restricted Subsidiary is subject as of
the date of the Indenture; (f) any Lien securing Indebtedness under the Senior
Credit Facility, the NationsBank Facility, the C$35,000,000 credit facility made
available pursuant to the letter agreement, dated as of April 3, 1998, between
Laidlaw Environmental Services (Canada) Ltd., as borrower, and Toronto-Dominion
Bank, as lender, as such agreement may be amended, modified or supplemented from
time to time, and Hedging Obligations entered into in connection with the Senior
Credit Facility; and (g) any renewal or substitution for any Lien permitted by
any of the preceding clauses (a) through (g), including any Lien securing
reborrowing of amounts previously secured within 270 days of the repayment
thereof, provided that no such renewal or substitution shall extend to any
properties or assets of the Company or any Restricted Subsidiary other than the
properties or assets of the Company or any Restricted Subsidiary covered by the
Lien being renewed or substituted.
"Person" means any individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Stock) of the Company or Parent pursuant to a registration statement
that has been declared effective by the Commission pursuant to the Securities
Act (other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under any employee benefit plan of the Company or
Parent).
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any Person means any and all Capital Stock of such
Person, other than Disqualified Stock.
"Reference Treasury Dealer" means each of TD Securities (USA) Inc. and
NationsBanc Montgomery Securities LLC, and their respective successors;
provided, however, that if either of the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such
redemption date.
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"Restricted Payment" means any of the following:
(a) the declaration or payment of any dividend on, or the making of
any distribution to holders of, any shares of the Capital Stock of the
Company or any Restricted Subsidiary other than (i) dividends or
distributions payable solely in Qualified Equity Interests or (ii)
dividends or distributions by a Restricted Subsidiary payable to the
Company or another Restricted Subsidiary or (iii) pro rata dividends or
distributions on common stock of a Restricted Subsidiary held by minority
stockholders, provided that such dividends do not in the aggregate exceed
the minority stockholders' pro rata share of such Restricted Subsidiary's
net income from the first day of the Company's fiscal quarter during which
the Closing Date occurs;
(b) the purchase, redemption or other acquisition or retirement for
value, directly or indirectly of any shares of Capital Stock (or any
options, warrants or other rights to acquire shares of Capital Stock) of
(i) the Company or any Unrestricted Subsidiary or (ii) any Restricted
Subsidiary held by any Affiliate of the Company (other than, in either
case, any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);
(c) the making of any principal payment on, or the repurchase,
redemption, defeasance or other acquisition or retirement for value, prior
to any scheduled principal payment, sinking fund payment or maturity, of
any Subordinated Indebtedness; or
(d) the making of any Investment (other than a Permitted Investment)
in any Person.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of any
properties or assets of the Company and/or such Restricted Subsidiary (except
for temporary leases for a term, including any renewal thereof, of not more than
three years and except for leases between the Company and any Restricted
Subsidiary, between any Restricted Subsidiary and the Company or between
Restricted Subsidiaries), which properties or assets have been or are to be sold
or transferred by the Company or such Restricted Subsidiary to such Person with
the intention of taking back a lease of such properties or assets.
"S&P" means Standard & Poor's Ratings Group, a division of the McGraw Hill
Companies, and its successors.
"Senior Credit Facility" means the credit agreement dated as of April 3,
1998 among the Company, the Banks and Toronto Dominion Bank, as agent, as such
agreement may be amended, renewed, extended, substituted, replaced, restated,
refinanced, restructured, supplemented or otherwise modified from time to time
(including, without limitation, any successive amendments, renewals, extensions,
substitutions, replacements, restatements, refinancings, restructuring,
supplements or other modifications of the foregoing); provided that with respect
to any agreement providing for the refinancing of Indebtedness under the Senior
Credit Facility, such agreement shall be the Senior Credit Facility for the
purposes of this definition only if a notice to that effect is delivered by the
Company to the Trustee and there shall be at any time only one instrument that
is the Senior Credit Facility under the Indenture.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law, whether or not
allowed) and other amounts due on or in connection with any Indebtedness of the
Company (other than the Notes or Pari Passu Indebtedness), whether outstanding
on the date of the Indenture or thereafter incurred, unless, in the case of such
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness will be
pari passu with or subordinate in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" includes the
principal of and premium, if any, and interest (including interest accruing
after the occurrence of an event of default or after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law, whether or not
allowed) on all obligations of every nature of the Company from time to time
owed to the Banks under the Senior Credit Facility, provided, however, that any
Indebtedness under any refinancing, refunding or replacement of the Senior
Credit
118
<PAGE> 127
Facility will not constitute Senior Indebtedness to the extent that the
Indebtedness thereunder is by its express terms subordinate to any other
Indebtedness of the Company. Notwithstanding the foregoing, "Senior
Indebtedness" will not include (a) Indebtedness that is represented by
Disqualified Stock, (b) any trade payables, (c) Indebtedness of or amounts owed
by the Company for compensation to employees or for services rendered to the
Company, (d) any liability for foreign, federal, state, local or other taxes
owed or owing by the Company, (e) Indebtedness of the Company to a Subsidiary of
the Company or any other Affiliate of the Company or any of such Affiliate's
Subsidiaries, (f) that portion of any Indebtedness that, at the time of the
incurrence, is incurred by the Company in violation of the Indenture and (g)
amounts owing under leases (other than Capital Lease Obligations).
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that would be a "Significant Subsidiary" of the Company within the meaning of
Rule 1-02 under Regulation S-K promulgated by the Commission as such Rule is in
effect on the date of the Indenture.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable, and will not, in either case, include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor that is subordinated in right of payment to the Notes or the Guarantee
issued by such Guarantor, as the case may be.
"Subsidiary" means any Person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more Subsidiaries of the Company.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary in accordance with the
covenant described under "-- Certain Covenants -- Unrestricted Subsidiaries" and
(b) any Subsidiary of an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a)
the sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Indebtedness or Disqualified Stock,
respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
"Wholly-Owned Foreign Restricted Subsidiary" means any Foreign Subsidiary
that is a Restricted Subsidiary, all of the outstanding Capital Stock (other
than directors' qualifying shares of such Foreign Subsidiary required to be
owned by foreign nationals pursuant to applicable law) of which is owned,
directly or indirectly, by the Company.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding Capital Stock (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which is owned, directly or indirectly,
by the Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of Existing Notes for New Notes and of the purchase,
ownership and disposition of the New Notes is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and
proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold New Notes as part of a straddle or conversion
transaction or holders subject to the alternative minimum tax, may be subject to
special rules. In addition, the summary is limited to persons that will hold the
New Notes as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Code. ALL INVESTORS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE EXCHANGE AND THE OWNERSHIP AND DISPOSITION OF NEW NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of Existing Notes
for New Notes should not be a taxable event to Holders of Existing Notes and
Holders should not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a Holder would have the same adjusted basis and holding
period in the New Notes as it had in the Existing Notes immediately before the
exchange. Further, the tax consequences of ownership and disposition of any New
Notes should be the same as the tax consequences of ownership and disposition of
Existing Notes.
MARKET DISCOUNT
If a Holder purchases a Note for an amount that is less than its principal
amount, the amount of the difference will be treated as "market discount" for
federal income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a Holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement or
other disposition of, a Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such a Note at the time of such payment or disposition. In
addition, the Holder may be required to defer, until the maturity of the Note or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the Holder
elects to accrue on a constant interest method. A Holder of a Note may elect to
include market discount in income currently as it accrues (on either a ratable
or constant interest method), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first taxable year to which the election
applies and may not be revoked without the consent of the Internal Revenue
Service (the "IRS").
AMORTIZABLE BOND PREMIUM
A Holder that purchases a Note for an amount in excess of the sum of its
principal amount will be considered to have purchased the Note at a "premium." A
Holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the Holder's interest income from the Note. Bond
premium on a Note held by a Holder that does not make such an election will
decrease the gain or increase the loss otherwise recognized on disposition of
the Note. The election to amortize premium on a constant yield method once made
applies to all debt obligations held or subsequently acquired by the electing
Holder on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS.
120
<PAGE> 129
SALE, EXCHANGE AND RETIREMENT OF NOTES
A Holder's tax basis in a Note will, in general, be the Holder's cost
therefor, increased by market discount previously included in income by the
Holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Note, a Holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Note. Except as described above with respect to market discount,
such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange or retirement the Note has been
held for more than one year. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
sale of a Note made to Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
Holder fails to provide a taxpayer identification number or certification of
foreign or other exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such Holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
THE FOREGOING SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES TO
HOLDERS DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF HIS PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF NOTES SHOULD CONSULT SUCH
HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE
OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF.
121
<PAGE> 130
PLAN OF DISTRIBUTION
With respect to resales of New Notes, based on an interpretation by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that any holder or beneficial owner (other than a person
that is an affiliate of the Company within the meaning of Rule 405 under the
Securities Act or a "broker" or "dealer" registered under the Exchange Act) who
exchanges Existing Notes for New Notes in the ordinary course of business and
who is not participating, does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the New
Notes, will be allowed to resell the New Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the New Notes a prospectus that satisfies the requirements of Section 10
thereof. However, if any holder or beneficial owner acquires New Notes in the
Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder or beneficial owner cannot rely on
the position of the staff of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988) or similar no-action letters or any similar
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
As contemplated by the above no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes to be acquired
by the holder and any beneficial owners of Existing Notes in connection with the
Exchange Offer are being acquired in the ordinary course of business of the
holder and any beneficial owners, (ii) that at the time of the consummation of
the Exchange Offer the holder and each beneficial owner are not engaging, do not
intend to engage and have no arrangements or understanding with any person to
participate in the distribution of the New Notes in violation of the provisions
of the Securities Act, (iii) the holder and each beneficial owner acknowledge
and agree that any person participating in the Exchange Offer for the purpose of
distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the New Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in no-action letters that
are discussed herein above, (iv) the holder and each beneficial owner understand
that a secondary resale transaction described in clause (iii) above should be
covered by an effective registration statement containing the selling
securityholder information required by Item 507 or 508, as applicable, of
Regulation S-K of the Commission, and (v) neither the holder nor any beneficial
owner(s) is an "affiliate," as defined under Rule 456 of the Securities Act, of
the Company except as otherwise disclosed to the Company in writing.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holds Existing Notes that were acquired for its own account
as a result of market-making activities or other trading activities (other than
Existing Notes acquired directly from the Company or any affiliate of the
Company) may exchange such Existing Notes for New Notes pursuant to the Exchange
Offer. However, such Broker-Dealer may be deemed an underwriter within the
meaning of the Securities Act and, therefore, must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of the New
Notes received by it in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of this
Prospectus. Any Broker-Dealer participating in the Exchange Offer will be
required to acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of New Notes
received by it in the Exchange Offer. However, only Broker-Dealers who exchange
Existing Notes that were acquired for their own account as a result of
market-making activities or other trading activities (other than Existing Notes
acquired directly from the Company or any affiliate of the Company), may use
this Prospectus to satisfy the prospectus delivery requirements of the
Securities Act. The delivery by a Broker-Dealer of a prospectus in connection
with resales of New Notes shall not be deemed to be an admission by such Broker-
Dealer that it is an underwriter within the meaning of the Securities Act.
Prior to the Exchange Offer, there has been no market for any of the New
Notes. The Existing Notes are eligible for trading in the Private Offerings,
Resales and Trading through Automatic Linkages ("PORTAL") market. The New Notes
will not be eligible for PORTAL trading. There can be no assurance that an
active trading market will develop for, or as to the liquidity of, any of the
New Notes.
122
<PAGE> 131
LEGAL MATTERS
The legality of the New Notes are being passed upon on behalf of the
Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of the Parent as of August 31, 1997
and 1996, and for each of the three years in the period ended August 31, 1997,
included in this Prospectus have been audited by PriceWaterhouseCoopers, LLP
(formerly Coopers & Lybrand L.L.P.), independent accountants, as stated in their
report appearing herein.
The consolidated financial statements of Safety-Kleen as of January 3, 1998
and December 28, 1997, and for each of the three years in the period ended
January 3, 1998, included in this Prospectus have been audited by Arthur
Andersen LLP, independent accountants as stated in their report appearing
herein.
The consolidated financial statements of Rollins as of September 30, 1996
and 1995, and for each of the three years in the period ended September 30,
1996, incorporated by reference in this Prospectus have been audited by KPMG
Peat Marwick LLP, independent accountants as stated in their report incorporated
herein by reference.
AVAILABLE INFORMATION
The Parent, the Company and the Subsidiary Guarantors have filed with the
Commission a Registration Statement on Form S-4 (together with all amendments,
exhibits, schedules and supplements thereto, the "Registration Statement") under
the Securities Act with respect to the New Notes and Guarantees being offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement. For
further information with respect to the Parent, the Company, and the Subsidiary
Guarantors and the New Notes, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Parent is currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports and other information with the
Commission. Copies of the Registration Statement and reports and other
information filed by the Parent with the Commission pursuant to the
informational requirements of the Exchange Act may be examined without charge at
the Public Reference Section of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any portion of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, upon payment of certain fees prescribed by the Commission. The Commission
maintains an Internet Web Site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. In addition, copies of such
information may also be inspected and copied at the office of The New York Stock
Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005, upon
which the Parent's common stock is listed.
Under the Indenture relating to the Notes, and without regard to whether
the Parent or the Company is subject to the informational requirements of the
Exchange Act, the Parent has agreed to file with the Commission and to
distribute to the Trustee and holders of the Notes annual reports of the Parent
containing audited consolidated financial statements, as well as quarterly
reports containing unaudited consolidated financial statements for each of the
first three quarters of fiscal year. The Parent has agreed that if it or the
Company is not subject to the informational requirements of Section 13 or 15(d)
of the Exchange Act at any time prior to the second anniversary of the Closing
Date, it will furnish to holders of the Notes and to prospective purchasers
designated by such holders the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in
connection with resales of the Notes.
123
<PAGE> 132
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Parent with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
1. The Parent's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997;
2. The Parent's Proxy Statement dated October 28, 1997 for the Parent's
annual meeting held on November 25, 1997;
3. The Parent's Quarterly Report on Form 10-Q for the fiscal period ended
November 30, 1997;
4. The Parent's Current Reports filed on Form 8-K dated November 5, 1997,
November 14, 1997, November 14, 1997, November 19, 1997, November 21,
1997, November 25, 1997, December 8, 1997, December 19, 1997, December
31, 1997, December 31, 1997, December 31, 1997, December 31, 1997,
December 31, 1997, January 2, 1998, January 28, 1998, February 5,
1998, February 9, 1998, February 9, 1998, February 11, 1998, February
17, 1998, February 17, 1998, February 18, 1998, February 20, 1998,
February 24, 1998, February 24, 1998, February 25, 1998, February 26,
1998, March 5, 1998, March 6, 1998, March 10, 1998, March 12, 1998,
March 13, 1998, March 16, 1998, March 19, 1998, March 30, 1998, April
1, 1998, April 3, 1998, April 6, 1998, April 8, 1998, April 20, 1998,
May 18, 1998 and May 27, 1998;
5. The Parent's Registration Statement on Form S-4 dated November 13,
1997, as amended by amendments dated November 25, 1997, December 16,
1997, January 6, 1998, January 15, 1998, January 16, 1998, January 27,
1998, January 28, 1998, March 16, 1998, March 18, 1998 and March 19,
1998;
6. The Parent's Proxy Statement dated December 16, 1997 for
Safety-Kleen's special meeting to be held on January 9, 1998;
7. The Parent's Preliminary Proxy Statement Dated January 22, 1998 for
Safety-Kleen's special meeting to be held on February 11, 1998, as
amended;
8. The Parent's Preliminary Proxy Statement dated January 21, 1998 for
the Parent's special meeting at which the stockholder's of the Parent
approved resolutions (i) increasing the Parent's authorized common
stock from 350,000,000 shares to 750,000,000 shares, and (ii)
authorizing the issuance of the Parent's common stock pursuant to the
offer;
9. The Parent's Schedule 14D-1 dated January 16, 1998, as amended, by
amendments dated January 27, 1998, January 28, 1998, February 5, 1998,
February 9, 1998, February 11, 1998, February 17, 1998, February 18,
1998, February 23, 1998, February 24, 1998, February 25, 1998,
February 27, 1998, March 3, 1998, March 5, 1998, March 6, 1998, March
11, 1998, March 12, 1998, March 13, 1998 and as amended by supplement
on March 19, 1998;
10. The Parent's Revised Definitive Proxy Materials dated December 31,
1997, January 5, 1998, January 6, 1998, January 22, 1998, January 27,
1998, February 9, 1998, February 10, 1998, February 11, 1998, February
17, 1998, February 27, 1998, March 3, 1998, March 5, 1998, March 6,
1998, March 11, 1998, March 12, 1998, filed with Safety-Kleen's
Schedule 14D-9;
11. The Parent's Quarterly Reports on Form 10-Q for the fiscal period
ended February 28, 1998 and May 31, 1998;
12. The Parent's Proxy Statement dated March 16, 1998, and March 18, 1998;
13. The Parent's Proxy Statement dated April 10, 1998, and April 17, 1998.
124
<PAGE> 133
The following documents listed below filed by Rollins with the Commission
pursuant to the Exchange Act and the portions thereof referred to below are
specifically incorporated by reference in and are an integral part of this
Prospectus:
1. The consolidated audited financial statements of Rollins included in
Rollins' Annual Report on Form 10-K for the year ended September 30,
1996 filed on December 4, 1996; and
2. The interim unaudited condensed consolidated financial statements for
the three and six month periods ended March 31, 1997 and 1996 included
in Rollins' Quarterly Report on Form 10-Q filed on May 9, 1997.
Each document filed by the Parent or the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the Expiration Date shall be deemed to be incorporated by reference
into this Prospectus from the date of filing such document. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
document subsequently filed with the Commission which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to each
person to whom this Prospectus is delivered, upon the written request of such
person, a copy of any or all of the documents incorporated by reference herein
(not including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Company at Suite 300, 1301 Gervais Street,
Columbia, South Carolina 29201, Attention: Investor Relations.
125
<PAGE> 134
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements that are "Forward-Looking
Statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Those statements include, among other things, the
discussions of the Parent's and the Company's business strategy and expectations
concerning market position, future operations, margins, profitability, liquidity
and capital resources, as well as statements concerning the integration of the
operations of Safety-Kleen and achievement of financial benefits and operational
efficiencies in connection therewith. Forward-looking statements are included in
"Prospectus Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Laidlaw Environmental," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Safety-Kleen," and elsewhere in this Prospectus. Although the Company believes
that the expectations reflected in such Forward-Looking Statements are
reasonable, they can give no assurance that such expectations will prove to have
been correct. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, number of acquisitions and projected or anticipated
benefits from acquisitions made by or to be made by the Company and the Parent
(including the Safety-Kleen Acquisition), or projections involving anticipated
revenues, expenses, earnings, levels of capital expenditures or other aspects of
operating results. All phases of the operations of the Company and the Parent
are subject to a number of certainties, risks and other influences, many of
which are outside the control of the Company and the Parent and any one of
which, or a combination of which, could materially affect the results of their
operations and whether the Forward-Looking Statements made by the Company and
the Parent ultimately prove to be accurate. Important factors that could cause
actual results to differ materially from such expectations are disclosed in this
section and in "Risk Factors." See "Risk Factors."
126
<PAGE> 135
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF LAIDLAW ENVIRONMENTAL
SERVICES, INC.
Independent Auditors' Report.............................. F-2
Consolidated Statements of Income for the Years Ended
August 31, 1997, 1996 and 1995......................... F-3
Consolidated Balance Sheets as of August 31, 1997 and
1996................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended
August 31, 1997, 1996 and 1995......................... F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended August 31, 1997, 1996 and 1995............. F-6
Notes to Consolidated Financial Statements................ F-7
Consolidated Statements of Income for the Nine Month
Periods Ended May 31, 1998 and 1997 (unaudited)........ F-30
Consolidated Balance Sheets as of May 31, 1998 (unaudited)
and August 31, 1997.................................... F-31
Consolidated Statements of Cash Flows for the Nine Month
Periods Ended May 31, 1998 and 1997 (unaudited)........ F-32
Notes to Consolidated Financial Statements (unaudited).... F-33
CONSOLIDATED FINANCIAL STATEMENTS OF SAFETY-KLEEN CORP.
Independent Auditors' Report.............................. F-40
Consolidated Statements of Operations for Fiscal Years
1997, 1996 and 1995.................................... F-41
Consolidated Statements of Comprehensive Income for Fiscal
Years 1997, 1996 and 1995.............................. F-42
Consolidated Balance Sheets as of January 3, 1998 and
December 28, 1996...................................... F-43
Consolidated Statements of Shareholders' Equity for Fiscal
Years 1997, 1996 and 1995.............................. F-44
Consolidated Statements of Cash Flows for Fiscal Years
1997, 1996 and 1995.................................... F-45
Notes to Consolidated Financial Statements................ F-46
Consolidated Balance Sheets as of March 28, 1998 and
January 3, 1998 (unaudited)............................ F-71
Consolidated Statements of Earnings for the Twelve Weeks
Ended March 28, 1998 and March 22, 1997 (unaudited).... F-72
Consolidated Statements of Comprehensive Income for the
Twelve Weeks Ended March 28, 1998 and March 22, 1997
(unaudited)............................................ F-73
Consolidated Statements of Cash Flows for the Twelve Weeks
Ended March 28, 1998 and March 22, 1997 (unaudited).... F-74
Notes to Consolidated Financial Statements (unaudited).... F-75
</TABLE>
F-1
<PAGE> 136
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors
Laidlaw Environmental Services, Inc.
We have audited the accompanying consolidated balance sheets of Laidlaw
Environmental Services, Inc. and Subsidiaries, as of August 31, 1997 and 1996,
and the related consolidated statements of income, cash flows, and changes in
stockholders' equity for each of the three years in the period ended August 31,
1997. 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 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 consolidated financial position of Laidlaw
Environmental Services, Inc. and Subsidiaries as of August 31, 1997 and 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended August 31, 1997, in accordance with
generally accepted accounting principles.
As discussed in Note 2, the statement of cashflows has been revised for the
years ended August 31, 1996 and 1995.
Coopers & Lybrand L.L.P.
Charlotte, North Carolina
October 7, 1997, except for the first two paragraphs of Note 17
as to which the date is May 21, 1998
F-2
<PAGE> 137
LAIDLAW ENVIRONMENTAL SERVICES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------
1997 1996 1995
--------- -------- --------
($ IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues.................................................... $ 678,619 $652,973 $599,241
--------- -------- --------
Expenses:
Operating................................................. 485,062 473,563 428,932
Depreciation and amortization............................. 53,506 48,291 48,386
Selling, general and administrative....................... 73,068 73,800 62,064
Restructuring charge...................................... 331,697 -- --
--------- -------- --------
Total expenses.................................... 943,333 595,654 539,382
--------- -------- --------
Operating income (loss)..................................... (264,714) 57,319 59,859
Allocated interest expense.................................. 24,030 41,506 36,846
Interest expense............................................ 20,243 5,344 4,296
Other income................................................ 2,865 1,391 2,967
--------- -------- --------
Income (loss) from continuing operations before income
tax....................................................... (306,122) 11,860 21,684
Income tax expense (benefit)................................ (122,789) 2,500 4,769
--------- -------- --------
Income (loss) from continuing operations before minority
interest.................................................. (183,333) 9,360 16,915
Minority interest (net of tax).............................. (119) (2,646) (150)
--------- -------- --------
Income (loss) from continuing operations.................... (183,452) 6,714 16,765
Income from discontinued operations (net of tax)............ 20 1,496 819
--------- -------- --------
Net income (loss)................................. $(183,432) $ 8,210 $ 17,584
========= ======== ========
Per share data:
Net income (loss) from continuing operations.............. $ (1.329) $ 0.056 $ 0.140
Income from discontinued operations....................... -- 0.012 0.007
--------- -------- --------
Net income (loss) per share....................... $ (1.329) $ 0.068 $ 0.147
========= ======== ========
Weighted average common and common stock equivalents
outstanding (000's)....................................... 138,033 120,000 120,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 138
LAIDLAW ENVIRONMENTAL SERVICES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------
1997 1996
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 11,160 $ --
Trade and other accounts receivable (net of allowance for
doubtful accounts of $7,236 in 1997; $4,985 in 1996)... 210,914 184,626
Inventories............................................... 7,927 7,956
Income taxes receivable................................... -- 5,017
Deferred income taxes..................................... 13,027 --
Other current assets...................................... 8,512 5,871
---------- ----------
Total current assets.............................. 251,540 203,470
---------- ----------
Long-term investments....................................... 51,909 37,093
---------- ----------
Land, landfill sites and improvements....................... 499,680 564,934
Buildings................................................... 423,712 397,165
Machinery and equipment..................................... 610,274 431,077
Construction in process..................................... 6,357 42,732
---------- ----------
Property, plant and equipment............................... 1,540,023 1,435,908
Less: Accumulated depreciation and amortization............. (303,454) (323,180)
---------- ----------
Net property, plant and equipment................. 1,236,569 1,112,728
---------- ----------
Net assets of discontinued operations....................... -- 55,827
Goodwill, at cost (net of accumulated amortization of
$11,669 in 1997; $12,962 in 1996)......................... 70,527 81,579
Deferred changes............................................ 333 597
---------- ----------
Total assets...................................... $1,610,878 $1,491,294
========== ==========
LIABILITIES
Current liabilities
Accounts payable.......................................... $ 48,148 $ 88,806
Accrued liabilities....................................... 115,211 66,705
Current portion of long-term debt......................... 12,086 7,282
---------- ----------
Total current liabilities......................... 175,445 162,793
---------- ----------
Deferred items
Income taxes.............................................. 49,790 86,985
Other..................................................... 179,668 98,183
Long-term debt.............................................. 528,010 48,556
Subordinated convertible debenture.......................... 350,000 --
---------- ----------
Total liabilities................................. 1,282,913 396,517
---------- ----------
Commitments and contingencies............................... -- --
STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized
350,000,000, issued and outstanding 180,435,311 in
1997, 120,000,000 in 1996.............................. 180,435 120,000
Additional paid-in capital................................ 385,200 1,028,309
Accumulated deficit....................................... (237,670) (53,532)
---------- ----------
Total stockholders' equity........................ 327,965 1,094,777
---------- ----------
Total liabilities and stockholders' equity........ $1,610,878 $1,491,294
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 139
LAIDLAW ENVIRONMENTAL SERVICES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)........................................... $(183,432) $ 8,210 $ 17,584
Adjustments to reconcile net income (loss) to net cash
provided by (used in) continuing operations:
Income from discontinued operations....................... (20) (1,496) (819)
Restructuring charge, net of applicable income taxes...... 200,000 -- --
Depreciation and amortization............................. 53,506 48,291 48,386
Deferred income taxes..................................... 37,507 783 4,298
Change in accounts receivable............................. (8,151) (1,719) (6,896)
Change in accounts payable, accrued liabilities and
deferred liabilities.................................... (52,632) (30,692) (21,741)
Decrease in liabilities assumed upon acquisition.......... (17,945) -- --
Change in other, net...................................... 8,126 (1,428) (984)
--------- --------- ---------
Net cash provided by continuing operations.......... 36,959 21,949 39,828
Net cash provided by discontinued operations........ 425 3,199 276
--------- --------- ---------
Net cash provided by operating activities........... 37,384 25,148 40,104
--------- --------- ---------
Cash flow from investing activities:
Cash acquired (expended) on acquisition of business....... 15,451 (8,000) (229,186)
Purchase of property, plant and equipment................. (36,097) (104,284) (68,650)
Increase in long-term investments......................... (2,837) -- (1,238)
Proceeds from sales of equipment.......................... 1,596 3,319 1,176
Other..................................................... -- (5,984) (2,859)
--------- --------- ---------
Net cash used in continuing operations.............. (21,887) (114,949) (300,757)
Net cash used in discontinued operations............ (1,887) (5,026) (3,173)
--------- --------- ---------
Net cash used in investing activities............... (23,774) (119,975) (303,930)
--------- --------- ---------
Cash flows from financing activities:
Issuance of debt under Bank Credit Facility............... 375,000 -- --
Additional debt issuances................................. 76,622 -- 32,251
Debt financing fees and expenses.......................... (18,788) -- --
Bank overdraft............................................ (32,188) 21,880 7,311
Repayment of long-term debt............................... (61,542) (7,548) (27,049)
Payment to Laidlaw Inc. .................................. (349,116) -- --
Advances from Laidlaw Inc. ............................... 7,562 82,913 243,614
--------- --------- ---------
Net cash provided by (used in) continuing
operations.......................................... (2,450) 97,245 256,127
Net cash provided by (used in) discontinued
operations.......................................... -- (2,418) 7,699
--------- --------- ---------
Net cash provided by (used in) financing
activities.......................................... (2,450) 94,827 263,826
--------- --------- ---------
Net increase in cash and cash equivalents................... 11,160 -- --
Cash and cash equivalents of:
Beginning of period....................................... -- -- --
--------- --------- ---------
End of period............................................. $ 11,160 $ -- $ --
========= ========= =========
CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amounts capitalized)..................... $ 26,660 $ 34,050 $ 35,242
Income taxes.............................................. -- -- --
NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of Rollins
Fair value of assets acquired............................. $ 495,168 $ -- $ --
Fair value of liabilities assumed......................... 329,134 -- --
--------- --------- ---------
Fair value of stock issued................................ $ 166,034 $ -- $ --
========= ========= =========
Issuance of subordinated convertible debenture to Laidlaw
Inc. ................................................... $ 350,000 $ -- $ --
========= ========= =========
Accounts payable related to fixed assets.................... $ -- $ 8,992 $ --
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 140
LAIDLAW ENVIRONMENTAL SERVICES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL ACCUMULATED STOCKHOLDERS'
STOCK PAID-IN CAPITAL DEFICIT EQUITY
-------- --------------- ----------- -------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at September 1, 1994................... $120,000 $ 757,923 $ (79,326) $ 798,597
Net income..................................... -- -- 17,584 17,584
Net additional investment by Laidlaw Inc....... -- 240,085 -- 240,085
-------- ---------- --------- ----------
Balance at August 31, 1995..................... 120,000 998,008 (61,742) 1,056,266
Net income..................................... -- -- 8,210 8,210
Net additional investment by Laidlaw Inc....... -- 30,301 -- 30,301
-------- ---------- --------- ----------
Balance at August 31, 1996..................... 120,000 1,028,309 (53,532) 1,094,777
Net loss....................................... -- -- (183,432) (183,432)
Net additional investment by Laidlaw Inc....... -- 7,562 -- 7,562
Issuance of subordinated convertible debenture
to Laidlaw Inc............................... -- (350,000) -- (350,000)
Cash paid to Laidlaw Inc....................... -- (349,116) -- (349,116)
Issuance of additional shares on acquisition... 60,376 105,658 -- 166,034
Exercise of stock options...................... 59 96 -- 155
Transfer of JTM Industries, Inc. to Laidlaw
Inc.......................................... -- (57,309) -- (57,309)
Cumulative foreign currency translation
adjustments.................................. -- -- (706) (706)
-------- ---------- --------- ----------
Balance at August 31, 1997..................... $180,435 $ 385,200 $(237,670) $ 327,965
======== ========== ========= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 141
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS COMBINATION
On May 15, 1997, pursuant to a February 6, 1997 stock purchase agreement
(the "Stock Purchase Agreement") between Rollins Environmental Services, Inc.
("Rollins") and Laidlaw Inc. ("Laidlaw"), Rollins acquired the hazardous and
industrial waste operations of Laidlaw ("Old LESI" or the "Accounting Acquirer")
(the "Acquisition"). The business combination was accounted for as a reverse
acquisition using the purchase method of accounting. Rollins issued 120 million
common shares and a $350 million 5% subordinated convertible debenture, and paid
$349.1 million in cash ($400 million, less debt of $50.9 million assumed), to
Laidlaw to consummate the Acquisition. Coincident with the closing of the
Acquisition, the continuing legal entity changed its name from Rollins
Environmental Services, Inc. to Laidlaw Environmental Services, Inc. (the
"Company"). As a result of the Acquisition, Laidlaw owns 67% of the issued
common shares of the Company. Accordingly, the Company adopted the Accounting
Acquirer's fiscal year-end of August 31.
The reverse acquisition purchase price is the fair market value of the
Rollins common shares outstanding prior to completion of the Acquisition. As the
only remaining conditions to close the Acquisition after signing the Stock
Purchase Agreement involved stockholder and regulatory approvals, the date of
signing is the appropriate determination date for the market price of the
Rollins common shares. The average closing market price per share on the
NYSE -- Composite Transactions for the five trading days before and after
February 6, 1997, was $2.75. Applying this price per share to the 60,375,811
common shares outstanding on February 6, 1997, resulted in a purchase price of
approximately $166 million.
As a direct result of the personnel reductions and facility closures
related to the Rollins acquisition, the Company plans incurring cash severance
and closure costs. With respect to the former Rollins' operations, approximately
$17 million of severance costs and $40 million of closure costs related to
dismantling, decontamination and regulatory approval are planned to be incurred.
With respect to the Old LESI operations, approximately $25 million of costs are
scheduled to be incurred. Of such costs, management expects to incur between $20
million and $25 million within 12 months of the Acquisition. (See Note 9.)
As a result of the Acquisition, the historical financial information
included in these consolidated financial statements is that of the Accounting
Acquirer. The results of operations of Rollins have been included from the date
of acquisition, May 15, 1997.
Condensed unaudited pro forma statements of operations data, as if the
Acquisition had occurred at the beginning of the previous year, are as follows
($ in thousands, except per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------
1997 1996
--------- --------
<S> <C> <C>
Revenue..................................................... $ 825,505 $885,741
Loss from continuing operations............................. (222,162) (23,981)
Income from discontinued operations......................... 20 1,496
--------- --------
Net loss.................................................... $(222,142) $(22,485)
========= ========
Per share data:
Loss from continuing operations............................. $ (1.204) $ (.131)
Income from discontinued operations......................... .000 .008
--------- --------
Net loss.................................................... $ (1.204) $ (.123)
========= ========
Weighted average common and common stock equivalents
outstanding (000's)....................................... 184,444 182,787
</TABLE>
F-7
<PAGE> 142
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles requiring the Company
to make estimates and assumptions that affect reported amounts of assets,
liabilities, revenue and expenses, and disclosure of contingencies. Future
events could alter such estimates in the near term.
Certain figures as of August 31, 1996, and for the years ended August 31,
1996 and 1995 have been reclassified to conform to the current period's
presentations. The Company has revised its statement of cash flows for the years
ended August 31, 1996 and 1995 to reclassify certain long term liability amounts
from financing activities to operating activities and to reclassify bank
overdraft amounts from operating activities to financing activities.
Additionally, the amount reported as the change in Net Investment by Laidlaw
Inc. has been reclassified as a financing cash flow activity. Accordingly, cash
flows from operations decreased by $37,604 and $13,478 for the years ended
August 31, 1996 and 1995, respectively, and cash flows from financing activities
decreased by $907 and $244,191 for the years ended August 31, 1996 and 1995,
respectively, from the amounts previously reported.
A summary of the significant accounting policies followed in the
preparation of these consolidated financial statements is as follows:
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its subsidiary companies. All significant intercompany transactions
are eliminated. The purchase method of accounting for business combinations has
been used.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit and term deposits in
investments with maturities of less than three months.
INVENTORIES
Inventories are valued at the lower of cost, determined on a first-in,
first-out basis, or replacement cost.
LONG-TERM INVESTMENTS
Long-term investments, held to maturity, are carried at cost, which
approximates fair market value, and consist primarily of long-term trust fund
deposits with government authorities to support closure and post-closure
activities at several of the Company's facilities.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost.
Landfill sites, preparation costs and improvements are amortized on the
basis of landfill capacity utilized during the year. Landfill capacity
represents total permitted airspace which is measured in the form of cubic
yards. Effective in 1996, the Company commenced capitalizing interest on
landfill capacity under development to the cost of the landfill. The effect of
the adoption of this policy was immaterial in the current and prior years.
During the construction and development period of an asset, the costs
incurred, including applicable interest costs, are classified as construction in
process. Once an asset has been completed and put into use, it is transferred to
the appropriate category and depreciation commences.
F-8
<PAGE> 143
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal years 1997, 1996 and 1995, the Company capitalized interest
of $6.7 million, $12.8 million and $5.9 million, respectively.
The cost of permits directly related to property, plant and equipment is
capitalized with the related asset and depreciated over the expected permit
life.
Depreciation and amortization of other property, plant and equipment is
provided substantially on a straight-line basis over their estimated useful
lives which are as follows:
Buildings -- 20 to 40 years
Machinery and equipment -- 5 to 30 years.
GOODWILL
Goodwill is amortized on a straight-line basis over forty years.
IMPAIRMENT
The Company periodically reviews the carrying values of its fixed assets
and intangibles to determine whether such values are recoverable. Accordingly,
when indicators of impairment are present, the Company evaluates the carrying
value of property, plant and equipment and intangibles in relation to the
operating performance and future undiscounted cash flows of the underlying
business. The Company adjusts the book value of the underlying asset if the sum
of expected future cash flows is less than book value. Any resulting write downs
are charged to depreciation and amortization expense.
DEFERRED CHARGES
Deferred charges are amortized on a straight-line basis over a two- to
five-year period depending on the nature of the deferred costs.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the life of the related debt
instrument and included in long-term debt.
ENVIRONMENTAL LIABILITIES
Environmental liabilities include accruals for costs associated with
closure and post-closure monitoring and maintenance of the Company's landfills,
remediation at certain of the Company's facilities and corrective actions at
Superfund sites. The Company accrues for closure and post-closure costs over the
life of the landfill site as capacity is consumed.
FINANCIAL INSTRUMENTS
The Company's cash and cash equivalents, accounts receivable, certain
long-term investments, accounts payable, long-term debt and the subordinated
convertible debenture constitute financial instruments. Concentration of credit
risks in accounts receivable are limited due to the large number of customers
comprising the Company's customer base throughout North America. The Company
performs ongoing credit evaluations of its customers, but does not require
collateral to support customer accounts receivable. The Company establishes an
allowance for doubtful accounts based on the credit risk applicable to
particular customers, historical trends and other relevant information.
F-9
<PAGE> 144
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate swap agreements to minimize the impact of
interest rate fluctuations on floating interest rate long-term borrowings. The
differential paid or received on interest rate swap agreements is recognized as
an adjustment to interest expense. See Note 4 for fair value information
pertaining to long-term debt and derivative financial instruments.
REVENUE RECOGNITION
Revenues, along with the related costs of treatment, disposal and
transportation, at the Company's service center operations, which primarily
collect, transport and prepare waste material for transfer to disposal
facilities are recognized when the waste material is accepted at the service
center. Pursuant to contracts with its customers, the Company accepts title to
waste material at such time and provides contractual indemnification to its
customers against future liability with respect to the waste materials.
Revenues from the Company's treatment and disposal operations, primarily
landfill and incineration facilities, are recognized when the waste material is
disposed of, whether burned, landfilled or treated.
INCOME TAXES
Deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts. Future tax benefits, such as net operating loss
carryforwards, are recognized to the extent that realization of such benefits
are more likely than not. Prior to May 15, 1997, the Company filed consolidated
tax returns with Laidlaw. Income taxes for the periods prior to May 15, 1997
have been calculated using applicable income tax rates on income for tax
purposes on a separate return basis.
FOREIGN CURRENCY TRANSLATION
The Company's foreign operations are all of a self-sustaining nature. The
functional currency of the Company's foreign subsidiaries is its respective
local currency. Assets and liabilities are translated to U. S. Dollars at the
exchange rate in effect at the balance sheet date and revenue and expenses at
weighted monthly average exchange rates for the year. Gains and losses from the
translation of the financial statements of the foreign subsidiaries are included
in stockholders' equity.
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1997 1996
-------- -------
($ IN THOUSANDS)
<S> <C> <C>
Current portion of environmental liabilities................ $ 27,376 $26,327
Interest payable............................................ 12,643 938
Accrued severance pay....................................... 12,911 --
Accrued disposal costs...................................... 10,039.. 9,147
Other....................................................... 52,242 30,293
-------- -------
Total............................................. $115,211 $66,705
======== =======
</TABLE>
4. LONG-TERM DEBT
Prior to May 15, 1997, Laidlaw provided the majority of the financing for
Old LESI's operating and investing activities through a combination of
intercompany equity and debt investments. The total investment in
F-10
<PAGE> 145
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company by Laidlaw is included in stockholders' equity prior to May 15,
1997. Interest expense associated with this intercompany financing has been
allocated to the Company based on its share of Laidlaw's consolidated net
assets.
The Company financed the cash consideration portion of the Acquisition and
certain fees related thereto with proceeds of a bank credit facility (the "Bank
Credit Facility") arranged pursuant to a credit agreement between the Company
and a syndicate of banks and other financial institutions. The Bank Credit
Facility consists of five parts: (i) a $275 million six-year senior revolving
credit facility with a $200 million letter of credit sublimit ("Revolving Credit
Facility"), (ii) a $165 million six-year senior amortizing term loan, (iii) a
$60 million six-year senior amortizing Canadian term loan, (iv) a $75 million
minimally amortizing seven-year senior term loan and (v) a $75 million minimally
amortizing eight-year senior term loan. The term loans referred to in clauses
(ii), (iii), (iv) and (v) are collectively referred to herein as the "Term
Loans".
The Term Loans were drawn upon in full May 15, 1997, the closing date of
the Acquisition. The Revolving Credit Facility has $200 million available for
letters of credit and $100 million available for loans, subject to the aggregate
limit of $275 million. As of August 31, 1997, $23.3 million of letters of credit
were issued and none was used for loans.
The Bank Credit Facility also contains negative, affirmative and financial
covenants customarily found in credit agreements for financings similar to the
financing provided under the Bank Credit Facility, including covenants limiting
annual capital expenditures, restricting debt, guaranties, liens, mergers and
consolidations, sales of assets and payment of dividends. The Company was in
compliance with its covenants at August 31, 1997.
The Bank Credit Facility is collateralized by certain tangible assets of
the Company. All of the capital stock of the Company's subsidiaries are pledged
to the lenders, and such subsidiaries guaranty the obligations of the Company to
the lenders.
Interest costs on the Bank Credit Facility are reset periodically, at least
annually, and vary depending on the particular facility and whether the Company
chooses to borrow under Eurodollar or non-Eurodollar loans. Interest costs on
the promissory note is based on U.S. Dollar London Interbank Offered Rate
("LIBOR"), determined on a semi-annual basis.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1997 1996
-------- -------
($ IN THOUSANDS)
<S> <C> <C>
Bank Credit Facility:
Term loans, U.S., with interest rates from 8.095% to
9.225%................................................. $315,000 $ --
Term loans, Canadian, with interest rates from 5.881% to
6.141%................................................. 60,000 --
Promissory note, due May 2003, with an interest rate of
5.98%..................................................... 60,000 --
Industrial Revenue Bonds, due 2003 - 2027, with fixed
interest rates from 6.0% to 9.0%.......................... 123,314 46,991
Other....................................................... 948 9,717
-------- -------
559,262 56,708
Less: current portion....................................... 12,086 7,282
Less: unamortized deferred financing costs.................. 19,166 870
-------- -------
Total............................................. $528,010 $48,556
======== =======
</TABLE>
F-11
<PAGE> 146
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate amount of minimum payments required on long-term debt in each
of the years indicated is as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ---------------------- ($ IN THOUSANDS)
<S> <C>
1998..................................................... $ 12,086
1999..................................................... 26,827
2000..................................................... 36,658
2001..................................................... 51,500
2002..................................................... 66,500
Thereafter............................................... 365,691
--------
Total minimum payments due..................... $559,262
========
</TABLE>
In management's view, due to the long-term debt being primarily based on
floating rates, the carrying amounts approximate fair value. The promissory note
and $39 million of the Industrial Revenue Bonds are guaranteed by Laidlaw.
In July 1997, the Company entered into interest rate swap agreements to
alter interest rate exposures. These agreements, with a principal notional
amount of $160 million, expire in periods ranging from 1.5 to 2.5 years, with a
weighted average of 2.1 years. The Company pays fixed rates ranging from 5.945%
to 6.07%, and receives floating rates based on U.S. Dollar LIBOR, determined on
a quarterly basis of 5.719% at August 31, 1997.
Credit risk arises from the possible inability of counterparties to meet
the terms of their contracts on a net basis. All of the Company's interest rate
swap agreements have been entered into with major financial institutions which
are expected to fully perform under the terms of the agreements. The Company's
credit exposure on swaps is related not to the notional balances of the interest
rate swaps, but to the current and potential replacement costs of all profitable
contracts at year end. At August 31, 1997 this credit exposure is immaterial.
Credit exposure will increase along with the market value of the swaps, if
interest rates increase, and decrease if interest rates decline.
Derivative financial instrument fair values represent an approximation of
amounts the Company would have paid to or received from counterparties to
terminate its positions prior to maturity, and are based on capital market rates
prevailing at August 31, 1997. The Company's fair value benefit for all interest
rate derivative contracts as of August 31, 1997, was approximately $0.3 million.
At August 31, 1997, the Company had no plans to terminate these positions prior
to maturity.
5. SUBORDINATED CONVERTIBLE DEBENTURE
Pursuant to the Acquisition described in Note 1, the Company issued a $350
million 5% subordinated convertible, pay-in-kind debenture ("PIK") due May 15,
2009 to Laidlaw.
Interest on the PIK is payable semiannually, on November 15 and May 15
until maturity. Beginning on May 15, 2002, and continuing until maturity, the
PIK is convertible, at the option of the holder into common shares of the
Company based on a conversion price per share of $3.75 (the "Conversion Price").
Beginning on May 15, 2002, and continuing until maturity, the Company has the
option to redeem the PIK in cash if the common shares are trading at a market
price greater than or equal to 120% of the Conversion Price. The PIK ranks
junior in right of payment (principal and interest) to all other long-term debt,
including the Bank Credit Facility.
The estimated fair value of the PIK is based on quoted market prices, where
available, along with present value calculations which are calculated using
current rates for similar debt with the same remaining maturity. The Company
estimates that the fair value of the PIK at August 31, 1997 was $493.6 million.
Interest payments due during the first two years after issuance of the PIK
are required to be satisfied by the issuance of the Company's common shares,
based on the market price of the common shares at the time the
F-12
<PAGE> 147
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest payments are due. At the Company's option, any other interest or
principal payments, other than optional early redemption, may be satisfied by
issuing common shares, based on the market price at the time such payments are
due.
6. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS:
Rental expense incurred under operating leases was $36.1 million, $35.9
million and $35.4 million in 1997, 1996 and 1995, respectively. Minimum future
rental amounts required under operating leases for premises and equipment having
non-cancelable terms in excess of one year as of August 31, 1997, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ---------------------- ($ IN THOUSANDS)
<S> <C>
1998........................................................ $18,163
1999........................................................ 13,007
2000........................................................ 9,853
2001........................................................ 5,664
2002........................................................ 3,454
Thereafter.................................................. 9,365
-------
Total............................................. $59,506
=======
</TABLE>
CLOSURE, POST-CLOSURE AND ENVIRONMENTAL LIABILITIES:
The Company has recorded liabilities for closure and post-closure
monitoring and environmental remediation costs as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1997 1996
-------- -------
($ IN THOUSANDS)
<S> <C> <C>
Current portion, included in accrued liabilities............ $ 27,376 $26,327
Non-current portion, included in deferred items -- other.... 155,685 70,478
-------- -------
Total..................................................... $183,061 $96,805
======== =======
</TABLE>
The business of the Company's hazardous and industrial waste services is
continuously regulated by federal, state, provincial and local provisions that
have been enacted or adopted, regulating the discharge of materials into the
environment or primarily for the purpose of protecting the environment. The
nature of the Company's businesses results in its frequently becoming a party to
judicial or administrative proceedings involving all levels of governmental
authorities and other interested parties. The issues that are involved generally
relate to applications for permits and licenses by the Company and their
conformity with legal requirements and alleged technical violations of existing
permits and licenses. The Company does not believe that these matters will be
material to its operations or financial condition.
The Company, in the normal course of its business, expends funds for
environmental protection and remediation, but does not expect these expenditures
to have a materially adverse effect on its financial condition or results of
operations, since its business is based upon compliance with environmental laws
and regulations.
Closure and post-closure monitoring and maintenance costs for U.S.
landfills are estimated based on the technical requirements of Subtitle C and D
Regulations of the U. S. Environmental Protection Agency or the applicable state
requirements, whichever is stricter, and the air emissions standards under the
Clean Air Act. The costs include such items as final capping of the site,
methane gas and leachate management, groundwater monitoring and operation and
maintenance costs to be incurred during the period after the facility closes and
F-13
<PAGE> 148
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ceases to accept waste. Closure and post-closure costs for the Company's
landfills in Canada are based upon the local landfill regulations governing the
facility.
The Company has also established procedures to routinely evaluate potential
remedial liabilities at sites which it owns or operates, or to which it
transports waste, including 22 sites listed on the Superfund National Priority
List ("NPL"). In the majority of situations, the Company's connection with NPL
sites relates to allegations that its subsidiaries, or their predecessors,
transported waste to the facilities in question, often prior to the acquisition
of such subsidiaries by the Company. The Company routinely reviews and evaluates
sites requiring remediation, including NPL sites, giving consideration to the
nature (i.e., owner, operator, transporter or generator), and the extent (i.e.,
amount and nature of waste hauled to the location, number of years of site
operations or other relevant factors), of the Company's alleged connection with
the site, the accuracy and strength of evidence connecting the Company to the
location, the number, connection and financial ability of other named and
unnamed potentially responsible parties and the nature and estimated cost of the
likely remedy. Where the Company concludes that it is probable that a liability
has been incurred, provision is made in the financial statements, based upon
management's judgment and prior experience, for the Company's best estimate of
the liability. If no amount within the range appears to be a better estimate
than any other amount, then the Company provides for the minimum amount within
the range in accordance with SFAS No. 5, "Accounting for Contingencies". Such
estimates are subsequently revised as deemed necessary as additional information
becomes available. The Company believes that it is more than remotely possible
but less than likely, that its potential liability could be at the high end of
such ranges, which would be approximately $26 million higher in the aggregate
than the estimate that has been recorded in the financial statements as of
August 31, 1997.
Estimates of the extent of the Company's degree of responsibility for
remediation of a particular site and the method and ultimate cost of remediation
require a number of assumptions and are inherently difficult to evaluate, such
that the ultimate outcome may differ from current estimates. However, the
Company believes that its extensive experience in the environmental services
business, as well as its involvement with a large number of sites, provides a
reasonable basis for estimating its aggregate liability. As additional
information becomes available, estimates are adjusted as necessary. While the
Company does not anticipate that any such adjustment would be material to its
financial statements, it is reasonably possible that technological, regulatory
or enforcement developments, the results of environmental studies or other
factors could necessitate the recording of additional liabilities which could be
material. The impact of such future events cannot be estimated at the current
time.
Where the Company believes that both the amount of a particular
environmental liability and the timing of the payments are reliably
determinable, the cost in current dollars is discounted to present value
assuming inflation of 3.6% and a risk free discount rate of 8.5%. Had the
Company not discounted any portion of its liability, the amount recorded would
have been increased by approximately $9 million at August 31, 1997 (1996 -- $9
million).
The majority of the Company's active landfill sites have estimated
remaining lives ranging from two to more than 100 years based upon current site
plans and anticipated annual volumes of waste. As of August 31, 1997, the
Company estimates that during this remaining site life, it will provide for an
additional $97 million (1996 -- $72 million) of closure and post-closure costs,
including accretion for the discount recognized to date.
F-14
<PAGE> 149
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Anticipated payments of environmental liabilities for each of the next five
years and thereafter are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ---------------------- ($ IN THOUSANDS)
<S> <C>
1998....................................................... $ 27,376
1999....................................................... 32,365
2000....................................................... 22,735
2001....................................................... 15,972
2002....................................................... 10,926
Thereafter................................................. 170,687
--------
Total............................................ $280,061
========
</TABLE>
In conjunction with the acquisitions of certain facilities, the Company has
obtained varying amounts and types of indemnification from potential
environmental liabilities existing at the time of acquisition. Such indemnities
typically cover all or a portion of the costs associated with the remediation of
pre-existing environmental liabilities, and may be available for a limited
period of time.
FINANCIAL ASSURANCE OBLIGATIONS:
As of August 31, 1997, the Company was obligated to provide financial
assurances to the applicable regulatory authorities, totalling approximately
$450 million, in connection with the closure and post-closure requirements of
certain facility operating permits. The majority of these financial assurances
have been provided by Laidlaw at August 31, 1997. The Company is obligated to
assume these financial assurances from Laidlaw during fiscal 1998. The Company
intends to provide the required financial assurances through a combination of
letters of credit and insurance policies.
LEGAL PROCEEDINGS:
The consolidated federal income tax returns of Laidlaw Transportation, Inc.
and its U.S. subsidiaries (collectively "LTI") (which until May 15, 1997,
included certain of the subsidiaries of the Company) for the fiscal years ended
August 31, 1986, 1987 and 1988, have been under audit by the Internal Revenue
Service. In March 1994, LTI received a statutory notice of deficiency proposing
that LTI pay additional taxes relating to disallowed deductions in those income
tax returns. The principal issue involved relates to the timing and the
deductibility for tax purposes of interest attributable to loans owing to
related foreign persons. LTI has petitioned the United States Tax Court
(captioned as Laidlaw Transportation, Inc. & Subsidiaries et al v. Commissioner
of Internal Revenue, Docket Nos. 9361-94 and 9362-94) for a redetermination of
claimed deficiencies of approximately $49.6 million (plus interest of
approximately $80.3 million as of August 31, 1997).
In October 1997, LTI received a statutory notice of deficiency proposing
that LTI pay additional taxes of approximately $143.5 million (plus interest of
approximately $121 million as of August 31, 1997) relating to disallowed
deductions in federal income tax returns for the fiscal years ended August 31,
1989, 1990 and 1991, based on the same issues. LTI intends to vigorously contest
these claimed deficiencies. The Company anticipates that the Internal Revenue
Service will propose adjustments for the same issue in subsequent taxation
years.
Pursuant to the Stock Purchase Agreement referred to in Note 1, Laidlaw and
Laidlaw Transportation, Inc. agreed to be responsible for any tax liabilities,
including the costs to defend the subsidiaries, resulting from these matters.
The Company believes that the ultimate disposition of these issues will not have
a materially adverse effect upon the Company's consolidated financial position
or results of operations.
F-15
<PAGE> 150
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCKHOLDERS' EQUITY
Prior to May 15, 1997, the Company's total stockholders' equity consisted
of the intercompany investment by Laidlaw. The 120 million shares of common
stock received by Laidlaw to consummate the Acquisition described in Note 1, are
deemed, for accounting purposes, to have been issued and outstanding in all
prior periods presented in these consolidated financial statements.
AUTHORIZED AND ISSUED CAPITAL STOCK:
Since the former Rollins is the continuing legal entity, its authorized and
issued capital stock constitutes that of the Company.
The Company is authorized to issue 350 million shares of its $1 par value
common stock and one million shares of its $1 par value preferred stock. The
terms and conditions of each issue of preferred stock are determined by the
Board of Directors.
At August 31, 1997, the Company had issued and outstanding 180,435,311
shares of its $1 par value common stock. For accounting purposes, 120 million of
these shares were deemed outstanding in all periods prior to the Closing and
60,375,811 were deemed to have been issued on May 15, 1997, at $2.75 per share,
as consideration ($166,034,000) for the acquisition of the former Rollins by the
Company.
NO PREFERRED STOCK HAS BEEN ISSUED.
Each share of common stock outstanding includes one common stock purchase
right (a "Right") which is non-detachable and non-exercisable until certain
defined events occur, including certain tender offers or the acquisition by a
person or group of affiliated or associated persons of 15% or more of the
Company's common stock. Upon the occurrence of certain defined events, the Right
entitles the holder to purchase additional stock of the Company or stock of an
acquiring company at a 50% discount. The Right expires on June 30, 1999, unless
earlier redeemed by the Company at a price of $.01 per Right.
8. STOCK OPTION PLANS
The Company has the following stock option plans:
1. The 1982 Stock Option Plan of the former Rollins Environmental
Services, Inc.
2. The 1993 Stock Option Plan of the former Rollins Environmental
Services, Inc.
3. The 1997 Directors Stock Option Plan
4. The 1997 Stock Option Plan
All outstanding employee stock options granted by the former Rollins were
fully vested on May 15, 1997, in accordance with the terms of the Stock Purchase
Agreement referred to in Note 1.
Option activity is as follows:
<TABLE>
<CAPTION>
AUGUST 31,
1997
----------
<S> <C>
Number of options Outstanding at May 15, 1997............... 1,106,555
Granted................................................... 1,187,500
Exercised................................................. (59,500)
Expired or canceled....................................... (194,510)
---------
Outstanding at end of year.................................. 2,040,045
=========
</TABLE>
F-16
<PAGE> 151
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AUGUST 31,
1997
---------------
<S> <C>
Options available for grant............................... 5,352,500
Options exercisable....................................... 852,545
Per share prices
Options granted......................................... $3.19
Options exercised....................................... $2.25 to $2.88
Options outstanding..................................... $2.63 to $12.25
</TABLE>
Effective July 9, 1997, the directors of the Company set aside six million
shares of its $1 par value common stock for issuance under a 1997 stock option
plan. All options under this plan are for a term of ten years from the date of
grant and become exercisable with respect to 20% of the total number of shares
subject to the option, one year after the date of grant, and with respect to an
additional 20% at the end of each 12 month period thereafter on a cumulative
basis during the succeeding four years. The plan provides for the granting of
stock options to certain senior employees and officers of the Company at the
discretion of the Board of Directors. The plan will be submitted to the
Company's stockholders for approval at the next annual meeting. All options are
subject to certain conditions of service.
Effective July 9, 1997, the directors of the Company set aside 540,000
shares of its $1 par value common stock for issuance under a 1997 directors
stock option plan. All options under this plan are for a term of ten years from
the date of grant and become exercisable with respect to 20% of the total number
of shares subject to the option, one year after the date of grant, and with
respect to an additional 20% at the end of each 12 month period thereafter on a
cumulative basis during the succeeding four years. The plan will be submitted to
the Company's stockholders for approval at the next annual meeting. All options
are subject to certain conditions of service.
On July 9, 1997, the Board of Directors granted 1,097,500 shares from the
stock option plan and 90,000 shares from the directors stock option plan, both
at an exercise price of $3.188, subject to stockholder approval of the plans.
The Company applies Accounting Principles Board ("APB") 25 in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized for the plans in fiscal 1997 or 1996. Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," defines a fair value method of accounting for stock options and
other equity instruments. Under the fair value method, compensation cost is
measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting, or exercise
period.
During fiscal year 1996, the Accounting Acquirer had no stock option plan.
Accordingly, no pro forma disclosures are required. As a result of the exercise
terms of the Company's 1997 stock option plan effective July 9, 1997, pro forma
disclosure is immaterial for fiscal year 1997.
9. RESTRUCTURING CHARGE
The integration related to the Acquisition described in Note 1 resulted in
the closure and consolidation of certain operations formerly owned by Rollins or
by Old LESI. Such actions are expected to produce substantial cost savings.
With respect to the Old LESI operations, the Company recorded a one-time
charge of $331.7 million ($200 million after tax, or $1.52 per share) against
income in the quarter ended May 31, 1997, to reflect the closing of certain of
the operating facilities that had become redundant, and an impairment in the
carrying value of certain operating facilities due to lower expected future cash
flows, as a result of the Acquisition.
F-17
<PAGE> 152
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. DISCONTINUED OPERATIONS
On May 1, 1997, in contemplation of the Acquisition described in Note 1,
the Company transferred, in a non-cash transaction, JTM Industries, Inc., its
coal combustion by-products management operations to Laidlaw. Accordingly, no
gain or loss was recognized on this transfer. These operations were retained by
Laidlaw and are not part of the Company's ongoing operations.
The Company has classified these operations as discontinued. Historically
these operations have been included in Laidlaw's Hazardous Waste Services
segment for financial reporting purposes.
Revenue for the discontinued operations for 1997, 1996 and 1995, was $41.5
million, $62.9 million and $43.6 million, respectively.
11. INCOME TAXES
The income tax benefit is comprised as follows:
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
1997
-----------------
($ IN THOUSANDS)
<S> <C>
Current:
Federal.................................................. $ (30,236)
State.................................................... 1,000
Foreign.................................................. (2,064)
Deferred:
Federal.................................................. (87,086)
State.................................................... (12,440)
Foreign 8,037
---------
Income tax benefit......................................... $(122,789)
=========
</TABLE>
A reconciliation of the income tax benefit, calculated by applying the
statutory federal income tax rate to the loss before income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
1997
-----------------
($ IN THOUSANDS)
<S> <C>
Federal income tax benefit at statutory rate............... 35.0%
State income tax benefit................................... 5.2
Other...................................................... (0.1)
-----
Income tax benefit......................................... 40.1%
=====
</TABLE>
F-18
<PAGE> 153
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effect of temporary differences which comprise the current and
non-current deferred income tax amounts shown on the balance sheet are as
follows:
<TABLE>
<CAPTION>
AUGUST 31,
--------------------
1997 1996
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities....................................... $122,051 $ 35,372
Tax attribute carryovers.................................. 62,865 69,601
Interest.................................................. 15,358 --
Other..................................................... 7,016 1,858
-------- --------
Total gross deferred tax assets................... 207,290 106,831
Less: valuation allowance................................... 14,066 --
-------- --------
Net deferred tax assets........................... $193,224 $106,831
======== ========
Deferred tax liabilities:
Excess of tax over book depreciation...................... $223,732 $187,934
Other..................................................... 6,255 5,882
-------- --------
Total gross deferred tax liabilities.............. 229,987 193,816
-------- --------
Net deferred tax liability........................ $ 36,763 $ 86,985
======== ========
</TABLE>
The Company has net operating loss carryforwards for federal income taxes
expiring in the years 2008 to 2112 of $80.3 million. A valuation allowance of
$14.1 million has been recorded against $46.9 million of the loss carryforwards
which are subject to limitations of both Treasury Regulation 1.1502-21 and
Internal Revenue Code ("IRC") Section 382. Foreign net operating losses expiring
in the years 1999 to 2004 are $44.1 million. Interest carryovers of $27.1
million limited by IRC Section 163(j) are available against federal tax without
expiration.
12 -- EARNINGS PER SHARE
Primary earnings per share amounts are computed based on the weighted
average number of shares actually outstanding. In 1997, the shares considered to
be common stock equivalents that would be outstanding, assuming the exercise of
dilutive stock options, have not been included as the effect of such inclusion
would be to increase earnings per share, and thus be anti-dilutive.
Additionally, fully diluted earnings per share amounts, which would include the
dilutive effect of the subordinated convertible debenture, have not been
included as the effect of such inclusion would be to increase earnings per
share, and thus be anti-dilutive.
13 -- RELATED PARTY TRANSACTIONS
Included in selling, general and administrative expenses are management
fees paid to Laidlaw in the amounts of $2.6 million, $4.6 million and $3.6
million during 1997, 1996 and 1995, respectively.
Management fees have been allocated to the Company, prior to May 15, 1997,
based upon the Company's share of Laidlaw's consolidated revenue. Management
fees are charged by Laidlaw to each of its operating groups in order to recover
its general and administrative costs. The services provided by Laidlaw include
treasury, taxation and insurance.
Related party insurance transactions totalled $7.2 million, $7.2 million
and $7.7 million in 1997, 1996 and 1995, respectively.
Certain directors and officers of the Company are also directors and
officers of Laidlaw.
F-19
<PAGE> 154
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SEGMENT AND GEOGRAPHIC INFORMATION
The Company's revenues and income are derived from one industry segment and
principally in the United States, which includes the collection, transportation,
processing, recovery and disposal of hazardous and industrial wastes. The
segment renders services to a variety of commercial, industrial, governmental
and residential customers.
15. RECENT ACCOUNTING DEVELOPMENTS
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1 "Environmental Remediation Liabilities" ("SOP
96-1") for fiscal years beginning after December 15, 1996. SOP 96-1 provides
that environmental remediation liabilities should be accrued when the criteria
of SFAS No. 5, "Accounting for Contingencies" are met and it includes benchmarks
to aid in the determination of when environmental remediation liabilities should
be recognized. SOP 96-1 also provides guidance with respect to the measurement
of the liability and the display and disclosure of environmental remediation
liabilities in the financial statements. The Company believes that the adoption
of this SOP will not have a material impact on the Company's financial condition
or results of operations.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings Per Share". This standard is effective for financial
statements issued for periods ending after December 15, 1997, and will be
adopted for the interim period ended February 28, 1998, with restatement of all
prior period earnings per share ("EPS") data presented. This statement requires
the presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS is
computed similarly to fully diluted EPS under the existing rules. The Company
does not expect that SFAS No. 128 will have a material impact on the earnings
per share computation.
16. QUARTERLY FINANCIAL DATA -- UNAUDITED
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL*
-------- -------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
Revenues.................................... $172,565 $140,627 $155,330 $210,097 $678,619
Income (loss) from operations............... 14,899 9,169 (316,760) 27,978 (264,714)
Income (loss) from continuing operations.... 3,588 1,750 (197,155) 8,365 (183,452)
Income (loss) from discontinued
operations................................ 703 (917) 234 -- 20
Net income (loss)........................... 4,291 833 (196,921) 8,365 (183,432)
Earnings per share:
Continuing operations:
Before restructuring................... $ 0.030 $ 0.015 $ 0.022 $ 0.046 $ 0.120
Restructuring charge................... -- -- (1.525) -- (1.449)
-------- -------- -------- -------- --------
0.030 0.015 (1.503) 0.046 (1.329)
Discontinued operations..................... 0.006 (0.008) 0.002 -- --
-------- -------- -------- -------- --------
Net income (loss) per share....... $ 0.036 $ 0.007 $ (1.501) $ 0.046 $ (1.329)
======== ======== ======== ======== ========
</TABLE>
F-20
<PAGE> 155
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL*
-------- -------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
Revenues.................................... $179,793 $150,362 $153,139 $169,679 $652,973
Income from operations...................... 18,636 11,987 13,217 13,479 57,319
Income from continuing operations........... 3,791 365 739 1,819 6,714
Income (loss) from discontinued
operations................................ 579 (378) 622 673 1,496
Net income (loss)........................... 4,370 (13) 1,361 2,492 8,210
Net income (loss) per share................. 0.036 (0.000) 0.011 0.021 0.068
</TABLE>
- ---------------
* 1997 includes restructuring charge of $331.7 million ($200 million net of tax)
Results for the quarters include the results of operations of acquired companies
for the periods in which they were owned by the Company.
F-21
<PAGE> 156
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUMMARIZED FINANCIAL INFORMATION
The Company announced on April 1, 1998 that 94% of Safety-Kleen Corp.
shareholders had accepted its exchange offer, as amended on March 16, 1998,
relating to the acquisition of Safety-Kleen Corp. ("Safety-Kleen") by the
Company. Under the terms of the offer, the Company exchanged $18.30 and 2.8
common shares for each Safety-Kleen share tendered. The total consideration for
the acquisition was approximately $2.2 billion, including debt assumed,
estimated transaction costs and the issuance of approximately 166 million common
shares. On April 7, 1998, the Company completed the acquisition of the shares
tendered prior to April 1, 1998. The balance of the Safety-Kleen Common Stock
was acquired through a back-end merger on May 20, 1998.
In connection with the acquisition, Safety-Kleen Services, Inc. (formerly
known as LES, Inc.), a wholly owned subsidiary of Laidlaw Environmental
Services, Inc., issued 9 1/4% Senior Subordinated Notes. The Notes are jointly
and severally guaranteed by the Company and all wholly-owned domestic
subsidiaries of the Company, including the wholly-owned domestic subsidiaries of
Safety-Kleen Corp., on a full and unconditional basis. No foreign direct or
indirect subsidiary or non-wholly-owned domestic subsidiary is an obligor or
guarantor on the financing. Separate financial statements and other disclosures
concerning each of Safety-Kleen Services, Inc. and the subsidiary guarantors are
not presented because management believes they are not material to investors.
Summarized financial information for Laidlaw Environmental Services, Inc. and
its subsidiaries on a combined basis as of and for the year ended August 31,
1997 is as set forth below. The summarized financial information set forth below
does not include information regarding Safety-Kleen Corp. and its domestic
wholly-owned subsidiaries. For summarized financial information regarding such
entities see Note 7 to the unaudited Consolidated Financial Statements of
Safety-Kleen Corp. and Notes 14 and 15 to the audited Consolidated Financial
Statements of Safety-Kleen Corp.
CONSOLIDATING CONDENSED BALANCE SHEET
AUGUST 31, 1997
<TABLE>
<CAPTION>
LAIDLAW SUBSIDIARY CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets................... $ -- $ -- $ 213,139 $ 38,401 $ -- $ 251,540
Property, plant and equipment,
net............................ -- -- 1,043,874 192,695 -- 1,236,569
Investment in Subsidiaries....... 809,745 633,669 88,000 -- (1,531,414) --
Other non-current assets......... -- -- 93,346 48,847 (19,424) 122,769
-------- -------- ---------- -------- ----------- ----------
Total assets..................... $809,745 $633,669 $1,438,359 $279,943 $(1,550,838) $1,610,878
======== ======== ========== ======== =========== ==========
LIABILITIES
Current liabilities.............. $ 6,580 $ 1,952 $ 116,679 $ 50,454 $ (220) $ 175,445
Non-current liabilities.......... -- -- 241,335 7,547 (19,424) 229,458
Long-term debt................... 125,200 299,717 7,863 95,230 -- 528,010
Subordinated convertible
debenture...................... 350,000 -- -- -- -- 350,000
-------- -------- ---------- -------- ----------- ----------
Total liabilities................ 481,780 301,669 365,877 153,231 (19,644) 1,282,913
STOCKHOLDERS' EQUITY............. 327,965 332,000 1,072,482 126,712 (1,531,194) 327,965
-------- -------- ---------- -------- ----------- ----------
Total liabilities and
stockholders' equity........... $809,745 $633,669 $1,438,359 $279,943 $(1,550,838) $1,610,878
======== ======== ========== ======== =========== ==========
</TABLE>
F-22
<PAGE> 157
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
LAIDLAW SUBSIDIARY CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues................... $ -- $ -- $ 510,563 $168,056 $ -- $ 678,619
Operating expenses............... -- -- 472,254 139,382 -- 611,636
Restructuring charge............. -- -- 325,070 6,627 -- 331,697
--------- --------- --------- -------- -------- ---------
Operating income (loss).......... -- -- (286,761) 22,047 -- (264,714)
Interest expense................. 6,580 8,010 23,161 6,522 -- 44,273
Other income..................... -- -- 631 2,234 -- 2,865
Undistributed losses of
subsidiaries................... (179,397) (174,485) -- -- 353,882 --
--------- --------- --------- -------- -------- ---------
Income (loss) from continuing
operations before income tax... (185,977) (182,495) (309,291) 17,759 353,882 (306,122)
Income tax expense (benefit)..... (2,545) (3,098) (118,579) 1,433 -- (122,789)
--------- --------- --------- -------- -------- ---------
Income (loss) from continuing
operations before minority
interest....................... (183,432) (179,397) (190,712) 16,326 353,882 (183,333)
Minority interest................ -- -- (72) (47) -- (119)
--------- --------- --------- -------- -------- ---------
Income (loss) from continuing
operations..................... (183,432) (179,397) (190,784) 16,279 353,882 (183,452)
Income from discontinued
operations..................... -- -- 20 -- -- 20
--------- --------- --------- -------- -------- ---------
Net income (loss)................ $(183,432) $(179,397) $(190,764) $ 16,279 $353,882 $(183,432)
========= ========= ========= ======== ======== =========
</TABLE>
F-23
<PAGE> 158
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
LAIDLAW SAFETY-KLEEN SUBSIDIARY CONSOLIDATING
ENVIRONMENTAL SERVICES, SUBSIDIARY NON- ELIMINATING CONSOLIDATED
SERVICES, INC. INC. GUARANTORS GUARANTORS ENTRIES TOTAL
-------------- ------------ ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
continuing operations............. $ 2,545 $ 3,098 $ 38,964 $ (7,428) $(220) $ 36,959
Net cash provided by discontinued
operations........................ -- -- 425 -- -- 425
-------- --------- --------- -------- ----- ---------
Net cash provided by (used in)
operating activities.............. 2,545 3,098 39,389 (7,428) (220) 37,384
-------- --------- --------- -------- ----- ---------
Cash flow from investing activities:
Cash acquired on acquisition of
business........................ -- -- 15,451 -- -- 15,451
Purchase of plant, property and
equipment....................... -- -- (16,154) (19,943) -- (36,097)
Proceeds from sale of property,
plant and equipment............. -- -- 1,689 (93) -- 1,596
Net increase in long-term
investments..................... -- -- (1,492) (1,345) -- (2,837)
-------- --------- --------- -------- ----- ---------
Net cash used in continuing
operations...................... -- -- (506) (21,381) -- (21,887)
Net cash used in discontinued
operations...................... -- -- (1,887) -- -- (1,887)
-------- --------- --------- -------- ----- ---------
Net cash used in investing
activities...................... -- -- (2,393) (21,381) -- (23,774)
-------- --------- --------- -------- ----- ---------
Cash flow from financing activities:
Issuance of debt under Bank Credit
Facility........................ -- 315,000 -- 60,000 -- 375,000
Additional debt issuances......... 65,200 -- -- 11,422 -- 76,622
Debt financing fees and
expenses........................ -- (16,448) -- (2,340) -- (18,788)
Bank overdraft.................... -- -- (28,829) (3,359) -- (32,188)
Repayment of long-term debt....... -- -- (55,700) (5,842) -- (61,542)
Intercompany payable
(receivable).................... (67,745) (301,650) 369,175 -- 220 --
Net payment to Laidlaw, Inc....... -- -- (296,872) (44,682) -- (341,554)
-------- --------- --------- -------- ----- ---------
Net cash provided by (used in)
financing activities.............. (2,545) (3,098) (12,226) 15,199 220 (2,450)
-------- --------- --------- -------- ----- ---------
Net increase (decrease) in cash and
cash equivalents.................. -- -- 24,770 (13,610) -- 11,160
Cash and cash equivalents at:
Beginning of period............... -- -- -- -- -- --
-------- --------- --------- -------- ----- ---------
End of period..................... $ -- $ -- $ 24,770 $(13,610) $ -- $ 11,160
======== ========= ========= ======== ===== =========
</TABLE>
F-24
<PAGE> 159
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
AUGUST 31, 1996
<TABLE>
<CAPTION>
LAIDLAW SAFETY-KLEEN CONSOLIDATING
ENVIRONMENTAL SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- ------------ ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets............ $ -- $ -- $ 155,717 $ 47,753 $ -- $ 203,470
Property, plant and
equipment, net......... -- -- 899,415 213,313 -- 1,112,728
Investment in
Subsidiaries........... -- 1,094,777 -- -- (1,094,777) --
Other non-current
assets................. -- -- 134,440 40,656 -- 175,096
-------- ---------- ---------- -------- ----------- ----------
Total assets.............. $ -- $1,094,777 $1,189,572 $301,722 $(1,094,777) $1,491,294
======== ========== ========== ======== =========== ==========
LIABILITIES:
Current liabilities....... $ -- $ -- $ 138,145 $ 24,648 $ -- $ 162,793
Non-current liabilities... -- -- 166,266 18,902 -- 185,168
Long-term debt............ -- -- 18,119 30,437 -- 48,556
-------- ---------- ---------- -------- ----------- ----------
Total liabilities......... -- -- 322,530 73,987 -- 396,517
STOCKHOLDERS' EQUITY........ -- 1,094,777 867,042 227,735 (1,094,777) 1,094,777
-------- ---------- ---------- -------- ----------- ----------
Total liabilities and
stockholders' equity... $ -- $1,094,777 $1,189,572 $301,722 $(1,094,777) $1,491,294
======== ========== ========== ======== =========== ==========
</TABLE>
F-25
<PAGE> 160
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
LAIDLAW SAFETY-KLEEN CONSOLIDATING
ENVIRONMENTAL SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- ------------ ------------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues............... $ -- $ -- $474,410 $178,563 $ -- $652,973
Operating expenses........... -- -- 443,093 152,561 -- 595,654
-------- ---------- -------- -------- ---------- --------
Operating income............. -- -- 31,317 26,002 -- 57,319
Interest expense............. -- -- 35,101 11,749 -- 46,850
Other income................. -- -- 2,034 (643) -- 1,391
Undistributed earnings of
subsidiaries............... -- 8,210 -- -- (8,210) --
-------- ---------- -------- -------- ---------- --------
Income (loss) from continuing
operations before income
tax........................ -- 8,210 (1,750) 13,610 (8,210) 11,860
Income tax expense
(benefit).................. -- -- (369) 2,869 -- 2,500
-------- ---------- -------- -------- ---------- --------
Income (loss) from continuing
operations before minority
interest................... -- 8,210 (1,381) 10,741 (8,210) 9,360
Minority interest............ -- -- -- (2,646) -- (2,646)
-------- ---------- -------- -------- ---------- --------
Income (loss) from continuing
operations................. -- 8,210 (1,381) 8,095 $ (8,210) 6,714
Income from discontinued
operations................. -- -- 1,496 -- -- 1,496
-------- ---------- -------- -------- ---------- --------
Net income................... $ -- $ 8,210 $ 115 $ 8,095 $ (8,210) $ 8,210
======== ========== ======== ======== ========== ========
</TABLE>
F-26
<PAGE> 161
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
LAIDLAW SUBSIDIARY CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by continuing
operations........................... $ -- $ -- $ 18,061 $ 3,888 $ -- $ 21,949
Net cash provided by discontinued
operations........................... -- -- 3,199 -- -- 3,199
------- ------- --------- -------- ------- ---------
Net cash provided by operating
activities........................... -- -- 21,260 3,888 -- 25,148
------- ------- --------- -------- ------- ---------
Cash flow from investing activities:
Cash expended on acquisition of
business........................... -- -- (8,000) -- -- (8,000)
Purchase of plant, property and
equipment.......................... -- -- (91,313) (12,971) -- (104,284)
Net increase in long-term
investments........................ -- -- (4,881) (1,103) -- (5,984)
Proceeds from sales of equipment..... -- -- 3,127 192 -- 3,319
------- ------- --------- -------- ------- ---------
Net cash used in continuing
operations........................... -- -- (101,067) (13,882) -- (114,949)
Net cash used in discontinued
operations........................... -- -- (5,026) -- -- (5,026)
------- ------- --------- -------- ------- ---------
Net cash used in investing
activities........................... -- -- (106,093) (13,882) -- (119,975)
------- ------- --------- -------- ------- ---------
Cash flow from financing activities:
Bank overdraft....................... -- -- 19,503 2,377 -- 21,880
Changes in long-term debt............ -- -- (3,967) (3,581) -- (7,548)
Advance from (payments to) Laidlaw,
Inc................................ -- -- 71,715 11,198 -- 82,913
------- ------- --------- -------- ------- ---------
Net cash provided by continuing
operations........................... -- -- 87,251 9,994 -- 97,245
Net cash used in discontinued
operations........................... -- -- (2,418) -- -- (2,418)
------- ------- --------- -------- ------- ---------
Net cash provided by financing
activities........................... -- -- 84,833 9,994 -- 94,827
------- ------- --------- -------- ------- ---------
Net increase in cash and cash
equivalents.......................... -- -- -- -- -- --
Cash and cash equivalents at:
Beginning of period.................. -- -- -- -- -- --
------- ------- --------- -------- ------- ---------
End of period........................ $ -- $ -- $ -- $ -- $ -- $ --
======= ======= ========= ======== ======= =========
</TABLE>
F-27
<PAGE> 162
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
YEAR ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
LAIDLAW SUBSIDIARY CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues................... $ -- $ -- $485,378 $113,863 $ -- $599,241
Operating expenses............... -- -- 434,829 104,553 -- 539,382
------- ------- -------- -------- -------- --------
Operating income................. -- -- 50,549 9,310 -- 59,859
Interest expense................. -- -- 30,895 10,247 -- 41,142
Other income..................... -- -- 2,942 25 -- 2,967
Undistributed earnings of
subsidiaries................... -- 17,584 -- -- (17,584) --
------- ------- -------- -------- -------- --------
Income (loss) from continuing
operations before income tax... -- 17,584 22,596 (912) (17,584) 21,684
Income tax expense (benefit)..... -- -- 4,969 (200) -- 4,769
------- ------- -------- -------- -------- --------
Income (loss) from continuing
operations before minority
interest....................... -- 17,584 17,627 (712) (17,584) 16,915
Minority interest................ -- -- -- (150) -- (150)
------- ------- -------- -------- -------- --------
Income (loss) from continuing
operations..................... -- 17,584 17,627 (862) (17,584) 16,765
Income (loss) from discontinued
operations..................... -- -- 819 -- -- 819
------- ------- -------- -------- -------- --------
Net income (loss)................ $ -- $17,584 $ 18,446 $ (862) $(17,584) $ 17,584
======= ======= ======== ======== ======== ========
</TABLE>
F-28
<PAGE> 163
LAIDLAW ENVIRONMENTAL SERVICES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
LAIDLAW SUBSIDIARY CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by continuing
operations....................... $-- $-- $ 29,107 $ 10,721 $-- $ 39,828
Net cash provided by discontinued
operations....................... -- -- 276 -- -- 276
-- -- --------- -------- -- ---------
Net cash provided by operating
activities....................... -- -- 29,383 10,721 -- 40,104
-- -- --------- -------- -- ---------
Cash flow from investing
activities:
Cash expended on acquisition of
business....................... -- -- (227,842) (1,344) -- (229,186)
Purchase of plant, property and
equipment...................... -- -- (61,763) (6,887) -- (68,650)
Net increase in long-term
investments.................... -- -- (1,238) -- -- (1,238)
Proceeds from sales of
equipment...................... -- -- 1,203 (27) -- 1,176
Other............................ -- -- (2,887) 28 -- (2,859)
-- -- --------- -------- -- ---------
Net cash used in continuing
operations....................... -- -- (292,527) (8,230) -- (300,757)
Net cash used in discontinued
operations....................... -- -- (3,173) -- -- (3,173)
-- -- --------- -------- -- ---------
Net cash used in investing
activities....................... -- -- (295,700) (8,230) -- (303,930)
-- -- --------- -------- -- ---------
Cash flow from financing
activities:
Bank overdraft................... -- -- 5,808 1,503 -- 7,311
Additional debt issuance......... -- -- 32,251 -- -- 32,251
Repayment of long-term debt...... -- -- (15,115) (11,934) -- (27,049)
Advances from (payments to)
Laidlaw, Inc. ................. -- -- 235,674 7,940 -- 243,614
-- -- --------- -------- -- ---------
Net cash provided by (used in)
continuing operations............ -- -- 258,618 (2,491) -- 256,127
Net cash provided by discontinued
operations....................... -- -- 7,699 -- -- 7,699
-- -- --------- -------- -- ---------
Net cash provided by (used in)
financing activities............. -- -- 266,317 (2,491) -- 263,826
-- -- --------- -------- -- ---------
Net increase in cash and cash
equivalents...................... -- -- -- -- -- --
Cash and cash equivalents at:
Beginning of period.............. -- -- -- -- -- --
-- -- --------- -------- -- ---------
End of period.................... $-- $-- $ -- $ -- $-- $ --
== == ========= ======== == =========
</TABLE>
F-29
<PAGE> 164
LAIDLAW ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues.................................................... $ 750,472 $ 468,522
Expenses:
Operating................................................. 513,138 338,343
Depreciation and amortization............................. 55,927 39,134
Selling, general and administrative....................... 74,273 52,040
Restructuring charge...................................... 65,831 331,697
--------- ---------
Total expenses.................................... 709,169 761,214
--------- ---------
Operating income (loss)..................................... 41,303 (292,692)
Allocated interest expense.................................. -- 24,030
Interest expense (net of amount capitalized)................ 61,266 5,892
Other income................................................ 3,216 2,129
--------- ---------
Loss from continuing operations before income taxes......... (16,747) (320,485)
Income tax benefit.......................................... (6,282) (128,934)
--------- ---------
Loss from continuing operations before minority interest.... (10,465) (191,551)
Minority interest........................................... 129 (266)
--------- ---------
Loss from continuing operations............................. (10,336) (191,817)
Income from discontinued operations......................... -- 20
--------- ---------
Loss before extraordinary item.............................. (10,336) (191,797)
Extraordinary loss, net of applicable income tax............ (11,283) --
--------- ---------
Net loss.......................................... $ (21,619) $(191,797)
========= =========
Basic and diluted income (loss) per share:
Loss from continuing operations........................... $ (0.05) $ (1.55)
Income from discontinued operations....................... -- --
Extraordinary loss, net of applicable income tax.......... (0.05) --
--------- ---------
Net loss.......................................... $ (0.10) $ (1.55)
========= =========
Weighted average common stock outstanding (000s).......... 215,023 123,760
========= =========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
F-30
<PAGE> 165
LAIDLAW ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31,
1998 AUGUST 31,
(UNAUDITED) 1997
----------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 19,497 $ 11,160
Trade and other accounts receivable....................... 328,799 210,914
Inventories............................................... 48,734 7,927
Deferred income taxes..................................... 17,701 13,027
Income taxes recoverable.................................. 39,605 --
Other current assets...................................... 61,151 8,512
---------- ----------
Total current assets.............................. 515,487 251,540
Long-term investments....................................... 47,861 51,909
Property, plant and equipment, net.......................... 2,800,888 1,236,569
Goodwill.................................................... 1,025,542 70,527
Other assets................................................ 16,304 333
---------- ----------
Total assets...................................... $4,406,082 $1,610,878
========== ==========
LIABILITIES
Current liabilities
Accounts payable.......................................... $ 139,247 $ 48,148
Accrued liabilities....................................... 207,345 115,211
Current portion of long-term debt......................... 78,000 12,086
---------- ----------
Total current liabilities......................... 424,592 175,445
Deferred items
Income taxes.............................................. 375,786 49,790
Other..................................................... 374,952 179,668
Long-term debt.............................................. 1,874,489 528,010
Subordinated convertible debenture.......................... 350,000 350,000
---------- ----------
Total liabilities................................. 3,399,819 1,282,913
---------- ----------
Commitments and contingencies............................... -- --
STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized
750,000,000; issued and outstanding May 31,
1998 -- 350,959,471; August 31, 1997 -- 180,435,311....... 350,959 180,435
Additional paid-in capital.................................. 919,261 385,200
Cumulative foreign currency translation adjustment.......... (4,668) --
Accumulated deficit......................................... (259,289) (237,670)
---------- ----------
Total stockholders' equity........................ 1,006,263 327,965
---------- ----------
Total liabilities and stockholders' equity........ $4,406,082 $1,610,878
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
F-31
<PAGE> 166
LAIDLAW ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
------------------------
1998 1997
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (21,619) $(191,797)
Adjustments to reconcile net loss to net cash provided by
operations:
Income from discontinued operations.................... -- (20)
Extraordinary loss, net of applicable income taxes..... 11,283 --
Restructuring charge, net of applicable income taxes... 39,499 200,000
Depreciation and amortization.......................... 55,927 39,134
Deferred income taxes.................................. 7,816 2,763
Change in accounts receivable.......................... 12,454 4,146
Change in accounts payable, accrued liabilities and
deferred liabilities.................................. (9,381) (54,380)
Decrease in liabilities assumed upon acquisition....... (19,830) --
Restructuring charge payments.......................... (13,214) --
Change in other, net................................... (19,653) 9,141
----------- ---------
Net cash provided by continuing operations.................. 43,282 8,987
Net cash used in discontinued operations.................... -- (357)
----------- ---------
Net cash provided by operating activities................... 43,282 8,630
----------- ---------
Cash flows from investing activities:
Cash acquired (expended) on acquisition of business....... (1,282,744) 15,451
Purchase of property, plant and equipment................. (34,564) (29,719)
Proceeds from sales of property, plant and equipment...... 9,924 3,601
Net increase in long-term investments..................... (2,342) (1,977)
Proceeds from sale of assets held for sale................ 33,675 --
Change in other, net...................................... (43) --
----------- ---------
Net cash used in continuing operations...................... (1,276,094) (12,644)
Net cash used in discontinued operations.................... -- (1,887)
----------- ---------
Net cash used in investing activities....................... (1,276,094) (14,531)
----------- ---------
Cash flows from financing activities:
Issuance of common stock on exercise of stock options..... 436 --
Bank overdraft (included in accounts payable)............. 11,652 --
Bank financing fees and expenses.......................... (36,946) (17,813)
Repayment of long-term debt............................... (591,547) (9,162)
Borrowings of long-term debt.............................. 1,857,756 375,000
Payments to Laidlaw Inc................................... -- (349,116)
Advances from Laidlaw Inc................................. -- 22,385
----------- ---------
Net cash provided by financing activities................... 1,241,351 21,294
----------- ---------
Effect of exchange rate changes on cash..................... (202) --
----------- ---------
Net increase in cash and cash equivalents................... 8,337 15,393
Cash and cash equivalents at:
Beginning of period....................................... 11,160 --
----------- ---------
End of period............................................. $ 19,497 $ 15,393
=========== =========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
F-32
<PAGE> 167
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 1998
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X and, therefore, do not include all of the disclosures required by
generally accepted accounting principles for annual financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the interim period results have been included; all such
adjustments are of a normal recurring nature. Operating results for the nine
month period ended May 31, 1998 are not necessarily indicative of the results
that may be expected for the full fiscal year ending August 31, 1998. These
statements should be read in conjunction with the consolidated financial
statements, including the accounting policies, and notes thereto included in the
Registrant's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on October 31, 1997. Certain amounts as of August 31, 1997 have been
reclassified to conform to the current period's presentations.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1 "Environmental Remediation Liabilities" ("SOP
96-1"). This SOP was adopted by the Company for the fiscal year beginning
September 1, 1997. SOP 96-1 provides that environmental remediation liabilities
should be accrued when the criteria of Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies" ("SFAS 5") are met and it
includes benchmarks to aid in the determination of when environmental
remediation liabilities should be recognized. SOP 96-1 also provides guidance
with respect to the measurement of the liability and the display and disclosure
of environmental remediation liabilities in the financial statements. The
adoption of this SOP did not have a material impact on the Company's financial
condition or net income.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS 128").
This standard is effective for financial statements issued for periods after
December 15, 1997, with restatement of all prior period earnings per share
("EPS") data presented. This statement requires the presentation of basic and
diluted EPS. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of shares
outstanding for the period. Diluted EPS gives effect to all dilutive potential
common shares that were outstanding during the period. The adoption of this
standard did not have an impact on the prior period earnings per share data.
NOTE 2 -- NAME CHANGE
On June 22, 1998, the Laidlaw Environmental Services, Inc. announced that
effective July 1, 1998, it will begin doing business as Safety-Kleen Corp. and
that its stock will trade on the New York Stock Exchange under the name
Safety-Kleen Corp. and the ticker symbol NYSE:SK.
The formal name change requires shareholder approval which the Company will
seek at its annual meeting in November, 1998.
NOTE 3 -- BUSINESS COMBINATIONS
The Company announced on April 1, 1998 that 93% of Safety-Kleen Corp.
shareholders had accepted its exchange offer, as amended on March 16, 1998,
relating to the acquisition of Safety-Kleen by the Company. Under the terms of
the offer, the Company exchanged $18.30 and 2.8 common shares of Company stock
for each Safety-Kleen share tendered. In May 1998, the Company completed the
acquisition of Safety-Kleen Corp. through a back-end merger, approved by the
Safety-Kleen shareholders on May 18, 1998. The total consideration of
approximately $2.2 billion, including debt assumed and estimated transaction
costs, was comprised of $1.5 billion cash and 166.5 million shares of Common
Stock. The fair value per share of the Common Stock of $4.125 is the average of
the closing New York Stock Exchange market price for the three trading days
prior to and the three trading days immediately following and including March
16, 1998, the date of the merger
F-33
<PAGE> 168
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement. The cash consideration and the refinancing of certain existing
indebtedness was financed from the proceeds of a $2.2 billion Senior Credit
Facility (See Note 4).
The acquisition of Safety-Kleen has been accounted for under the purchase
method and accordingly, the financial statements include the results of
operations of the acquired business from the date of acquisition. The purchase
price has been allocated to the assets acquired and liabilities assumed based
upon management's best preliminary estimate of their fair values. The cost, and
the allocation thereof, of the acquisition is subject to change based upon the
final resolution of those estimates. The excess of the estimated purchase price
over the assets acquired of approximately $931.8 million is being amortized over
forty years.
The unaudited pro forma consolidated data set forth below presents the
results of operations of the Company as if the acquisition had occurred as of
September 1, 1996. This data does not purport to be indicative of the results of
operations that might have occurred nor which might occur in the future. In
addition, the information does not reflect synergies expected to result from the
integration of the Company and Safety-Kleen.
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31,
----------------------------
1998 1997
------------ ------------
($ IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Revenue............................................. $1,319,980 $1,362,516
Loss from continuing operations..................... (22,838) (254,476)
Loss before extraordinary loss...................... (22,838) (254,456)
Extraordinary loss, net of applicable income tax.... (11,283) --
Net loss............................................ (34,121) (254,456)
Basic and diluted loss per share (Note A):
Loss from continuing operations................... $ (0.07) $ (0.73)
Loss before extraordinary loss.................... (0.07) (0.73)
Extraordinary loss, net of applicable income
tax............................................ (0.03) --
Net loss.......................................... (0.10) (0.73)
Weighted average common stock outstanding
(000s)......................................... 348,372 346,836
</TABLE>
Note A: There were no assumed conversions of potential common shares
included in the computation of diluted income (loss) per share for the nine
months ended May 31, 1998 and 1997 as the effect of such inclusion would be
antidilutive.
NOTE 4 -- CHANGES IN LONG-TERM DEBT
SENIOR CREDIT FACILITY:
In April 1998, the Company repaid its existing Bank Credit Facility (See
Note 10) and established a $2.2 billion Senior Credit Facility (as amended in
May 1998) pursuant to a credit agreement between the Company and a syndicate of
banks and other financial institutions. All of the capital stock of the
Company's subsidiaries, including the acquired Safety-Kleen subsidiaries, have
been pledged as security for the Senior Credit Facility, and such subsidiaries
have guaranteed the obligations of the Company.
The subsequent issuance of the Senior Subordinated Notes, described below,
reduced the availability of borrowings under the Senior Credit Facility by $325
million to $1.875 billion, consisting of the following tranches: (i) a $550
million six-year Senior Secured Revolving Credit Facility with a $200 million
letter of credit sublimit and $400 million sublimit for loans (the "Revolver"),
(ii) a $455 million six-year Senior Secured Amortizing Term Loan, (iii) a $70
million six-year Senior Secured Amortizing Term Loan, (iv) a $400 million
Minimally Amortizing seven-year Senior Secured Term Facility, and (v) a $400
million Minimally Amortizing eight-year Senior Secured Term Loan.
F-34
<PAGE> 169
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The interest rate and terms of the Senior Credit Facility are substantially
the same as those under the Bank Credit Facility, including negative,
affirmative and financial covenants.
SENIOR SUBORDINATED NOTES:
On May 29, 1998, Safety-Kleen Services, Inc. (formerly known as LES, Inc.),
a wholly-owned subsidiary of the Company, issued $325 million 9.25% Senior
Subordinated Notes due 2008 (the "Notes") in a Rule 144A offering. Net proceeds
from the sale of the Notes, after the underwriting discount and other expenses,
were approximately $316 million. The proceeds were used to repay a portion of
the borrowings outstanding under the Senior Credit Facility.
The Notes mature on June 1, 2008. Interest on the Notes will be payable
semiannually, commencing December 1, 1998. The Notes will be redeemable, in
whole or in part, at the option of the Company, at any time prior to June 1,
2003 at a redemption price equal to the greater of (i) 100% of the principal
amount of such Notes or (ii) the sum of the present values of 104.625% of the
principal amount of such Notes and the scheduled payments of interest thereon
through and including June 1, 2003 discounted to such redemption date on a semi-
annual basis at the Adjusted Treasury Rate, as defined, plus 50 basis points,
together with accrued and unpaid interest, if any. The Notes will be redeemable,
in whole or in part, at the option of the Company at any time on or after June
1, 2003 at 104.625% of the principal amount declining ratably in annual
increments to par on or after June 1, 2006. In addition, prior to June 1, 2001,
the Company may redeem up to 35% of the original aggregate principal amount of
the Notes with the net proceeds of one or more public equity offerings at a
redemption price equal to 109.25% of the principal amount thereof, plus accrued
and unpaid interest. Upon a change in control of the Company, each holder of the
Notes may require the Company to repurchase all or a portion of such holder's
Notes at 101% of the principal amount thereof, plus accrued interest.
The Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future senior indebtedness,
as defined, of the Company. The Notes will rank senior in right of payment to
all existing and future subordinated indebtedness of the Company, if any. The
payment of the Notes are guaranteed on a senior subordinated basis by Laidlaw
Environmental Services, Inc. and are jointly and severally guaranteed on a
senior subordinated basis by the Company's wholly-owned domestic subsidiaries.
No foreign direct or indirect subsidiary or non-wholly-owned domestic subsidiary
is an obligor or guarantor on the financing.
The Notes contain certain affirmative and negative covenants which, in
certain instances and subject to certain limitations and qualifications,
restrict, among other things, (i) the incurrence of additional debt; (ii)
restricted payments; (iii) asset sales; (iv) transactions with affiliates; (v)
dividend and other payments; (vi) the issuance of stock of subsidiaries to third
parties; (vii) certain liens; and (viii) certain consolidations, mergers or
sales of assets.
SAFETY-KLEEN NOTES:
Subsequent to the acquisition of Safety-Kleen, the company repurchased
substantially all of the outstanding 9.25% $100 million Notes due September 15,
1999 pursuant to a tender offer to the note holders at a price of approximately
105%.
INTEREST RATE EXPOSURE:
As a result of a number of interest rate swap agreements entered into by
the Company, the interest rates on approximately 50% of its long-term debt
(excluding the subordinated convertible debenture) have been fixed.
F-35
<PAGE> 170
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS:
Tax Matters. Laidlaw Inc.'s ("Laidlaw") United States subsidiaries
petitioned the United States Tax Court (captioned as Laidlaw Transportation,
Inc. and Subsidiaries et al v. Commissioner of Internal Revenue, Docket Nos.
9361-94 and 9362-94) with respect to their consolidated federal income tax
returns (which until May 15, 1997 included certain of the Company's United
States subsidiaries) for the fiscal years ended August 31, 1986, 1987 and 1988.
The principal issue involved related to the timing and deductibility for tax
purposes of interest attributable to loans owing to related foreign persons.
Judge John O. Colvin issued an opinion on June 30, 1998 concluding that advances
from the Laidlaw's related foreign entity, were equity rather than debt and that
interest deductions claimed were disallowed. Based on this opinion, taxes of
$49.6 million (plus interest of approximately $91.4 million as of May 31, 1998)
would be payable. The Company expects Laidlaw to appeal this opinion.
Similar claims have been asserted with respect to the consolidated federal
income tax returns for the fiscal years ended August 31, 1989, 1990 and 1991. A
petition has been filed with the United States Tax Court with respect to these
years (captioned as Laidlaw Transportation, Inc. and Subsidiaries v.
Commissioner of internal Revenue, Docket No. 329-98). The income taxes at issue
for these years is approximately $143.5 million (plus interest of approximately
$145.3 million as of May 31, 1998). The Company also anticipates that similar
claims will be asserted for the fiscal years ended August 31, 1992, 1993 and
1994. Should Laidlaw's United States subsidiaries ultimately be required to pay
all claims on these issues, both presently asserted and expected to be asserted,
for the fiscal years 1986 through 1994, the cost (including interest as of May
31, 1998) would be approximately $500 million. Laidlaw is reviewing all of the
above issues with counsel and the Company expects that Laidlaw will vigorously
contest the claimed deficiencies.
Pursuant to the February 6, 1997 Stock Purchase Agreement among the
Company, Laidlaw Transportation, Inc. ("LTI") and Laidlaw, Laidlaw and LTI are
responsible for any tax liabilities resulting from these matters.
Reference is also made to the Company's Annual Report on Form 10K for the
year ended August 31, 1997.
NOTE 6 -- STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity since September 1, 1997
are as follows ($ in thousands):
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN TRANSLATION ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL ADJUSTMENT DEFICIT EQUITY
-------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at September 1, 1997..... $180,435 $385,200 $ -- $(237,670) $ 327,965
Net loss for period.............. -- -- -- (21,619) (21,619)
Exercise of stock options........ 143 293 -- -- 436
Issuance of shares (Note A)...... 3,921 13,579 -- -- 17,500
Issuance of shares in connection
with Safety-Kleen
acquisition.................... 166,460 520,189 -- -- 686,649
Cumulative foreign currency
translation adjustment......... -- -- (4,668) -- (4,668)
-------- -------- ------- --------- ----------
Balance at May 31, 1998.......... $350,959 $919,261 $(4,668) $(259,289) $1,006,263
======== ======== ======= ========= ==========
</TABLE>
Note A: To satisfy interest payments due on November 15, 1997 and May 15,
1998 subordinated convertible debenture.
For accounting purposes, 120 million shares of common stock were deemed
outstanding in all periods prior to May 15, 1997, the date of the Rollins
acquisition.
F-36
<PAGE> 171
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- STATEMENTS OF CASH FLOWS
The non-cash transactions for the nine months ended May 31, 1998 and 1997
are as follows ($ in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31,
-------------------------
1998 1997
------------ ---------
($ IN THOUSANDS)
<S> <C> <C>
Non-cash Investing and Financing Activities:
Business combinations:
Fair value of assets acquired.......................... $ 2,869,192 $495,168
Fair value of liabilities assumed...................... 930,202 329,134
Less, cash paid........................................ (1,252,341) --
----------- --------
Fair value of stock issued on acquisition.............. 686,649 166,034
=========== ========
Issuance of common stock to satisfy interest payment due
on subordinated convertible debenture.................. $ 17,500 $ --
=========== ========
Non-cash transactions arising from sale of assets held for
sale:
Promissory note receivable............................. $ 8,000 $ --
Reduction of debt...................................... 40,814 --
=========== ========
</TABLE>
NOTE 8 -- SALE OF ASSETS
On December 18, 1997, the Company sold its municipal solid waste landfill
in Carbon County, Utah to Allied Waste Industries, Inc. The total consideration
received by the Company was $90 million, consisting of $19 million in cash,
assumed debt of approximately $51 million, a promissory note for $10 million
with interest at 7% due March 1, 2000, and $10 million contingently receivable
March 1, 2000, upon the satisfaction of certain earnings targets. As well, the
Company was reimbursed $14.7 million in cash for trust funds securing
obligations of the landfill. The transaction resulted in no gain or loss.
NOTE 9 -- RESTRUCTURING CHARGE
The integration of Safety-Kleen (See Note 3) will result in personnel
reductions and facility closures at certain of the Company's operations. Such
actions are expected to generate significant cash cost savings.
With respect to the existing operations, the Company recorded a one-time
charge of $65.8 million ($39.5 million after tax) against earnings to reflect
the costs associated with the closing of certain facilities and the severance of
employees as a result of the acquisition of Safety-Kleen. The Company
anticipates incurring approximately $15 million in cash expenditures within 12
months in connection with this restructuring charge.
NOTE 10 -- EXTRAORDINARY LOSS
In April 1998, the Company repaid its existing Bank Credit Facility with a
Senior Credit Facility (see Note 4) and recognized an extraordinary charge of
approximately $18.8 million ($11.3 million net of tax) related to the write-off
of previous deferred debt issuance costs and repayment penalties.
NOTE 11 -- INCOME (LOSS) PER SHARE
Basic income (loss) per share is computed by dividing income available to
common stockholders by the weighted average number of shares outstanding for the
period. Diluted income (loss) per share gives effect to all dilutive potential
common shares that were outstanding during the period.
F-37
<PAGE> 172
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the nine months ended May 31, 1998 and 1997, there were no assumed
conversions of potential common shares included in the computation of diluted
income (loss) per share as the effect of such inclusion would be antidilutive.
NOTE 12 -- ACCOUNTING PRONOUNCEMENTS NOT YET REQUIRED TO BE ADOPTED
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income," ("SFAS 130") and Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information," ("SFAS
131"). SFAS 130 and SFAS 131 are effective for periods beginning after December
15, 1997 and will be adopted in the first quarter of the year ended August 31,
1999. SFAS 130 establishes standards for reporting and displaying comprehensive
income and its components. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-owner sources and includes all changes in equity during a period except
those resulting from investments by and distributions to owners. SFAS 131
establishes standards for the reporting by public business enterprises of
information about operating segments in interim and annual financial statements.
The implementation of these standards will have no effect on the Company's
consolidated results of operations, financial position or cash flows, but may
require additional disclosures. Restatement, if any, of financial statement
disclosures for prior periods will also be required.
NOTE 13 -- SUMMARIZED FINANCIAL INFORMATION
As discussed in Note 4, in connection with the acquisition of Safety-Kleen,
Safety-Kleen Services, Inc. (formerly known as LES, Inc.), a wholly-owned
subsidiary of Laidlaw Environmental Services, Inc., issued the Notes, the
payment of which is fully and unconditionally guaranteed on senior subordinated
basis by the Company and are fully and unconditionally guaranteed on a senior
subordinated and joint and several basis by the Company's wholly-owned domestic
subsidiaries (including Safety-Kleen Corp. and its wholly owned domestic
subsidiaries). No foreign direct or indirect subsidiary or non-wholly-owned
domestic subsidiary is an obligor or guarantor on the financing. Separate
financial statements and other disclosures concerning each of Safety-Kleen
Services, Inc. and the subsidiary guarantors are not presented because
management believes that they are not material to investors. The summarized
financial information below, for the Company and its subsidiaries, includes
information with respect to Safety-Kleen Corp. and its wholly-owned domestic
subsidiaries from April 1, 1998 (the date of the acquisition). For additional
summarized financial information concerning such entities, see Note 7 to the
unaudited Consolidated Financial Statements of Safety-Kleen Corp. and Notes 14
and 15 to the audited Consolidated Financial Statements of Safety-Kleen Corp.
F-38
<PAGE> 173
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
LAIDLAW CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets................. $ -- $ -- $ 391,182 $ 124,305 $ -- $ 515,487
Property, plant and equipment,
net.......................... -- -- 2,513,946 286,942 -- 2,800,888
Investment in Subsidiaries..... 1,484,212 2,798,398 228,861 (140,861) (4,370,610) --
Goodwill....................... -- -- 979,431 46,111 -- 1,025,542
Other non-current assets....... -- -- 73,674 23,629 (33,138) 64,165
---------- ---------- ---------- --------- ----------- ----------
Total assets.......... $1,484,212 $2,798,398 $4,187,094 $ 340,126 $(4,403,748) $4,406,082
========== ========== ========== ========= =========== ==========
LIABILITIES
Current liabilities............ $ 2,749 $ 78,227 $ 189,724 $ 153,892 $ -- $ 424,592
Non-current liabilities........ -- -- 755,378 28,498 (33,138) 750,738
Long-term debt................. 125,200 1,676,343 15,756 57,190 -- 1,874,489
Subordinated convertible
debenture.................... 350,000 -- -- -- -- 350,000
---------- ---------- ---------- --------- ----------- ----------
Total liabilities..... 477,949 1,754,570 960,858 239,580 (33,138) 3,399,819
STOCKHOLDERS' EQUITY........... 1,006,263 1,043,828 3,226,236 100,546 (4,370,610) 1,006,263
---------- ---------- ---------- --------- ----------- ----------
Total liabilities and
stockholders' equity......... $1,484,212 $2,798,398 $4,187,094 $ 340,126 $(4,403,748) $4,406,082
========== ========== ========== ========= =========== ==========
</TABLE>
F-39
<PAGE> 174
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
LAIDLAW SAFETY-KLEEN CONSOLIDATING
ENVIRONMENTAL SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- ------------ ---------- -------------- ------------- ------------
($ IN THOUSANDS)
----------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $ -- $ -- $596,378 $158,259 $(4,165) $750,472
Operating expenses...... -- -- 581,315 132,019 (4,165) 709,169
-------- -------- -------- -------- ------- --------
Operating income........ -- -- 15,063 26,240 -- 41,303
Interest expense........ 19,265 33,684 3,506 4,256 -- 60,711
Other income
(expense)............. -- -- 3,087 (426) -- 2,661
Undistributed earnings
(losses) of
subsidiaries.......... (10,233) 19,750 -- -- (9,517) --
-------- -------- -------- -------- ------- --------
Income (loss) from
continuing operations
before income tax..... (29,498) (13,934) 14,644 21,558 (9,517) (16,747)
Income tax expense
(benefit)............. (7,879) (13,777) 9,143 6,231 -- (6,282)
-------- -------- -------- -------- ------- --------
Income (loss) from
continuing operations
before minority
interest.............. (21,619) (157) 5,501 15,327 (9,517) (10,465)
Minority interest....... -- -- -- 129 -- 129
-------- -------- -------- -------- ------- --------
Income (loss) from
continuing
operations............ (21,619) (157) 5,501 15,456 (9,517) (10,336)
Extraordinary loss, net
of applicable tax..... -- (10,076) -- (1,207) -- (11,283)
-------- -------- -------- -------- ------- --------
Net income (loss)....... $(21,619) $(10,233) $ 5,501 $ 14,249 $(9,517) $(21,619)
======== ======== ======== ======== ======= ========
</TABLE>
F-40
<PAGE> 175
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
LAIDLAW SAFETY-KLEEN CONSOLIDATING
ENVIRONMENTAL SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- ------------ ----------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used
in) operating
activities............... $(14,997) $ (31,134) $ 29,799 $59,614 $-- $ 43,282
-------- ----------- ----------- ------- -- -----------
Cash flow from investing
activities:
Cash expended on
acquisition of
business................. -- -- (1,274,177) (8,567) -- (1,282,744)
Purchase of plant, property
and equipment............ -- -- (27,220) (7,344) -- (34,564)
Proceeds from sale of
property, plant and
equipment................ -- -- 9,879 45 -- 9,924
Net increase in long-term
investments.............. -- -- (2,153) (189) -- (2,342)
Proceeds from sale of
assets held for sale..... -- -- -- 33,675 -- 33,675
Change in other, net....... -- -- (43) -- -- (43)
-------- ----------- ----------- ------- -- -----------
Net cash provided by (used
in) investing
activities............... -- -- (1,293,714) 17,620 -- (1,276,094)
-------- ----------- ----------- ------- -- -----------
Cash flow from financing
activities:
Issuance of common stock on
exercise of stock
options.................. 436 -- -- -- -- 436
Bank overdraft (included in
accounts payable)........ -- -- 11,652 -- -- 11,652
Bank financing fees and
expenses................. -- (36,946) -- -- -- (36,946)
Repayment of long-term
debt..................... -- (315,000) (217,770) (58,777) -- (591,547)
Borrowings of long-term
debt..................... -- 1,788,000 -- 69,756 -- 1,857,756
Intercompany payable
(receivable)............. 14,561 (1,404,920) 1,450,810 (60,451) -- --
-------- ----------- ----------- ------- -- -----------
Net cash provided by (used
in) financing
activities............... 14,997 31,134 1,244,692 (49,472) -- 1,241,351
-------- ----------- ----------- ------- -- -----------
Effect of exchange rates
changes on cash.......... -- -- -- (202) -- (202)
-------- ----------- ----------- ------- -- -----------
Net increase in cash and
cash equivalents......... -- -- (19,223) 27,560 -- 8,337
Cash and cash equivalents
at:
Beginning of period...... -- -- 24,770 (13,610) -- 11,160
-------- ----------- ----------- ------- -- -----------
End of period............ $ -- $ -- $ 5,547 $13,950 $-- $ 19,497
======== =========== =========== ======= == ===========
</TABLE>
F-41
<PAGE> 176
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
AUGUST 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
LAIDLAW CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES,INC. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
------------- -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets............ $ -- $ -- $ 213,139 $ 38,401 $ -- $ 251,540
Property, plant and
equipment, net.......... -- -- 1,043,874 192,695 -- 1,236,569
Investment in
Subsidiaries............ 809,745 633,669 88,000 -- (1,531,414) --
Other non-current
assets.................. -- -- 93,346 48,847 (19,424) 122,769
-------- -------- ---------- -------- ----------- ----------
Total assets..... $809,745 $633,669 $1,438,359 $279,943 $(1,550,838) $1,610,878
======== ======== ========== ======== =========== ==========
LIABILITIES
Current liabilities....... $ 6,580 $ 1,952 $ 116,679 $ 50,454 $ (220) $ 175,445
Non-current liabilities... -- -- 241,335 7,547 (19,424) 229,458
Long-term debt............ 125,200 299,717 7,863 95,230 -- 528,010
Subordinated convertible
debenture............... 350,000 -- -- -- -- 350,000
-------- -------- ---------- -------- ----------- ----------
Total
liabilities.... 481,780 301,669 365,877 153,231 (19,644) 1,282,913
STOCKHOLDERS' EQUITY...... 327,965 332,000 1,072,482 126,712 (1,531,194) 327,965
-------- -------- ---------- -------- ----------- ----------
Total liabilities
and
stockholders'
equity......... $809,745 $633,669 $1,438,359 $279,943 $(1,550,838) $1,610,878
======== ======== ========== ======== =========== ==========
</TABLE>
F-42
<PAGE> 177
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
LAIDLAW CONSOLIDATING
ENVIRONMENTAL SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues............ $ -- $ -- $ 350,545 $117,977 $ -- $ 468,522
Operating expenses........ -- -- 651,759 109,455 -- 761,214
--------- --------- --------- -------- -------- ---------
Operating income.......... -- -- (301,214) 8,522 -- (292,692)
Interest expense.......... 922 1,371 21,197 6,432 -- 29,922
Other income (expense).... -- -- 410 1,719 -- 2,129
Undistributed earnings
(losses) of
subsidiaries............ (191,244) (190,422) -- -- 381,666 --
--------- --------- --------- -------- -------- ---------
Income (loss) from
continuing operations
before income tax....... (192,166) (191,793) (322,001) 3,809 381,666 (320,485)
Income tax expense
(benefit)............... (369) (549) (128,600) 584 -- (128,934)
--------- --------- --------- -------- -------- ---------
Income (loss) from
continuing operations
before minority
interest................ (191,797) (191,244) (193,401) 3,225 381,666 (191,551)
Minority interest......... -- -- -- (266) -- (266)
--------- --------- --------- -------- -------- ---------
Income (loss) from
continuing operations... (191,797) (191,244) (193,401) 2,959 381,666 (191,817)
Income (loss) from
discontinued
operations.............. -- -- 20 -- -- 20
--------- --------- --------- -------- -------- ---------
Net income (loss)......... $(191,797) $(191,244) $(193,381) $ 2,959 $381,666 $(191,797)
========= ========= ========= ======== ======== =========
</TABLE>
F-43
<PAGE> 178
LAIDLAW ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
LAIDLAW SAFETY-KLEEN CONSOLIDATING
ENVIRONMENTAL SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
SERVICES, INC. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------- ------------ ---------- -------------- ------------- ------------
($ IN THOUSANDS)
----------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by continuing
operations................... $-- $ -- $ 19,222 $(10,235) $-- $ 8,987
Net cash provided by
discontinued operations...... -- -- (357) -- -- (357)
-- --------- -------- -------- -- ---------
Net cash provided by (used in)
operating activities......... -- -- 18,865 (10,235) -- 8,630
-- --------- -------- -------- -- ---------
Cash flow from investing
activities:
Cash acquired on acquisition
of business................ -- -- 15,451 -- -- 15,451
Purchase of plant, property
and equipment.............. -- -- (12,202) (17,517) -- (29,719)
Net increase in long-term
investments................ -- -- (841) (1,136) -- (1,977)
Proceeds from sales of
equipment.................. -- -- 3,645 (44) -- 3,601
-- --------- -------- -------- -- ---------
Net cash provided by continuing
operations................... -- -- 6,053 (18,697) -- (12,644)
Net cash provided by
discontinued operations...... -- -- (1,887) -- -- (1,887)
-- --------- -------- -------- -- ---------
Net cash provided by (used in)
investing activities......... -- -- 4,166 (18,697) -- (14,531)
-- --------- -------- -------- -- ---------
Cash flow from financing
activities:
Issuance of debt under Bank
Credit Facility............ -- 315,000 -- 60,000 -- 375,000
Bank financing fees and
expenses................... -- (15,473) -- (2,340) -- (17,813)
Changes in long-term debt.... -- -- (12,402) 3,240 -- (9,162)
Advance from (payments to)
Laidlaw, Inc............... -- (299,527) 2,555 (29,759) -- (326,731)
-- --------- -------- -------- -- ---------
Net cash provided by (used in)
financing activities......... -- -- (9,847) 31,141 -- 21,294
-- --------- -------- -------- -- ---------
Net increase in cash and cash
equivalents.................. -- -- 13,184 2,209 -- 15,393
Cash and cash equivalents at:
Beginning of period.......... -- -- -- -- -- --
-- --------- -------- -------- -- ---------
End of period................ $-- $ -- $ 13,184 $ 2,209 $-- $ 15,393
== ========= ======== ======== == =========
</TABLE>
F-44
<PAGE> 179
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Safety-Kleen Corp.:
We have audited the accompanying consolidated balance sheets of
Safety-Kleen Corp. (a Wisconsin corporation) and Subsidiaries as of January 3,
1998 and December 28, 1996, and the related consolidated statements of
operations, comprehensive income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended January 3, 1998. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Safety-Kleen Corp. and
Subsidiaries as of January 3, 1998 and December 28, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 3, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
February 12, 1998, except with respect to the matters
discussed in Note 12 as to which the date is April 1, 1998.
F-45
<PAGE> 180
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996, AND DECEMBER 30,
1995
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- --------
(EXPRESSED IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUE..................................................... $1,007,903 $923,126 $859,251
Operating costs and expenses.............................. 748,986 671,971 628,469
---------- -------- --------
GROSS PROFIT................................................ 258,917 251,155 230,782
Selling and administrative expenses....................... 138,492 131,665 122,319
Restructuring (credit).................................... -- -- (15,217)
Special charge for environmental remediation costs........ -- -- 11,956
---------- -------- --------
OPERATING INCOME............................................ 120,425 119,490 111,724
Interest income........................................... (1,414) (1,398) (974)
Interest expense.......................................... 18,108 19,240 20,230
Merger related costs...................................... 3,231 -- --
---------- -------- --------
EARNINGS BEFORE INCOME TAXES................................ 100,500 101,648 92,468
Income taxes.............................................. 37,330 40,539 39,165
---------- -------- --------
NET EARNINGS................................................ $ 63,170 $ 61,109 $ 53,303
========== ======== ========
EARNINGS PER SHARE:
Basic..................................................... $ 1.08 $ 1.05 $ 0.92
Diluted................................................... $ 1.07 $ 1.05 $ 0.92
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE> 181
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30,
1995
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Net Earnings................................................ $ 63,170 $61,109 $53,303
Minimum pension liability adjustment........................ -- 1,226 (1,226)
Unrealized foreign currency translation adjustments......... (12,759) (972) 4,254
-------- ------- -------
Comprehensive Income........................................ $ 50,411 $61,363 $56,331
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE> 182
SAFETY-KLEEN CORP. AND SUBSIDIARIES
AS OF JANUARY 3, 1998 AND DECEMBER 28, 1996
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 3, 1998 DECEMBER 28, 1996
--------------- -----------------
(EXPRESSED IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 11,202 $ 10,648
Trade accounts receivable, less allowances of $7,634 and
$8,416, respectively.................................... 131,092 132,436
Inventories............................................... 51,339 49,971
Deferred tax assets....................................... 10,694 11,973
Prepaid expenses and other................................ 20,099 25,105
---------- ----------
224,426 230,133
---------- ----------
EQUIPMENT AT CUSTOMERS AND COMPONENTS, AT COST LESS
accumulated depreciation of $44,928 and $45,811,
respectively.............................................. 127,631 124,491
---------- ----------
PROPERTY, AT COST
Land...................................................... 50,130 49,340
Buildings and improvements................................ 243,619 238,296
Leasehold improvements.................................... 35,894 34,168
Machinery and equipment................................... 431,890 421,134
Autos and trucks.......................................... 124,999 129,319
---------- ----------
886,532 872,257
Less accumulated depreciation............................. 384,422 349,921
---------- ----------
502,110 522,336
---------- ----------
INTANGIBLE ASSETS, AT COST
Goodwill.................................................. 91,219 92,112
Other..................................................... 148,885 122,203
---------- ----------
240,104 214,315
Less accumulated amortization............................. 95,568 77,106
---------- ----------
144,536 137,209
---------- ----------
OTHER ASSETS
Deferred tax assets....................................... 20,607 24,135
Other..................................................... 15,396 6,519
---------- ----------
36,003 30,654
---------- ----------
$1,034,706 $1,044,823
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt...................... $ 37 $ --
Trade accounts payable.................................... 75,284 69,684
Accrued salaries, wages and employee benefits............. 29,769 25,510
Other accrued expenses.................................... 28,343 29,237
Insurance reserves........................................ 12,614 13,621
Accrued environmental liabilities......................... 8,382 8,941
Income taxes payable...................................... 1,014 10,800
---------- ----------
155,443 157,793
---------- ----------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 214,234 276,954
---------- ----------
DEFERRED TAX LIABILITIES.................................... 65,607 49,849
---------- ----------
ACCRUED ENVIRONMENTAL LIABILITIES........................... 32,888 40,260
---------- ----------
OTHER LIABILITIES........................................... 37,067 39,677
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock ($.10 par value; authorized 1,000,000
shares; none issued).................................... -- --
Common stock ($.10 par value; authorized 300,000,000
shares; issued and outstanding 59,191,462 shares and
58,246,939 shares, respectively)........................ 5,919 5,825
Additional paid-in capital................................ 212,504 192,755
Retained earnings......................................... 338,318 296,225
Cumulative translation adjustments........................ (27,274) (14,515)
---------- ----------
529,467 480,290
---------- ----------
$1,034,706 $1,044,823
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE> 183
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30,
1995
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
MINIMUM
TOTAL COMMON ADDITIONAL PENSION CUMULATIVE
SHAREHOLDERS' STOCK $.10 PAID-IN RETAINED LIABILITY TRANSLATION
EQUITY PAR VALUE CAPITAL EARNINGS ADJ. ADJUSTMENTS
------------- ---------- ---------- -------- --------- -----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.... $396,336 $5,775 $184,789 $223,569 $ -- $(17,797)
Net earnings.................... 53,303 -- -- 53,303 -- --
Cash dividends.................. (20,820) -- -- (20,820) -- --
Stock options exercised and
related tax benefits.......... 1,588 12 1,576 -- -- --
Minimum pension liability
adjustment.................... (1,226) -- -- -- (1,226) --
Change in cumulative translation
adjustment.................... 4,254 -- -- -- -- 4,254
-------- ------ -------- -------- ------- --------
Balance at December 30, 1995.... $433,435 $5,787 $186,365 $256,052 $(1,226) $(13,543)
Net earnings.................... 61,109 -- -- 61,109 -- --
Cash dividends.................. (20,936) -- -- (20,936) -- --
Stock issued for business
acquired...................... 4,847 27 4,820 -- -- --
Stock options exercised and
related tax benefits.......... 1,581 11 1,570 -- -- --
Minimum pension liability
adjustment.................... 1,226 -- -- -- 1,226 --
Change in cumulative translation
adjustments................... (972) -- -- -- -- (972)
-------- ------ -------- -------- ------- --------
Balance at December 28, 1996.... $480,290 $5,825 $192,755 $296,225 $ -- $(14,515)
Net earnings.................... 63,170 -- -- 63,170 -- --
Cash dividends.................. (21,077) -- -- (21,077) -- --
Stock options exercised and
related tax benefits.......... 19,843 94 19,749 -- -- --
Change in cumulative translation
adjustments................... (12,759) -- -- -- -- (12,759)
-------- ------ -------- -------- ------- --------
Balance at January 3, 1998...... $529,467 $5,919 $212,504 $338,318 $ -- $(27,274)
======== ====== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE> 184
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30,
1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 63,170 $ 61,109 $ 53,303
-------- --------- ---------
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation of equipment at customers and property.... 60,815 60,830 61,681
Amortization of intangible and other assets............ 20,195 16,911 16,120
Provisions for doubtful accounts receivable............ 4,228 4,556 4,225
Change in deferred income tax assets and liabilities,
net.................................................. 13,680 15,297 26,504
Other.................................................. 9,492 9,461 2,584
(Increase) decrease in assets, net of effects from
business acquisitions:
Trade accounts receivable.............................. (2,050) (25,251) (8,433)
Inventories............................................ (1,368) (13,499) (1,088)
Prepaid expenses and other............................. 2,219 (5,152) (2,001)
Increase (decrease) in liabilities, net of effects from
business acquisitions:
Trade accounts payable and accrued expenses............ 4,188 1,990 703
Environmental liabilities.............................. (7,931) (5,073) 4,459
Restructure and other liabilities...................... (2,624) (5,234) (33,115)
-------- --------- ---------
Total adjustments......................................... 100,844 54,836 71,639
-------- --------- ---------
Net cash provided by operating activities................... 164,014 115,945 124,942
-------- --------- ---------
Cash flows used in investing activities:
Equipment at customers additions.......................... (20,869) (23,854) (34,874)
Property additions........................................ (35,162) (37,670) (43,235)
Payment for business acquisitions, net of cash acquired... (13,458) (26,651) (12,682)
Other assets additions, net............................... (26,962) (13,158) (12,671)
-------- --------- ---------
Net cash used in investing activities....................... (96,451) (101,333) (103,462)
Cash flows from (used in) financing activities:
Net borrowings (payments) under line-of-credit
agreements............................................. (62,684) (6,760) (51,565)
Proceeds from issuance of senior notes.................... -- -- 50,000
Proceeds from stock option exercises...................... 16,940 1,576 1,930
Cash dividends paid....................................... (21,077) (20,936) (20,820)
-------- --------- ---------
Net cash from (used in) financing activities................ (66,821) (26,120) (20,455)
-------- --------- ---------
Effect of exchange rate changes on cash..................... (188) (82) 198
-------- --------- ---------
Increase (decrease) in cash and cash equivalents............ 554 (11,590) 1,223
Cash and cash equivalents at beginning of year.............. 10,648 22,238 21,015
-------- --------- ---------
Cash and cash equivalents at end of year.................... $ 11,202 $ 10,648 $ 22,238
======== ========= =========
Supplemental Information:
Cash paid during the year for:
Interest (net of amount capitalized)................... $ 18,957 $ 19,607 $ 18,997
Income taxes (net of refunds received)................. 23,955 27,547 11,231
Consideration given up and liabilities assumed in business
acquisitions........................................... 16,706 30,858 17,268
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE> 185
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
The Company is a leading provider of services to generators of spent
solvents and other contaminated waste streams as well as the leading provider of
parts cleaner services and one of the world's largest collectors and re-
refiners of used lube oil. The Company serves hundreds of thousands of customers
in North America and Europe, through a network of 230 branch facilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries after elimination of all significant intercompany balances
and transactions. The Company's fiscal year ends on the Saturday closest to
December 31. Fiscal year 1997 has fifty-three weeks while fiscal years 1996 and
1995 have fifty-two weeks.
EQUIPMENT AT CUSTOMERS AND RELATED DEPRECIATION
Equipment at customers is capitalized at manufactured or purchased cost.
Depreciation is computed using the straight-line method over a period of 3 to 13
years, commencing when the units are placed in service.
PROPERTY AND RELATED DEPRECIATION
Land, buildings and improvements, leasehold improvements, machinery and
equipment, and autos and trucks are capitalized at cost. Items of an ordinary
repair or maintenance nature are charged directly to operating expense.
Improvement costs are capitalized and charged to operations over the shorter of
the improvement life or the related asset life. Depreciation is computed
principally using the straight-line method over the estimated useful lives as
follows: buildings and improvements 5 to 40 years; machinery and equipment 2 to
20 years; autos and trucks 4 to 10 years; and leasehold improvements over the
shorter of 5 to 10 years, or the remaining term of the lease.
INTANGIBLE ASSETS AND RELATED AMORTIZATION
Goodwill consists primarily of the cost of acquired businesses in excess of
market value of net assets acquired. Goodwill is being amortized on a
straight-line basis over forty years or less. Subsequent to its acquisition, the
Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related undiscounted
operating income over the remaining life of the goodwill in measuring whether
the goodwill is recoverable.
Other intangible assets consist primarily of costs to obtain customers and
computer software. Amortization of other intangible assets is computed using the
straight-line method over the expected life of the intangible asset, which
principally ranges from 2 years to 10 years. The Company continually evaluates
whether later events and circumstances have occurred that indicate that the
remaining useful life of any of the other intangible assets may warrant revision
or that the remaining balance might not be recoverable. When factors indicate
that other intangible assets should be evaluated for possible impairment, the
Company uses an estimate of the related undiscounted cash flows, over the
remaining lives of the intangibles in measuring whether such intangibles are
recoverable.
F-51
<PAGE> 186
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ENVIRONMENTAL REMEDIATION COSTS AND LIABILITIES
The Company has recorded estimates for remediation costs relating to all
operating and previously closed sites prior to conducting detailed individual
site investigations to ascertain the existence and extent of contamination. Such
estimates are based on the Company's past experience in remediating such sites.
The Company reviews the adequacy of its liability for environmental remediation
on a periodic basis and records adjustments to the costs and liabilities
accordingly. In 1995, the Company recorded a $12 million pre-tax charge to
refine its estimates of environmental liabilities based on its ongoing review of
spending patterns.
EARNINGS PER SHARE (EPS)
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 128 on "Earnings Per Share", which requires the
presentation of basic and diluted earnings per common share for all periods
presented.
Basic EPS amounts are based on the weighted average number of shares of
common stock outstanding of 58,414,996, 58,088,894 and 57,813,488 for fiscal
years 1997, 1996 and 1995, respectively, while diluted EPS amounts are based on
the weighted average number of shares of common stock during the year and the
effect of dilutive stock options and warrants. For fiscal years 1997, 1996 and
1995, the effect of potentially dilutive stock options and warrants were
510,685; 63,461 and 43,456 shares, respectively. The Company had additional
stock options of 1,388,504; 3,454,836 and 3,498,286 at January 3, 1998, December
28, 1996 and December 30, 1995, respectively, which were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common share.
STATEMENT OF CASH FLOWS
Short-term investments with original maturities of 90 days or less are
considered to be cash equivalents for purposes of the Consolidated Statements of
Cash Flows and Consolidated Balance Sheets. Cash flows associated with items
intended as hedges of identifiable transactions are classified in the same
categories as the cash flows of the items being hedged. Refer to Note 6 for
further information regarding the Company's hedging agreements.
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries outside the United States are
generally measured using the local currency as the functional currency. Assets,
including goodwill, and liabilities of the subsidiaries are translated at the
rates of exchange at the balance sheet date. The resultant translation
adjustments are included in cumulative translation adjustments, a separate
component of shareholders' equity. Income and expense items are translated at
average period rates of exchange. Gains and losses from foreign currency
transactions of these subsidiaries are included in net earnings in the period in
which they occur and are not material.
REVENUE RECOGNITION
Revenues are recorded at the time of performance of services or shipment of
products. Revenue includes sales of oil related products totaling, $105.9,
$103.5 and $91.4 million for fiscal years 1997, 1996 and 1995, respectively.
Other sales of products were not material to the Consolidated Financial
Statements.
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 and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-52
<PAGE> 187
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to be consistent with
current year presentation.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130 on "Reporting Comprehensive Income," and SFAS No. 131 on "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 130
establishes standards for reporting comprehensive income in financial statements
and SFAS No. 131 expands certain reporting and disclosure requirements for
segments from current standards. The Company is not required to adopt these
statements until 1998 and is currently reviewing the impact of these new
standards.
3. ACQUISITIONS
All acquisitions made during the three fiscal years ended January 3, 1998
were accounted for using the purchase method and, accordingly, their operating
results have been included in the Company's Consolidated Statements of
Operations only since the respective dates of acquisition. The acquisitions were
not material either individually or in the aggregate.
4. SEGMENT INFORMATION
The Company and its subsidiaries operate in the United States, the
Commonwealth of Puerto Rico, Canada, the United Kingdom, the Republic of
Ireland, France, Belgium, Italy, Germany, and Spain. A summary of certain data
with respect to these operations for the fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995 is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
United States and Puerto Rico.................. $ 834,680 $ 754,271 $ 698,792
Canada......................................... 63,345 62,529 61,286
Europe......................................... 109,878 106,326 99,173
---------- ---------- ----------
Consolidated......................... $1,007,903 $ 923,126 $ 859,251
========== ========== ==========
TOTAL ASSETS
United States and Puerto Rico.................. $ 802,602 $ 788,521 $ 766,276
Canada......................................... 73,265 75,750 68,482
Europe......................................... 158,839 180,552 174,292
---------- ---------- ----------
Consolidated......................... $1,034,706 $1,044,823 $1,009,050
========== ========== ==========
NET EARNINGS
United States and Puerto Rico.................. $ 54,178 $ 56,092 $ 44,446
Canada......................................... 656 1,614 3,751
Europe......................................... 8,336 3,403 5,106
---------- ---------- ----------
Consolidated......................... $ 63,170 $ 61,109 $ 53,303
========== ========== ==========
</TABLE>
In 1997, based on the Company's ongoing review of its accrued environmental
liabilities, approximately $2.0 million of excess reserves in Europe were
reversed and a $2.0 million charge was recorded in the United States to cover
estimated remediation costs. This transfer only impacted net earnings by segment
and had no impact on consolidated net earnings.
F-53
<PAGE> 188
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1995, the Company recorded a $15.2 million pre-tax credit to income for
the writedown of restructuring reserves previously established in 1993 and the
$12 million pre-tax charge for the refinement of the Company's environmental
remediation reserves at its facilities in North America.
The net earnings, by segment, excluding the 1997 transfer of environmental
reserves and the 1995 adjustments to restructuring and accrued environmental
liabilities, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
United States and Puerto Rico......................... $55,378 $56,092 $49,383
Canada................................................ 656 1,614 1,856
Europe................................................ 7,136 3,403 2,064
------- ------- -------
Total....................................... $63,170 $61,109 $53,303
======= ======= =======
</TABLE>
The Company operates primarily in one business segment -- providing
businesses with environmentally safe and convenient solutions for managing fluid
waste and other recoverable resources.
5. INVENTORIES
The Company's inventories consist primarily of solvent, oil and supplies.
LIFO inventories at January 3, 1998 and December 28, 1996 were $5.5 million and
$4.8 million, respectively. Under the FIFO method of accounting (which
approximates current or replacement cost) inventories would have been $0.4 and
$0.3 million higher at January 3, 1998 and December 28, 1996, respectively. The
Company's inventories consist of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Oil......................................................... $12,759 $14,997
Solvent, Drums and Other.................................... 38,580 34,974
------- -------
Total............................................. $51,339 $49,971
======= =======
</TABLE>
6. FINANCIAL ARRANGEMENTS AND LONG-TERM DEBT
Long-term debt at January 3, 1998 and December 28, 1996 consisted of the
following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
9.25% Senior Notes due in 1999.............................. $100,000 $100,000
8.05% Senior Notes due in 1998.............................. 50,000 50,000
Unsecured notes payable to banks under financing agreements:
Revolving lines of credit................................. 47,000 67,990
Uncommitted lines of credit............................... 11,192 52,897
Other....................................................... 6,079 6,067
-------- --------
214,271 276,954
Less-current portion........................................ 37 0
-------- --------
Total long-term debt.............................. $214,234 $276,954
======== ========
</TABLE>
F-54
<PAGE> 189
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The long-term debt as of January 3, 1998 is due as follows:
<TABLE>
<CAPTION>
(EXPRESSED
IN THOUSANDS)
---------------
<S> <C>
1999........................................................ $100,091
2000........................................................ 108,653
2001........................................................ 5,190
2002........................................................ 60
2003 and thereafter......................................... 240
</TABLE>
The $100 million of 9.25% Senior Notes ("the Notes") due September 1999
specify that, upon the occurrence of a credit agency rating decline below
investment grade, either in conjunction with a change in control or as a result
of other events as defined in the Notes, each holder of the Notes has the option
to require the Company to purchase all or any part of such holder's Notes at a
price equal to 100% of the principal amount plus accrued interest.
In May 1992, the Company executed interest rate swap agreements that
effectively convert $100 million of its fixed-rate borrowings into variable rate
obligations. These swap agreements expire in September 1999. In April 1993, the
Company executed an interest rate swap agreement that converted these $100
million variable rate obligations to a fixed rate. This agreement expired in
September 1996. The effect of these swaps reduced the interest rate on the Notes
from 9.25% to 7.08% through September 1996. Effective September 1996, the
interest rate reverted back to a variable rate. The variable rate is based on
the U.S. Dollar London Interbank Offered Rate (LIBOR) determined at 6-month
intervals. At January 3, 1998, the effective variable rate of interest on these
borrowings was 7.9%.
In May 1992, at the same time the Company entered into the $100 million
interest rate swap agreement, the Company entered into an interest rate cap
agreement, which protects the Company from rising interest rates. The cap has a
notional amount of $100 million, and expires on September 12, 1999. The cap
effectively limits the Company's interest rate exposure to 13.92% if LIBOR
exceeds 12%. The premium paid on the cap is being amortized to interest expense
over the term of the cap.
The Company has a U.S. revolving credit agreement totaling $160 million,
which expires in March 2000. The agreement provides for interest rates to be
determined at the time of the borrowing based on a choice of formulas as
specified in the agreement. The Company currently benefits from a competitive
bid option under the agreement which ensures that favorable market rates of
interest are secured. A facility fee based on the Company's credit ratings is
paid on the total amount of the line of credit. At January 3, 1998, $47 million
of borrowings were outstanding at an average interest rate of 6.2%.
At January 3, 1998, the Company had uncommitted lines of credit totaling
$82 million. Borrowings under these lines were approximately $11 million at an
average interest rate of 6.1%.
The Company has the ability to convert other bank borrowings to its
revolving credit facilities. Since the committed facilities extend beyond 1998
and the Company intends to renew these obligations, $63 million of the loans
payable to banks have been classified as long-term debt.
The Company's German subsidiary had a revolving credit agreement totaling
76 million Deutschmarks (DM) (U.S. $42 million) that extended credit until
December 1997. The interest rate determined at the time of each borrowing was
6-month LIBOR plus 0.5%. A commitment fee of 0.125% per annum was paid quarterly
on the unused portion of the facility. On December 15, 1997, Safety-Kleen
Corp.'s USA parent company purchased the outstanding credit facility of the
German subsidiary totaling approximately DM 71 million (U.S. $40 million) from
Deutsche Bank for approximately $40 million. This note was purchased through the
use of additional U.S. borrowings through its revolving credit facility.
F-55
<PAGE> 190
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1992, the Company's German subsidiary executed an interest rate swap
agreement which expired in May 1997. The interest rate on DM 70 million (U.S.
$39 million) was swapped from rates based on 6-month DM LIBOR to rates based on
6-month U.S. Dollar LIBOR.
At January 3, 1998, the Company's other subsidiary operations have
miscellaneous line of credit agreements totaling $9 million (U.S.). At January
3, 1998, there were no borrowings under these lines of credit.
The Company's remaining interest rate swap agreement has been entered into
with major financial institutions which are expected to fully perform under the
terms of the agreements. The Company monitors the credit ratings of these
counterparties and considers the risk of default to be remote.
Interest expense excludes $2.1 million of interest capitalized for each of
the three fiscal years 1997, 1996 and 1995.
The fair value of the interest rate swap agreements and the interest cap
agreement noted above was approximately $1.8 and $2.1 million greater than the
Company's carrying value at January 3, 1998 and December 28, 1996, respectively.
This fair value is determined by obtaining quotes from brokers who regularly
deal in these types of financial instruments. These interest rate swaps have
resulted in a net savings of $0.7, $0.1, and $0.6 million in 1997, 1996, and
1995, respectively.
In January 1995, the Company entered into a note purchase agreement with
two insurance companies, under which the Company borrowed $50 million at a fixed
interest rate of 8.05% for 3 years expiring in January, 1998. Proceeds from the
note were used to repay existing bank borrowings. At the end of fiscal year
1997, the Company classified the $50 million in debt as non-current as it was
the Company's intention to repay the notes through the use of additional bank
borrowings under its revolving credit facilities. This action was consummated at
the end of January 1998.
The Company's credit agreements include provisions, among others, relative
to maintenance of minimum shareholders' equity and certain financial ratios. At
January 3, 1998, the Company's required minimum shareholders' equity was $465
million and the Company was in compliance with its loan provisions.
7. CAPITAL STOCK
PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock, par value $.10 per share, at such time or times, in such
series, and with such designations and features thereof as it may determine,
including rate of dividend, redemption provisions and prices, conversion
conditions and prices and voting rights. No shares of preferred stock have been
issued.
STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company has the following stock option and employee stock purchase
plans:
1. The 1985 and 1993 Stock Option Plans (The "Option Plans")
2. The 1988 Non-Qualified Stock Option Plan for Outside Directors (The
"Directors' Plan")
3. The Employee Stock Purchase Plan (the "ESPP")
F-56
<PAGE> 191
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for these plans under Accounting Principles Board
(APB) Opinion No. 25 under which no compensation has been recognized at the date
of grant. Had compensation costs for these plans been determined based on the
fair value at the date of grant consistent with SFAS No. 123, on "Accounting for
Stock-Based Compensation," the Company's net income and earnings per share
("EPS") for fiscal years 1997, 1996 and 1995 would have been reduced to the
following pro-forma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(EXPRESSED IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
NET INCOME:
As Reported............................................. $63,170 $61,109 $53,303
Pro Forma............................................... $60,134 $59,398 $52,235
BASIC EPS:
As Reported............................................. $ 1.08 $ 1.05 $ 0.92
Pro Forma............................................... $ 1.03 $ 1.02 $ 0.90
DILUTED EPS:
As Reported............................................. $ 1.07 $ 1.05 $ 0.92
Pro Forma............................................... $ 1.02 $ 1.02 $ 0.90
</TABLE>
The fair value of each option granted under the Option Plans is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants in 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Expected Lives (Years)...................................... 5.45 6.00 6.00
Dividend Yield.............................................. 1.99% 1.68% 1.46%
Expected Volatility......................................... 27.23% 30.74% 30.50%
Risk Free Interest Rate..................................... 6.13% 5.41% 7.44%
</TABLE>
The weighted average fair value of the shares granted under the Option
Plans in fiscal years 1997, 1996 and 1995 would be $5.17, $5.09 and $6.24,
respectively. No grants were made in 1997, 1996 and 1995 under the Directors'
Plan. The cost per ESPP share granted in 1997, 1996 and 1995 would be $3.46,
$3.30 and $3.49, respectively, based on a 10% discount on share price and a
Black-Scholes value of a 13-month option with a 2.08%, 2.23% and 2.23% dividend
yield rate in 1997, 1996 and 1995, respectively.
Because the SFAS No. 123 method of fair-value accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
At the Annual Meeting of Shareholders held in May 1996, the shareholders
approved an increase in the number of shares available for grant under the
Option Plans by 2,500,000 shares to a total of 8,437,500 shares. Under the
Option Plans, shares of the Company's common stock may be granted to officers
and other key employees at a price of 100% of the quoted market price at date of
grant. Options granted under the Plan may be either Incentive Stock Options or
Non-Qualified Stock Options. Stock Appreciation Rights (SARs) may be granted in
conjunction with Non-Qualified Stock Options whereby the grantee may surrender
exercisable Non-Qualified Options and receive a cash payment equal to the
difference between the option price and the market value of the common stock on
the exercise date. The exercise of Incentive Options, Non-Qualified Options and
SARs are subject to conditions as determined at the time of grant by the
Compensation Committee of the Board of Directors. All options granted since May
1990 have been for a 10-year life with 25% vesting per year beginning one year
from the date of grant. In November 1994, the Board extended the expiration date
on all stock options granted from February 1987 through May 1990 from their
original expiration date to November 30, 2004.
F-57
<PAGE> 192
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the Directors' Plan, options to purchase up to 300,000 shares of the
Company's common stock may be granted to outside Directors at a price of 100% of
the quoted market price at the date of grant. Under the terms of the Directors'
Plan, each outside Director was granted an option to purchase 15,000 shares at
the time the plan was adopted. Any new outside Director elected or appointed
after the date the plan was adopted would also be granted an option to purchase
15,000 shares of the Company's common stock upon taking office. The Directors'
Plan also provides that a second option to purchase 15,000 shares be granted to
each outside Director on the fifth anniversary of their initial grant of options
if such Director is still serving on the Board at that time. Options vest 25%
annually, on a cumulative basis, starting one year from date of grant and
terminate ten years after the grant date.
The Option Plans and the Directors' Plan include a change of control
provision that results in all shares granted under these plans becoming 100%
vested should a change of control take place.
Under the ESPP, a total of 1,500,000 shares of the Company's common stock
may be purchased by employees of the Company and designated subsidiaries,
through payroll deductions, at 90% of the lower of the quoted closing market
price on the date of grant or the quoted closing market price on June 30 in the
year following the date of grant. Under the plan, all full-time employees
(except officers of the Corporation) of the Company and designated subsidiaries
on the grant date who were continuously employed since January 1 of the year in
which the grant date occurs (subject to certain restrictions on percentage of
ownership outlined in the ESPP) are eligible to participate. The Company had an
employee stock purchase plan ("Old ESPP") which was in effect from 1990 through
1994. Under terms of the Old ESPP, no further grants to purchase shares could be
made after December 31, 1994. Therefore, 66,188 shares granted under the Old
ESPP in 1994 that were canceled in 1995 have expired.
A summary of the status of the Company's stock option plans and the
employee stock purchase plans for the three fiscal years ended January 3, 1998
is presented below:
<TABLE>
<CAPTION>
WEIGHTED AVAILABLE FOR
SHARES PRICE RANGE AVG. EX. PRICE EXERCISABLE FUTURE GRANTS
--------- --------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Outstanding Options @
12/31/94..................... 3,239,275 $13.50 - $32.25 $20.54 1,829,500 2,365,479
1995 ACTIVITY:
Expired........................ (66,188)
Authorized..................... 1,500,000
Granted........................ 1,228,846 15.41 - 16.88 16.15
Exercised...................... (133,992) 13.50 - 15.63 14.40
Canceled....................... (233,762) 13.50 - 32.25 19.05
- -----------------------------------------------------------------------------------------------------------
Outstanding Options @
12/30/95..................... 4,100,367 13.50 - 32.25 19.51 2,142,623 2,804,207
1996 ACTIVITY:
Authorized..................... 2,500,000
Granted........................ 977,759 14.25 - 17.50 15.13
Exercised...................... (102,536) 13.50 - 16.25 15.37
Canceled....................... (115,789) 13.50 - 32.25 16.99
- -----------------------------------------------------------------------------------------------------------
Outstanding Options @
12/28/96..................... 4,859,801 13.50 - 32.25 18.78 2,718,193 4,442,237
1997 ACTIVITY:
Granted........................ 1,218,393 14.17 - 17.13 16.78
Exercised...................... (944,523) 13.50 - 26.75 17.93
Canceled....................... (214,815) 13.50 - 32.25 17.21
- -----------------------------------------------------------------------------------------------------------
Outstanding Options @ 1/3/98 4,918,856 $13.50 - $32.25 $18.51 2,517,985 3,438,659
- -----------------------------------------------------------------------------------------------------------
</TABLE>
F-58
<PAGE> 193
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK WARRANTS
The Company, on January 27, 1995 issued 200,000 stock warrants in
conjunction with an acquisition. These warrants give the owner of stock warrants
the right to purchase up to 200,000 shares of the Company's common stock at a
price of $17.79 per share and expire on January 27, 2000.
The following table summarizes information about the Company's stock option
plans, employee stock purchase plan and stock warrants outstanding at January 3,
1998.
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE OPTIONS/WARRANTS OPTIONS/WARRANTS EXERCISABLE
REMAINING ------------------------------------------------ ------------------------------
CONTRACTUAL LIFE NUMBER RANGE OF WEIGHTED-AVERAGE NUMBER WEIGHTED AVERAGE
(YEARS) OUTSTANDING EXERCISE PRICES EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------- ----------- --------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
1 252,935 $13.50 - $19.46 $16.84 132,839 $19.22
1 56,325 24.00 - 32.00 29.01 56,325 29.01
2 216,650 13.50 - 19.33 17.62 214,287 17.65
2 30,100 24.00 - 32.00 28.45 30,100 28.45
3 2,063 13.50 - 16.25 15.88 1,225 15.68
3 245,875 24.00 - 32.25 31.96 245,875 31.96
4 10,101 13.50 - 19.42 16.10 6,201 16.36
4 190,725 24.00 - 32.25 27.12 190,725 27.12
5 34,050 13.50 - 21.75 18.72 24,637 19.67
5 332,100 24.00 - 24.00 24.00 332,100 24.00
6 434,887 13.50 - 17.38 15.05 332,792 14.69
7 1,504,003 15.88 - 23.92 17.44 1,002,967 17.93
8 741,792 14.25 - 15.13 15.12 147,912 $14.64
9 1,067,250 15.63 - 17.50 17.08 -- --
--------- --------------- ------ --------- ------
TOTAL 5,118,856 $13.50 - $32.25 $18.48 2,717,985 $20.41
========= =============== ====== ========= ======
</TABLE>
SHAREHOLDERS' RIGHTS PLAN
Pursuant to a plan adopted by the Company in December 1988 and amended in
1991, each share of the Company's common stock carries the right to buy one
share of the Company's common stock at a price of $73.33 per share. The rights
will expire on November 21, 1998, unless earlier redeemed by the Company. The
rights will become exercisable if a person becomes an "acquiring person" by
acquiring 20% of the Company's common stock or announces a tender offer that
would result in such person owning 20% or more of the Company's common stock. If
someone becomes an acquiring person, the holder of each right (other than rights
owned by the acquiring person) will be entitled to purchase common stock of the
Company having a market value of twice the exercise price of the right. In
addition, if the Company is acquired in a merger or other business combination
transaction in which the Company's common stock is exchanged for cash or
securities, or 50% or more of its consolidated assets or earning power are sold,
each holder (other than the acquiring person) will have the right to purchase
common stock of the acquiring company having a market value of twice the
exercise price. The rights may be redeemed by the Company, at a price of 0.67
cent per right, at any time prior to anyone becoming an acquiring person. See
Note 12 to the Consolidated Financial Statements for a discussion regarding
subsequent events.
8. PENSION AND EMPLOYEE BENEFIT PLANS
The Company has four noncontributory pension plans covering substantially
all full time employees in the United States. These four domestic pension plans
consist of three qualified plans and one unfunded non-qualified plan. The
qualified plans are funded in compliance with ERISA requirements as employees
become eligible to participate, generally, after completing one year of service.
F-59
<PAGE> 194
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's consolidated pension costs for fiscal years 1997, 1996 and
1995 were $6.0 million, $6.0 million, and $4.9 million, respectively.
The following table sets forth the domestic plans' combined funded status
at January 3, 1998 and December 28, 1996:
<TABLE>
<CAPTION>
JANUARY 3, 1998 DECEMBER 28, 1996
----------------------------- -----------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefits.................... $57,034 $ 2,558 $44,213 $ 2,395
Nonvested benefits................. 4,869 323 4,427 141
------- ------- ------- -------
Accumulated benefit obligation....... 61,903 2,881 48,640 2,536
Effect of projected compensation
levels............................. 20,082 1,394 16,169 584
------- ------- ------- -------
Projected benefit obligation......... 81,985 4,275 64,809 3,120
Plan assets at fair value............ 77,858 -- 64,204 --
------- ------- ------- -------
Projected benefit obligation
(greater) than plan assets......... (4,127) (4,275) (605) (3,120)
Unrecognized net loss (gain)......... 3,065 259 1,476 (629)
Unrecognized net assets to be
amortized over 16-20 years......... (498) 432 (568) 494
Unrecognized prior service cost...... 315 105 355 114
------- ------- ------- -------
Unfunded prepaid (accrued) pension
cost recognized in the Consolidated
Balance Sheets..................... $(1,245) $(3,479) $ 658 $(3,141)
======= ======= ======= =======
</TABLE>
The Plans' assets consist of cash, cash equivalents, equity funds, pooled
funds of real estate and common stock of the Company.
Net periodic pension cost for the Company's domestic plans for fiscal years
1997, 1996 and 1995 includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the year............. $ 4,898 $ 4,521 $ 3,451
Interest on projected benefit obligation................. 5,897 4,981 4,274
Return on plan assets.................................... (13,461) (9,422) (10,405)
Net amortization and deferral............................ 7,092 4,593 6,493
-------- ------- --------
Net periodic pension cost................................ $ 4,426 $ 4,673 $ 3,813
======== ======= ========
</TABLE>
F-60
<PAGE> 195
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Actuarial assumptions used to determine the projected benefit obligation
and the expected net periodic pension costs were:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Projected Benefit Obligation Assumptions:
Discount Rates............................................ 7.3% 7.8% 7.3%
Rates of increase in compensation levels.................. 4.0% 4.5% 4.0%
Net Periodic Cost Assumption:
Expected long-term rate of return on assets............... 10.0% 10.0% 10.0%
</TABLE>
The Company also has pension plans covering employees of its Canadian and
British subsidiaries. Those plans are funded by purchase of insurance contracts
and units in a managed fund invested in stocks, fixed income securities and real
estate. Vested benefits are fully funded. The Company's foreign subsidiaries are
not required to report under ERISA and do not otherwise determine the actuarial
value of accumulated plan benefits as disclosed above for the Company's domestic
pension plans. These plans do not have a material effect on the Company's
financial condition or results of operations.
The Safety-Kleen Corp. Savings and Investment Plan allows eligible
employees to make contributions, up to a certain limit, to the Plan on a
tax-deferred basis under Section 401(k) of the Internal Revenue Code of 1986.
The Company may, at its discretion, make matching contributions out of its
profits for the year. The Company's expense for contributions was $2.4 million
in 1997, $3.2 million in 1996 and $1.9 million in 1995.
The Company offers a post-retirement medical insurance plan to its domestic
employees retiring prior to the normal retirement age of 65. Retirees are
eligible to continue this medical coverage until age 65. The plan is currently
unfunded and retirees electing this coverage are required to pay a premium for
the insurance.
The following table reconciles the funded status of the plan to the accrued
post-retirement benefit cost recognized in the Consolidated Balance Sheets at
January 3, 1998 and December 28, 1996:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation (APBO):
Retirees, beneficiaries and dependents.................... $ 864 $ 1,310
Active employees.......................................... 5,793 5,074
------- -------
6,657 6,384
------- -------
Plan assets at fair value................................... -- --
------- -------
APBO greater than plan assets............................... (6,657) (6,384)
------- -------
Unrecognized net loss (gain)................................ (2,885) (2,502)
------- -------
Accrued post-retirement benefit cost........................ $(9,542) $(8,886)
======= =======
APBO discount rate assumption............................... 7.3% 7.8%
------- -------
</TABLE>
Net periodic post-retirement benefit costs recognized for fiscal years
1997, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------ ----
(EXPRESSED IN
THOUSANDS)
<S> <C> <C> <C>
Service costs -- benefits earned during the year............ $ 578 $ 683 $511
Interest costs on APBO...................................... 453 478 436
Other....................................................... (121) (57) (87)
----- ------ ----
Net periodic post-retirement benefit cost................... $ 910 $1,104 $860
===== ====== ====
</TABLE>
F-61
<PAGE> 196
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The health care cost trend was assumed to be 9% for 1995, 7% for 1996 and
5% for 1997 decreasing to an ultimate trend of 4.5% in 1998 and beyond.
If the health care cost trend rate increases one percent for all future
years, the accumulated post-retirement benefit obligation as of January 3, 1998
would have increased 14%. The effect of this change on the aggregate of the
service and interest cost for 1997 would be an increase of 21%.
At the end of 1994, the Company established a non-qualified Deferred
Compensation Plan. This plan allows corporate officers and other key management
personnel to defer a portion of their current compensation up to a certain
limit, as defined by the Plan. Distributions under the plan are made in
accordance with deferral elections as described in the plan. All expenses
associated with the Deferred Compensation Plan are recognized in the period in
which they are incurred. The Company has liabilities of approximately $1.6 and
$0.8 million recorded at January 3, 1998 and December 28, 1996, respectively,
associated with the Deferred Compensation Plan.
In 1997, the Company invested $5.0 million in an irrevocable Rabbi Trust
that will provide the resources necessary to pay any liabilities currently
accrued for under the Deferred Compensation Plan and the unfunded non-qualified
domestic pension plan. The investment in the trust is included in "Other Assets"
on the Company's Consolidated Balance Sheets.
9. INCOME TAXES
The components of earnings before income taxes consisted of the following
for each of the last three fiscal years:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Domestic............................................... $ 94,044 $ 93,986 $ 74,492
Foreign................................................ 6,456 7,662 17,976
-------- -------- --------
$100,500 $101,648 $ 92,468
======== ======== ========
</TABLE>
Under SFAS No. 109 on Accounting for Income Taxes, deferred tax assets and
liabilities are calculated based on the difference between the financial
statement and income tax bases of assets and liabilities using the enacted tax
rates.
The provisions (benefits) for income taxes include the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
CURRENT
Federal................................................... $16,020 $19,979 $16,505
State..................................................... 4,484 5,956 5,087
Commonwealth of Puerto Rico............................... 458 159 (376)
Foreign................................................... 2,066 704 662
DEFERRED
Federal................................................... 7,307 6,863 7,247
Foreign................................................... 1,916 4,105 2,087
PREPAID
Federal................................................... 5,706 5,077 1,949
Foreign................................................... (627) (2,304) 6,004
------- ------- -------
TOTAL PROVISION........................................... $37,330 $40,539 $39,165
======= ======= =======
</TABLE>
F-62
<PAGE> 197
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the statutory U.S. Federal income tax rate
to the Company's consolidated effective tax rate:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate............................. 35.0% 35.0% 35.0%
Increase(decrease) resulting from:
Provision for state income tax (net of federal benefit)... 2.7 2.1 3.6
Difference in foreign statutory rates....................... 0.2 1.6 2.2
Other....................................................... (0.8) 1.2 1.6
---- ---- ----
Effective tax rate.......................................... 37.1% 39.9% 42.4%
==== ==== ====
</TABLE>
Temporary differences and carry forwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Deferred Tax Assets -- Current
Environmental reserves....................... $ 3,080 $ 2,395 $ 2,625
Insurance reserves........................... 4,444 4,415 5,908
Bad debt reserve............................. -- 1,800 1,800
Restructure and Other........................ 3,170 3,363 7,651
-------- -------- --------
Total deferred tax assets -- current........... $ 10,694 $ 11,973 $ 17,984
======== ======== ========
Deferred Tax Assets -- Non-Current
Restructure charges not currently
deductible................................ $ 11,872 $ 11,440 $ 17,494
Net operating loss (NOL) carry forwards of
subsidiaries.............................. 18,279 20,616 20,149
Insurance reserves........................... 8,351 7,798 4,822
Environmental reserves....................... 12,828 16,325 14,382
Other........................................ 5,294 5,458 3,273
Valuation allowance.......................... (2,879) (3,340) (3,676)
-------- -------- --------
Total deferred tax assets -- non-current....... 53,745 58,297 56,444
-------- -------- --------
Total Deferred Tax Assets...................... $ 64,439 $ 70,270 $ 74,428
======== ======== ========
Deferred Tax Liabilities
Restructuring and Special Charges............ $ (1,750) $ -- $ 13,820
Depreciation................................. (87,659) (76,115) (80,250)
Tax lease agreements......................... (6,234) (6,852) (7,253)
Other........................................ (3,102) (1,044) (915)
-------- -------- --------
Total Deferred Tax Liabilities................. $(98,745) $(84,011) $(74,598)
======== ======== ========
</TABLE>
As of January 3, 1998, the Company has undistributed earnings of foreign
consolidated subsidiaries of approximately $30.1 million. The Company does not
provide for deferred taxes on possible future remittances of these earnings
since U. S. income taxes, under current law, on such remittances would not be
material.
F-63
<PAGE> 198
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of January 3, 1998, the tax assets derived from Net Operating Loss carry
forwards (NOLs) consist of NOL tax assets with expiration dates as follows:
<TABLE>
<CAPTION>
(EXPRESSED IN THOUSANDS)
------------------------
<S> <C>
1998................................................. $ 558
1999................................................. 1,539
2000................................................. 369
2001................................................. 395
2002................................................. 360
No Expiration........................................ 15,058
</TABLE>
The Company has recorded a valuation allowance of approximately $2.9
million for unrealized NOL tax assets that may expire before the Company is able
to utilize such NOLs.
The valuation allowance account balance of $2.9 million represents
approximately 89% of the NOL tax assets that are due to expire as it is more
likely than not that some portion of the deferred tax assets will not be
realized. The valuation account activity is summarized in the table below:
<TABLE>
<CAPTION>
1997
--------------
(EXPRESSED
IN THOUSANDS)
<S> <C>
Balance -- beginning of year................................ $3,340
Adjust valuation balances................................... 19
Cumulative translation adjustment........................... (480)
------
Balance -- end of year...................................... $2,879
======
</TABLE>
10. SPECIAL CHARGE FOR ENVIRONMENTAL REMEDIATION COSTS, OTHER ACCRUED
EXPENSES AND LIABILITIES, COMMITMENTS AND CONTINGENT LIABILITIES
The Company operates a large number of hazardous waste facilities for the
collection and processing of hazardous and non-hazardous wastes and is subject
to extensive and expansive regulation by federal, state and local authorities.
In the ordinary course of conducting its business activities, the Company
becomes involved in judicial and administrative proceedings in which
governmental authorities seek remedial actions and/or fines and penalties. The
Company also has been notified by the EPA that it may be a responsible party at
several National Priority List ("NPL") sites. Generally, these proceedings by
federal and state regulatory agencies have been resolved by negotiation and
settlement. The Company does not anticipate that the amount of fines and
penalties will have a material adverse impact on its financial condition. It
should be noted, however, that many environmental laws are written and enforced
in a way in which the potential liability can be large and it is possible that
the Company's actual liability in any particular case or claim will prove to be
larger than anticipated and accrued for by the Company. It is also possible that
expenses incurred in any particular reporting period for remediation costs or
for fines, penalties or judgments could have a material impact on the Company's
results of operations for that period.
Under various federal, state and local regulations, the Company can be
required to conduct an environmental investigation of any of its operating or
closed facilities to determine the possible existence and extent of
environmental contamination. In the event that contamination is found, the
Company may be required to perform a remedial cleanup of the site. The Company
is currently engaged in investigation and cleanup work at many of its sites.
In 1993, the Company recorded a $50 million pre-tax special charge ($30
million after-tax or $.52 per share) for a change in estimate for remediation
costs relating to all operating and previously closed sites prior to conducting
detailed individual site investigations to ascertain the existence and extent of
contamination. This change results in earlier recognition of environmental
remediation costs and liabilities as compared with the Company's previous
practice which was to accrue the estimated cost of remedial cleanup work at the
time the
F-64
<PAGE> 199
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
need for such work was specifically identified based on site investigation. In
1995, the Company recorded a $12 million pre-tax charge to increase its reserves
for environmental remediation based on a refinement of the estimate for such
liabilities and its ongoing review of spending patterns. The Company intends to
continue to operate at its active sites indefinitely. Accordingly, the accrued
environmental liabilities do not include estimates for costs associated with the
physical closure of such sites.
Federal environmental regulations require that the Company demonstrate
financial responsibility for sudden and non-sudden releases, as well as closure
and post-closure liabilities. One manner by which to make this demonstration is
through Environmental Impairment Liability (EIL) insurance coverage. The Company
has not been able to purchase large amounts of risk-transfer EIL insurance
coverage. The Company has EIL insurance coverage which it believes complies with
the Federal regulatory requirements. However, the Company must reimburse the
insurance carrier for all losses and expenses incurred by it under the policy.
The Company's income could be adversely affected in the future if it is unable
to obtain risk-transfer EIL insurance coverage and uninsured losses were to be
incurred.
In September 1997, the Company discovered that its East Chicago, Indiana
main feed tank had become contaminated with polychlorinated biphenyls ("PCBs")
resulting in approximately 4 million gallons of contaminated oil. The Company
immediately notified the EPA and the Indiana Department of Environmental
Management ("IDEM") of the problem. The Company believes that the IDEM and EPA
will allow it to treat this contaminated material on-site. If the IDEM or EPA
determine that off-site treatment is required, the cost of such treatment could
be material to the results of operations in that period.
The Company leases many of its branches, vehicles and other equipment.
These leases are accounted for as operating leases. Related rental expenses were
$40.4 million in 1997, $31.5 million in 1996 and $24.8 million in 1995.
Aggregate minimum future rentals are payable as follows:
<TABLE>
<CAPTION>
PERIODS (EXPRESSED IN MILLIONS)
- ------- -----------------------
<S> <C>
1998................................................... $ 32.6
1999................................................... 25.9
2000................................................... 16.3
2001................................................... 8.6
2002................................................... 5.8
Future Years........................................... 18.2
------
Total........................................ $107.4
======
</TABLE>
11. RESTRUCTURING CHARGES
In 1993, the Company adopted a restructuring plan based on conversion of
its core parts cleaner service to new technology and other strategic actions. In
conjunction with the adoption of this plan, the Company recorded a special
charge of $179 million ($106 million after tax or $1.84 per share). The pre-tax
restructuring charge included $93 million of asset write downs and $86 million
of other restructuring charges. In 1995, the Company recorded a pre-tax credit
to income of $15.2 million to adjust the restructuring reserves to their
expected required levels.
In 1996, the Company substantially completed all of its restructuring
activities and reclassified the remaining restructure liabilities (which are
primarily associated with the European operations) to other accrued expenses in
current liabilities and other liabilities in non-current liabilities. At January
3, 1998 and December 28, 1996, other accrued expenses include $1.7 and $3.6
million, respectively, and other liabilities include $2.3 and $7.9 million,
respectively.
F-65
<PAGE> 200
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. POTENTIAL SALE OF THE COMPANY
On August 8, 1997, the Company issued a press release stating that it had
initiated a process to explore strategic alternatives for enhancing shareholder
value and had engaged William Blair and Company, L.L.C. ("William Blair") to act
as its financial advisor in connection therewith. As part of the process, 50
potential buyers executed confidentiality and standstill agreements (which were
designed to encourage participation by creating a level playing field for all
interested parties and to protect Safety-Kleen's interests). On November 20,
1997, the Company's Board of Director's ("Board") voted unanimously to approve a
merger agreement with SK Parent Corp., a Delaware corporation owned equally by
Phillip Services Corp., affiliates of Apollo Management, L.P. and affiliates of
Blackstone Partners III, L.L.C. (the "SK Parent Merger Agreement").
Laidlaw Environmental Services, Inc. ("Laidlaw Environmental") also
contacted William Blair but repeatedly refused to execute a confidentiality and
standstill agreement and participate in the process like other potential buyers.
Laidlaw Environmental made an initial unsolicited exchange offer and two
subsequent revised exchange offers in an attempt to purchase Safety-Kleen. After
carefully reviewing the unsolicited offers from Laidlaw Environmental, the Board
continued to recommend the SK Parent Merger Agreement.
On March 9, 1998, the Company held a special meeting of shareholders for
the sole purpose of voting on the SK Parent Merger Agreement. It was announced
at the meeting, based on the advice of the Company's proxy solicitors, that the
Company would not achieve the affirmative vote of two-thirds of all outstanding
shares needed to approve the SK Parent Merger Agreement. The Board then
terminated the SK Parent Merger Agreement. The Board also announced that it
would begin negotiations with Laidlaw Environmental and would also continue to
explore other strategic alternatives for enhancing shareholder value including,
but not limited to, considering any new offers for the Company from any other
interested parties.
On March 16, 1998, the Company issued a press release stating the Board
unanimously approved a definitive merger agreement ("Merger Agreement") with
Laidlaw Environmental, providing for an exchange offer ("Exchange Offer")
followed by a back-end merger ("Merger"; together with the Exchange Offer, the
"Transaction"); the Merger Agreement provides for consideration per Safety-Kleen
share of $18.30 plus 2.8 shares of Laidlaw Environmental Common Stock in both
the Exchange Offer and the Merger. The Board also amended the Shareholders'
Rights Plan to exempt the Merger Agreement and the transactions pursuant
thereto.
On April 1, 1998, Laidlaw Environmental accepted for exchange 56,138,238
shares, constituting approximately 94% of the outstanding shares of Safety-Kleen
and announced it expected to pay for such shares on April 3, 1998 and to
consummate the Merger approximately 6 weeks thereafter. Also on April 1, 1998,
the Inspectors of Election issued their Final Report of the vote on the SK
Parent Merger Agreement, certifying that it received 21,256,083 votes for
approval out of 59,209,387 shares outstanding and entitled to vote (i.e., 36% of
the outstanding shares were voted in favor). The acceptance and exchange of
tendered shares triggers the change of control provision included in the
Company's 1985 and 1993 Stock Option Plans and the 1988 Non-Qualified Stock
Option Plan for Outside Directors which results in all granted options becoming
100% vested. Consistent with the Merger Agreement, each holder of stock options
will receive a cash-out amount, with respect to each of his/her option shares,
equal to the Exchange Offer consideration (valued for this purpose at $30.30)
reduced by the option exercise price, provided that such holder agrees to the
cancellation of all of his/her outstanding options. Also consistent with the
Merger Agreement, each participant in the Employee Stock Purchase Plan will
receive a cash-out payment equal to his/her contributions plus an amount equal
to the number of shares subscribed for by the participant multiplied by the
difference between such Exchange Offer consideration and the market price of the
stock at the date of grant.
The Company incurred $3.2 million in costs through January 3, 1998 in
conjunction with the process described above. During 1998, the Company
anticipates incurring approximately $140-160 million of additional costs related
to the process consisting primarily of the $75 million of termination costs
associated with the SK Parent Merger Agreement, compensation expense associated
principally with the cash-out of the stock option
F-66
<PAGE> 201
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
plans and Employee Stock Purchase Plan described above and investment banking
and legal fees associated with the process. These estimated costs do not include
any severance related costs incurred as a result of the integration of the
Company and Laidlaw Environmental.
13. INTERIM RESULTS OF OPERATIONS (UNAUDITED)
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BASIC DILUTED
EARNINGS EARNINGS
REVENUE GROSS PROFIT NET EARNINGS PER SHARE PER SHARE
--------------------- ------------------- ----------------- ------------- -------------
INTERIM PERIOD 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- -------------- ---------- -------- -------- -------- ------- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First (12 Weeks).............. $ 220,230 $201,723 $ 56,146 $ 55,900 $11,838 $13,077 $0.20 $0.23 $0.20 $0.23
Second (12 Weeks.............. 229,928 211,355 58,221 56,567 13,341 13,604 0.23 0.23 0.23 0.23
Third (12 Weeks).............. 230,014 213,098 58,662 57,824 15,118(1) 14,004 0.26 0.24 0.26 0.24
Fourth (17 and 16 Weeks)...... 327,731 296,950 85,888 80,864 22,873(2) 20,424 0.39 0.35 0.38 0.35
---------- -------- -------- -------- ------- ------- ----- ----- ----- -----
Total......................... $1,007,903 $923,126 $258,917 $251,155 $63,170(2) $61,109 $1.08 $1.05 $1.07 $1.05
========== ======== ======== ======== ======= ======= ===== ===== ===== =====
</TABLE>
- ---------------
(1) Includes $2.6 million of pre-tax severance related costs incurred during the
period that were offset by a reduction of other pre-established reserves.
(2) Includes $3.2 million pre-tax charge for merger related costs.
14. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
In connection with the Merger Agreement with Laidlaw Environmental (see
Note 12), Safety-Kleen Services Inc. (formerly known as LES, Inc.), a
wholly-owned subsidiary of Laidlaw Environmental Services, Inc. issued 9.25%
Senior Subordinated Notes to finance the acquisition. The wholly-owned domestic
subsidiaries of Safety-Kleen Services Inc. (formerly known as LES, Inc.)
(including the Company and its subsidiaries incorporated in the United States
and Puerto Rico) guaranteed such notes on a full and conditional and joint and
several basis. No foreign direct or indirect subsidiary (including those
incorporated in Europe and Canada) or non-wholly-owned subsidiary of the Company
is an obligor or guarantor on the financing. For summarized financial
information concerning such subsidiary guarantors and subsidiary non-guarantors,
see Note 15.
F-67
<PAGE> 202
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information on a combined basis as of and for the year
ended January 3, 1998 is as follows:
CONSOLIDATING CONDENSED BALANCE SHEET
AS OF JANUARY 3, 1998
<TABLE>
<CAPTION>
UNITED STATES
AND EUROPE, CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets...................... $170,287 $ 54,139 $ -- $ 224,426
Equipment at customers, net......... 108,085 19,546 -- 127,631
Property, plant and equipment,
net.............................. 413,051 89,059 -- 502,110
Intangible assets................... 88,381 56,361 (206) 144,536
Investment in Subsidiaries.......... 168,673 -- (168,673) --
Non-current prepaid taxes........... 32,643 21,102 (33,138) 20,607
Other non-current assets............ 14,347 1,049 -- 15,396
-------- -------- --------- ----------
Total assets........................ $995,467 $241,256 $(202,017) $1,034,706
======== ======== ========= ==========
Liabilities:
Current liabilities................. $125,546 $ 29,899 $ (2) $ 155,443
Long-term debt...................... 213,716 518 -- 214,234
Deferred income taxes............... 84,045 14,700 (33,138) 65,607
Intercompany payable (receivable)... (42,062) 42,062 -- --
Other non-current liabilities....... 61,208 8,747 -- 69,955
-------- -------- --------- ----------
Total liabilities................... 442,453 95,926 (33,140) 505,239
Stockholders' equity.................. 553,014 145,330 (168,877) 529,467
-------- -------- --------- ----------
Total liabilities and stockholders'
equity.............................. $995,467 $241,256 $(202,017) $1,034,706
======== ======== ========= ==========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-68
<PAGE> 203
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 3, 1998
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
---------------- ---------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues........................ $839,191 $175,076 $(6,364) $1,007,903
Operating costs and expenses.......... 613,490 136,116 (620) 748,986
-------- -------- ------- ----------
Gross profit.......................... 225,701 38,960 (5,744) 258,917
Selling and administrative expenses... 114,573 29,663 (5,744) 138,492
-------- -------- ------- ----------
Operating income...................... 111,128 9,297 -- 120,425
Interest expense, net................. 13,693 3,001 -- 16,694
Merger related costs.................. 3,231 -- -- 3,231
-------- -------- ------- ----------
Earnings before taxes................. 94,204 6,296 -- 100,500
Income taxes.......................... 36,095 1,235 -- 37,330
-------- -------- ------- ----------
Net earnings.......................... $ 58,109 $ 5,061 $ -- $ 63,170
======== ======== ======= ==========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-69
<PAGE> 204
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JANUARY 3, 1998
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings...................................... $ 58,109 $ 5,061 $-- $ 63,170
Depreciation and amortization..................... 66,520 14,490 -- 81,010
All other operating activities (net).............. 15,996 3,838 -- 19,834
-------- -------- --- --------
Net cash provided by operating activities........... 140,625 23,389 -- 164,014
-------- -------- --- --------
Cash flows used in investing activities:
Equipment at customers additions.................. (16,850) (4,019) -- (20,869)
Property additions................................ (28,612) (6,550) -- (35,162)
Business acquisitions and other................... (34,057) (6,363) -- (40,420)
-------- -------- --- --------
Net cash used in investing activities............... (79,519) (16,932) -- (96,451)
-------- -------- --- --------
Cash flows used in financing activities:
Net payments...................................... (14,840) (47,844) -- (62,684)
Intercompany receivable (payable)................. (40,037) 40,037 -- --
Proceeds from stock option exercises.............. 16,940 -- -- 16,940
Cash dividends paid............................... (21,077) -- -- (21,077)
-------- -------- --- --------
Net cash used in financing activities............... (59,014) (7,807) -- (66,821)
-------- -------- --- --------
Effect of exchange rates changes on cash............ -- (188) -- (188)
-------- -------- --- --------
Net increase (decrease) in cash and cash
equivalents....................................... 2,092 (1,538) -- 554
Cash and cash equivalents at beginning of year...... 1,459 9,189 -- 10,648
-------- -------- --- --------
Cash and cash equivalents at end of year............ $ 3,551 $ 7,651 $-- $ 11,202
======== ======== === ========
Supplemental Information:
Cash paid during the year for:
Interest (net of amounts capitalized)............. $ 15,074 $ 3,883 $-- $ 18,957
Income taxes paid (net of refunds received........ 22,075 1,880 -- 23,955
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-70
<PAGE> 205
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
AS OF DECEMBER 28, 1996
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets..................................... $174,904 $ 55,229 $ -- $ 230,133
Equipment of customers, net........................ 104,519 19,972 -- 124,491
Property, plant and equipment, net................. 423,613 98,723 -- 522,336
Intangible assets.................................. 78,660 58,755 (206) 137,209
Investment in Subsidiaries......................... 163,688 -- (163,688) --
Non-current prepaid taxes.......................... 34,398 23,716 (33,979) 24,135
Other non-current assets........................... 6,328 191 -- 6,519
-------- -------- --------- ----------
Total assets....................................... $986,110 $256,586 $(197,873) $1,044,823
======== ======== ========= ==========
Liabilities:
Current liabilities................................ $122,858 $ 34,937 $ (2) $ 157,793
Long-term debt..................................... 228,351 48,603 -- 276,954
Deferred income taxes.............................. 74,711 9,117 (33,979) 49,849
Intercompany payable (receivable).................. (2,024) 2,024 -- --
Other non-current liabilities...................... 66,073 13,864 -- 79,937
-------- -------- --------- ----------
Total liabilities.................................. 489,969 108,545 (33,981) 564,533
Stockholders' Equity................................. 496,141 148,041 (163,892) 480,290
-------- -------- --------- ----------
Total liabilities and stockholders' equity......... $986,110 $256,586 $(197,873) $1,044,823
======== ======== ========= ==========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-71
<PAGE> 206
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues...................................... $757,309 $169,057 $(3,240) $923,126
Operating costs and expenses........................ 539,803 132,934 (766) 671,971
-------- -------- ------- --------
Gross profit........................................ 217,506 36,123 (2,474) 251,155
Selling and administrative expenses................. 107,024 27,115 (2,474) 131,665
-------- -------- ------- --------
Operating income.................................... 110,482 9,008 -- 119,490
Interest expense, net............................... 14,344 3,498 -- 17,842
-------- -------- ------- --------
Earnings before income taxes........................ 96,138 5,510 -- 101,648
Income taxes........................................ 38,739 1,800 -- 40,539
-------- -------- ------- --------
Net earnings........................................ $ 57,399 $ 3,710 $ -- $ 61,109
======== ======== ======= ========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-72
<PAGE> 207
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
<TABLE>
<CAPTION>
UNITED STATES
AND EUROPE, CANADA CONSOLIDATING
PUERTO RICO AND OTHERS ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating activities:
Net earnings.................................... $ 57,399 $ 3,710 $ -- $ 61,109
Depreciation and amortization................... 62,497 15,244 -- 77,741
All other operating activities (net)............ (23,957) 1,052 -- (22,905)
-------- -------- ------- ---------
Net cash provided by operating activities......... 95,939 20,006 -- 115,945
-------- -------- ------- ---------
Cash flows from (used in) investing activities:
Equipment at customers additions................ (18,902) (4,952) -- (23,854)
Property additions.............................. (25,867) (11,803) -- (37,670)
Business acquisitions and other................. (36,132) (3,677) -- (39,809)
-------- -------- ------- ---------
Net cash used in investing activities............. (80,901) (20,432) -- (101,333)
-------- -------- ------- ---------
Cash flows from (used in) financing activities:
Net payments.................................... (4,057) (2,703) -- (6,760)
Intercompany receivable (payable)............... (4,436) 4,436 -- --
Proceeds from stock option exercises............ 1,576 -- -- 1,576
Cash dividends paid............................. (20,936) -- -- (20,936)
-------- -------- ------- ---------
Net cash provided by (used in) financing
activities...................................... (27,853) 1,733 -- (26,120)
-------- -------- ------- ---------
Effect of exchange rates changes on cash.......... -- (82) -- (82)
-------- -------- ------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... (12,815) 1,225 -- (11,590)
Cash and cash equivalents at beginning of
reporting period................................ 14,273 7,965 -- 22,238
-------- -------- ------- ---------
Cash and cash equivalents at end of reporting
period.......................................... $ 1,458 $ 9,190 $ -- $ 10,648
======== ======== ======= =========
Supplemental disclosures of cash paid during the
reporting period:
Interest (net of amounts capitalized)........... $ 15,624 $ 3,983 $ -- $ 19,607
Income taxes paid (net of refunds received)..... 27,919 (372) -- 27,547
</TABLE>
- ---------------
(1) Includes the Company, but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-73
<PAGE> 208
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
UNITED STATES
AND EUROPE, CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues.................................... $700,694 $160,636 $(2,079) $859,251
Operating costs and expenses...................... 503,550 125,548 (629) 628,469
-------- -------- ------- --------
Gross profit...................................... 197,144 35,088 (1,450) 230,782
Selling and administrative expenses............... 97,895 25,874 (1,450) 122,319
Restructuring charge (credit)..................... (6,920) (8,297) -- (15,217)
Remediation charge (credit)....................... 15,131 (3,175) -- 11,956
-------- -------- ------- --------
Operating income.................................. 91,038 20,686 -- 111,724
Interest expense, net............................. 15,379 3,877 -- 19,256
-------- -------- ------- --------
Earnings before income taxes...................... 75,659 16,809 -- 92,468
Income taxes...................................... 30,771 8,394 -- 39,165
-------- -------- ------- --------
Net earnings...................................... $ 44,888 $ 8,415 $ -- $ 53,303
======== ======== ======= ========
</TABLE>
- ---------------
(1) Includes the Company, but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-74
<PAGE> 209
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
UNITED STATES
AND EUROPE, CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating activities:
Net earnings.................................... $ 44,888 $ 8,415 $-- $ 53,303
Depreciation and amortization................... 62,780 15,021 -- 77,801
All other operating activities (net)............ 8,812 (14,974) -- (6,162)
-------- -------- --- --------
Net cash provided by operating activities......... 116,480 8,462 -- 124,942
-------- -------- --- --------
Cash flows from (used in) investing activities:
Equipment as customers additions................ (29,050) (5,824) -- (34,874)
Property additions.............................. (29,537) (13,698) -- (43,235)
Business acquisitions and other................. (24,764) (589) -- (25,353)
-------- -------- --- --------
Net cash used in investing activities............. (83,351) (20,111) -- (103,462)
-------- -------- --- --------
Cash flows from (used in) financing activities:
Net borrowings (payments)....................... (4,873) 3,308 -- (1,565)
Intercompany receivable (payable)............... (6,912) 6,912 -- --
Proceeds from stock option exercises............ 1,930 -- -- 1,930
Cash dividends paid............................. (20,820) -- -- (20,820)
-------- -------- --- --------
Net cash provided by (used in) financing
activities...................................... (30,675) 10,220 -- (20,455)
-------- -------- --- --------
Effect of exchange rates changes on cash.......... -- 198 -- 198
-------- -------- --- --------
Net increase in cash and cash equivalents......... 2,454 (1,231) -- 1,223
Cash and cash equivalents at beginning of
reporting period................................ 11,819 9,196 -- 21,015
-------- -------- --- --------
Cash and cash equivalents at end of reporting
period.......................................... $ 14,273 $ 7,965 $-- $ 22,238
======== ======== === ========
Supplemental disclosures of cash paid during the
reporting period:
Interest (net of amounts capitalized)........... $ 14,218 $ 4,779 $-- $ 18,997
Income taxes paid (net of refunds received)..... 10,260 971 -- 11,231
</TABLE>
- ---------------
(1) Includes the Company, but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-75
<PAGE> 210
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 28, JANUARY 3,
1998 1998
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $30,458.... $ 11,202
Trade accounts receivable, less allowances of $7,977 and
$7,634, respectively................................... 134,183... 131,092
Inventories............................................... 51,849 51,339
Deferred tax assets....................................... 10,177 10,694
Prepaid expenses and other................................ 20,662 20,099
---------- ----------
Total current assets.............................. 247,329 224,426
---------- ----------
Equipment at customers and components, at cost, less
accumulated depreciation of $44,853 and $44,928,
respectively.............................................. 130,569 127,631
Property, plant and equipment, at cost, less accumulated
depreciation of $393,379 and $384,422, respectively....... 497,128 502,110
Intangible assets, at cost, less accumulated amortization of
$73,524 and $95,568, respectively......................... 143,017 144,536
Other assets................................................ 37,092 36,003
---------- ----------
$1,055,135 $1,034,706
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term debt........................................... $ 213,000 $ 37
Trade accounts payable.................................... 78,053 75,284
Accrued salaries, wages and employee benefits............. 28,096 29,769
Other accrued expenses.................................... 24,343 28,343
Insurance reserves........................................ 12,855 12,614
Accrued environmental liabilities......................... 8,376 8,382
Income taxes payable...................................... 1,049 1,014
---------- ----------
Total current liabilities......................... 365,772 155,443
---------- ----------
Long-term debt.............................................. -- 214,234
---------- ----------
Deferred tax liabilities.................................... 67,259 65,607
---------- ----------
Accrued environmental liabilities........................... 31,436 32,888
---------- ----------
Other liabilities........................................... 37,760 37,067
---------- ----------
Shareholders' equity:
Preferred stock ($.10 par value; authorized 1,000,000
shares, none issued)................................... -- --
Common stock ($.10 par value; authorized 300,000,000
shares; issued and outstanding 60,101,962 and
59,191,462 shares, respectively)....................... 6,010 5,919
Additional paid-in capital................................ 231,175 212,504
Retained earnings......................................... 342,868 338,318
Cumulative translation adjustments........................ (27,145) (27,274)
---------- ----------
552,908 529,467
---------- ----------
$1,055,135 $1,034,706
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE> 211
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(EXPRESSED IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
<S> <C> <C>
Revenue..................................................... $241,777 $220,230
Operating costs and expenses.............................. 181,781 164,084
Selling and administrative expenses....................... 34,552 32,575
-------- --------
Operating income............................................ 25,444 23,571
Interest income........................................... (408) (227)
Interest expense.......................................... 3,612 4,361
Merger related costs...................................... 5,997 --
-------- --------
Earnings before income taxes................................ 16,243 19,437
Income taxes................................................ 6,286 7,599
-------- --------
Net earnings................................................ $ 9,957 $ 11,838
======== ========
Earnings per common share:
Basic..................................................... $ 0.17 $ 0.20
Diluted................................................... $ 0.16 $ 0.20
======== ========
Cash dividends per common share............................. $ 0.09 $ 0.09
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-77
<PAGE> 212
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(EXPRESSED IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
<S> <C> <C>
Net earnings................................................ $ 9,957 $11,838
Unrealized foreign currency translation adjustments......... 129 (7,197)
------- -------
Comprehensive income........................................ $10,086 $ 4,641
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE> 213
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 9,957 $ 11,838
Depreciation and amortization............................. 19,046 17,658
All other operating activities (net)...................... 1,534 (10,856)
-------- --------
Net cash provided by operating activities......... $ 30,537 $ 18,640
-------- --------
Cash flows used in investing activities:
Equipment at customers and component additions............ (8,709) (4,857)
Property, plant and equipment additions................... (5,686) (6,992)
Business acquisitions and other........................... (5,963) (8,399)
-------- --------
Net cash used in investing activities............. (20,358) (20,248)
-------- --------
Cash flows from (used in) financing activities:
Net borrowings (payments)................................. (1,271) 9,387
Proceeds from stock option exercises...................... 15,763 362
Cash dividends paid....................................... (5,406) --
-------- --------
Net cash from (used in) financing activities...... 9,086 9,749
-------- --------
Effect of exchange rate changes on cash..................... (9) (164)
-------- --------
Net increase in cash and cash equivalents................... 19,256 7,977
Cash and cash equivalents at beginning of year.............. 11,202 10,648
-------- --------
Cash and cash equivalents at end of the reporting period.... $ 30,458 $ 18,625
======== ========
Supplemental disclosures of cash paid during the reporting
period:
Interest (net of amount capitalized)...................... $ 7,491 $ 7,298
======== ========
Income taxes paid (net of refunds received)............... $ 119 $ 774
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-79
<PAGE> 214
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. MERGER RELATED COSTS
On August 8, 1997, the Company's Board of Directors ("Board") initiated a
process to review strategic alternatives including the sale of all or a part of
the Company. On November 20, 1997, the Board approved a merger agreement with SK
Parent Corp. (a Delaware corporation owned equally by Phillips Services Corp.,
affiliates of Apollo Management, L.P. and affiliates of Blackstone Partners III,
L.L.C.) but subsequently was unable to gain the necessary shareholder approval
for the agreement. The Board then terminated the merger agreement with SK Parent
and began negotiations with Laidlaw Environmental.
On March 15, 1998, the Board unanimously approved a definitive merger
agreement ("Merger Agreement") with Laidlaw Environmental which provides for an
exchange offer followed by a back-end merger. By April 7, 1998, Laidlaw
Environmental had acquired a total of 55,751,582 shares which were validly
tendered under the Exchange Offer and constituted approximately 93% of the
outstanding shares of Safety-Kleen. A special shareholder meeting occurred on
May 18, 1998 which approved the merger.
During the first twelve weeks of 1998, the Company incurred $6.0 million of
costs in conjunction with this process.
2. EARNINGS PER SHARE
The weighted average number of common shares outstanding for the twelve
weeks ended March 28, 1998 and March 22, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Weighted average number of shares outstanding -- basic...... 59,652 58,258
Dilutive effect of stock options and warrants............... 1,479 162
------ ------
Weighted average number of common shares
outstanding -- diluted.................................... 61,131 58,420
====== ======
</TABLE>
The Company had additional stock options of 309,525 and 2,370,103 shares at
March 28, 1998 and March 22, 1997, respectively, which were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common share.
3. COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 130 on "Reporting Comprehensive Income" which requires companies to
report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners in a financial statement for the
period in which they are recognized. The Company has selected to present
separate Consolidated Statements of Comprehensive Income following the
Consolidated Statements of Earnings. The prior year has been restated to conform
to the SFAS No. 130 requirements.
4. INVENTORIES
The Companies inventories consist of the following (expressed in
thousands):
<TABLE>
<CAPTION>
MARCH 28, 1998 JANUARY 3, 1998
-------------- ---------------
<S> <C> <C>
Oil....................................................... $12,878 $12,759
Solvent, Drums and Other.................................. 38,971 38,580
------- -------
Total........................................... $51,849 $51,339
======= =======
</TABLE>
F-80
<PAGE> 215
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LIFO inventories at March 28, 1998 and January 3, 1998 were $5.9 and $5.5
million, respectively. Under the FIFO method of accounting (which approximates
current or replacement cost), inventories would have been $0.4 million higher at
March 28, 1998 and January 3, 1998.
5. DEBT
The Company reclassified all outstanding long-term debt to short term as
all debt will be paid off in 1998 as a consequence of change of control
provisions included in the Company's credit agreements. These provisions were
triggered by the acquisition of 93% of the Company's outstanding common stock,
in April of 1998 by Laidlaw Environmental.
6. INTERIM REPORTING PERIODS
The Company's interim reporting periods are twelve weeks each for the first
three reporting periods of the year, and sixteen and seventeen weeks for the
fourth reporting period of 1998 and 1997, respectively.
F-81
<PAGE> 216
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SUMMARIZED FINANCIAL INFORMATION
In connection with the Merger Agreement with Laidlaw Environmental (see
Note 1), Safety-Kleen Services, Inc., (formerly known as LES, Inc.), a
wholly-owned subsidiary of Laidlaw Environmental Services, Inc. issued 9.25%
Senior Subordinated Notes to finance the acquisition. The wholly-owned domestic
subsidiaries of Safety-Kleen Services, Inc. (including the Company and its
subsidiaries incorporated in the United States and Puerto Rico) guaranteed such
notes on a full and unconditional and joint and several basis. No foreign direct
or indirect subsidiary (including those incorporated in Europe and Canada) or
non-wholly-owned subsidiary of the Company is an obligor or guarantor on the
financing. Summarized financial information for the Company and its subsidiaries
on a combined basis as of and for the twelve weeks ended March 28, 1998 is as
follows:
CONSOLIDATING CONDENSED BALANCE SHEET
AS OF MARCH 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets............... $ 188,940 $ 58,389 $ -- $ 247,329
Equipment at customers,
net....................... 110,158 20,411 -- 130,569
Property, plant and
equipment, net............ 409,156 87,972 -- 497,128
Intangible assets............ 87,728 55,495 (206) 143,017
Investment in Subsidiaries... 168,626 -- (168,626) --
Non-current prepaid taxes.... 31,396 20,898 (33,138) 19,156
Other non-current assets..... 17,070 866 -- 17,936
---------- -------- --------- ----------
Total assets................. $1,013,074 $244,031 $(201,970) $1,055,135
========== ======== ========= ==========
Liabilities:
Current liabilities.......... $ 334,267 $ 31,507 $ (2) $ 365,772
Deferred income taxes........ 85,415 14,982 (33,138) 67,259
Intercompany payable
(receivable).............. (40,665) 40,665 -- --
Other non-current
liabilities............... 60,533 8,663 -- 69,196
---------- -------- --------- ----------
Total liabilities............ 439,550 95,817 (33,140) 502,227
Stockholders' Equity........... 573,524 148,214 (168,830) 552,908
---------- -------- --------- ----------
Total liabilities and
stockholders' equity......... $1,013,074 $244,031 $(201,970) $1,055,135
========== ======== ========= ==========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-82
<PAGE> 217
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE WEEKS ENDED MARCH 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues.................... $ 200,476 $ 42,140 $ (839) $ 241,777
Operating costs and expenses...... 149,337 32,731 (287) 181,781
---------- -------- --------- ----------
Gross profit...................... 51,139 9,409 (552) 59,996
Selling and administrative
expenses........................ 28,170 6,934 (552) 34,552
---------- -------- --------- ----------
Operating income.................. 22,969 2,475 -- 25,444
Interest expense, net............. 2,942 262 -- 3,204
Merger related costs.............. 5,997 -- -- 5,997
---------- -------- --------- ----------
Earnings before income taxes...... 14,030 2,213 -- 16,243
Income taxes...................... 5,568 718 -- 6,286
---------- -------- --------- ----------
Net earnings...................... $ 8,462 $ 1,495 $ -- $ 9,957
========== ======== ========= ==========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-83
<PAGE> 218
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
TWELVE WEEKS ENDED MARCH 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE,
AND CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating activities:
Net earnings................................. $ 8,462 $ 1,495 $-- $ 9,957
Depreciation and amortization................ 15,525 3,521 -- 19,046
All other operating activities (net)......... (717) 2,251 -- 1,534
-------- ------- --- -------
Net cash provided by operating activities...... 23,270 7,267 -- 30,537
-------- ------- --- -------
Cash flows from (used in) investing activities:
Equipment at customers additions............. (7,151) (1,558) -- (8,709)
Property additions........................... (5,135) (551) -- (5,686)
Business acquisitions and other.............. (5,914) (49) -- (5,963)
-------- ------- --- -------
Net cash used in investing activities.......... (18,200) (2,158) -- (20,358)
Cash flows from (used in) financing activities:
Net payments................................. (973) (298) -- (1,271)
Intercompany receivable (payable)............ 1,397 (1,397) -- --
Proceeds from stock option exercises......... 15,763 -- -- 15,763
Cash dividends paid.......................... (5,406) -- -- (5,406)
-------- ------- --- -------
Net cash provided by (used in) financing
activities................................... 10,781 (1,695) -- 9,086
-------- ------- --- -------
Effect of exchange rates changes on cash....... -- (9) -- (9)
-------- ------- --- -------
Net increase in cash and cash equivalents...... 15,851 3,405 -- 19,256
Cash and cash equivalents at beginning of
reporting period............................. 3,550 7,652 -- 11,202
-------- ------- --- -------
Cash and cash equivalents at end of reporting
period....................................... $ 19,401 $11,057 $-- $30,458
======== ======= === =======
Supplemental disclosures of cash paid during
the reporting period:
Interest (net of amounts capitalized)...... $ 6,195 $ 1,296 $-- $ 7,491
Income taxes paid (net of refunds
received)................................ 119 -- -- 119
======== ======= === =======
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-84
<PAGE> 219
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING, CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE WEEKS ENDED MARCH 22, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES
AND EUROPE, CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES(1) SUBSIDIARIES(2) ENTRIES TOTAL
--------------- --------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues................... $181,830 $39,095 $(695) $220,230
Operating costs and expenses..... 133,498 30,694 (108) 164,084
-------- ------- ----- --------
Gross profit..................... 48,332 8,401 (587) 56,146
Selling and administrative
expenses....................... 26,561 6,601 (587) 32,573
-------- ------- ----- --------
Operating income................. 21,771 1,800 -- 23,571
Interest expense, net............ 3,333 801 -- 4,134
-------- ------- ----- --------
Earnings before income taxes..... 18,438 999 -- 19,437
Income taxes..................... 7,329 270 -- 7,599
-------- ------- ----- --------
Net earnings..................... $ 11,109 $ 729 $ -- $ 11,838
======== ======= ===== ========
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-85
<PAGE> 220
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FOR THE TWELVE WEEKS ENDED MARCH 22, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES
AND EUROPE, CANADA CONSOLIDATING
PUERTO RICO AND OTHER ELIMINATING CONSOLIDATED
SUBSIDIARIES (1) SUBSIDIARIES (2) ENTRIES TOTAL
---------------- ---------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in)
operating activities:
Net earnings.................. $ 11,109 $ 729 $-- $ 11,838
Depreciation and
amortization............... 14,278 3,380 -- 17,658
All other operating activities
(net)...................... (15,642) 4,786 -- (10,856)
-------- ------- -- --------
Net cash provided by
operating activities.......... 9,745 8,895 -- 18,640
-------- ------- -- --------
Cash flows from (used in)
investing activities:
Equipment at customers
additions.................. (4,015) (842) -- (4,857)
Property additions............ (6,115) (877) -- (6,992)
Business acquisitions and
other...................... (8,317) (82) -- (8,399)
-------- ------- -- --------
Net cash used in investing
activities.................... (18,447) (1,801) -- (20,248)
-------- ------- -- --------
Cash flows from (used in)
financing activities:
Net borrowings (payments)..... 13,393 (4,006) -- 9,387
Intercompany receivable
(payable).................. 267 (267) -- --
Proceeds from stock option
exercises.................. 362 -- -- 362
Cash dividends paid........... -- -- -- --
-------- ------- -- --------
Net cash provided by (used in)
financing activities.......... 14,022 (4,273) -- 9,749
-------- ------- -- --------
Effect of exchange rates changes
on cash....................... -- (164) -- (164)
-------- ------- -- --------
Net increase in cash and
cash equivalents.............. 5,320 2,657 -- 7,977
Cash and cash equivalents at
beginning of reporting
period........................ 1,458 9,190 -- 10,648
-------- ------- -- --------
Cash and cash equivalents at end
of reporting period........... $ 6,778 $11,847 $-- $ 18,625
======== ======= == ========
Supplemental disclosures of cash
paid during the reporting
period:
Interest (net of amounts
capitalized)............... $ 6,753 $ 545 $-- $ 7,298
Income taxes paid (net of
refunds received).......... 774 -- -- 774
</TABLE>
- ---------------
(1) Includes the Company but excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-86
<PAGE> 221
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson, or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Guarantors. This Prospectus does
not constitute an offer of any securities other than those to which it relates
or an offer to sell, or a solicitation of an offer to buy, to any person in any
jurisdiction where an offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof.
---------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 12
The Exchange Offer.................... 20
Use of Proceeds....................... 28
Capitalization........................ 29
The Transactions...................... 30
Unaudited Pro Forma Combined Financial
Information......................... 30
Selected Consolidated Financial
Data................................ 38
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- Laidlaw
Environmental....................... 42
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- Safety-Kleen....... 53
Business.............................. 61
Management............................ 78
Certain Relationships and Related
Transactions........................ 84
Principal Shareholders................ 85
Description of Other Indebtedness..... 86
Description of the Notes.............. 89
Certain Federal Income Tax
Considerations...................... 120
Plan of Distribution.................. 122
Legal Matters......................... 123
Independent Accountants............... 123
Available Information................. 123
Documents Incorporated by Reference... 124
Disclosure Regarding Forward-Looking
Statements.......................... 126
Index to Financial Statements......... F-1
</TABLE>
Until September , 1998 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SAFETY-KLEEN SERVICES, INC.
OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED NOTES
DUE 2008
(GUARANTEED BY LAIDLAW
ENVIRONMENTAL SERVICES, INC.)
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY
AND ALL OF ITS OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES
DUE 2008
(GUARANTEED BY LAIDLAW
ENVIRONMENTAL SERVICES, INC.)
--------------------
PROSPECTUS
--------------------
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 222
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Parent is incorporated under the laws of the State of Delaware. Section
145 of the DGCL, inter alia ("Section 145") provides that a Delaware corporation
may indemnify any person who were, are or are threatened to be made, parties to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal. A Delaware corporation may indemnify
any persons who are, were or are threatened to be made, a party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reason of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
The Certificate of Incorporation of the Parent provides that, to the
fullest extent permitted by the DGCL as the same exists or may hereafter be
amended, a director of the Parent shall not be liable to the Parent or its
stockholders for monetary damages for a breach of fiduciary duty as a director.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
All of the the Parent's directors and officers are covered by insurance
policies maintained and held in effect by Laidlaw Inc. against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
Similar indemnification provisions exist for each of the Company and the
Subsidiary Guarantors.
II-1
<PAGE> 223
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(2) -- Agreement and Plan of Merger dated as of March 16, 1998,
by and among the Parent, LES Acquisition Inc. and
Safety-Kleen included as Annex A of Safety-Kleen's
Revised Amended Prospectus on Form 14D-9, filed as
Exhibit 62 to Safety-Kleen's Amendment No. 28 to Schedule
14D-9A on March 17, 1997, and incorporated herein by
reference.
(3)(a) -- Restated Certificate of Incorporation of the Parent dated
May 13, 1997, and Amendment to Certificate of
Incorporation dated May 15, 1997, filed as Exhibit 3(a)
to the Parent's Form 10-Q for the Quarter ended May 31,
1997, and incorporated herein by reference.
(3)(b) -- Certificate of Correction Filed to Correct a Certain
Error in the Restated and Amended Certificate of
Incorporation of the Parent dated October 15, 1997, filed
as Exhibit 3(a)(i) to the Parent's Form 10-K for the
Fiscal Year ended August 31, 1997, and incorporated
herein by reference.
(3)(c) -- Certificate of Amendment of Restated Certificate of
Incorporation of the Parent dated February 19, 1998,
filed as Exhibit (3)(a)(ii) to the Registrant's Form 10-Q
for the Quarter ended February 28, 1998.
(3)(d) -- Amended and Restated Bylaws of the Parent filed as
Exhibit 4(ii) to the Registrant's Current Report on Form
8-K dated July 29, 1997, and incorporated herein by
reference.
(4)(a) -- Registration Rights Agreement dated as of May 29, 1998
between the Company, the Parent, the Subsidiary
Guarantors, TD Securities (USA) Inc. and NationsBanc
Montgomery Securities LLC.*
4(b) -- Indenture dated as of May 29, 1998 between the Company,
the Parent, the Subsidiary Guarantors and The Bank of
Nova Scotia Trust Company of New York, as trustee.*
4(c) -- Rights Agreement dated as of June 14, 1989 between the
Parent and First Chicago Trust Company as successor to
Registrar and Transfer Company, as Rights Agent filed as
an Exhibit to the Parent's Form 8-K filed on June 13,
1995, and incorporated herein by reference.
4(d) -- Amended and Restated Credit Agreement among Laidlaw
Chem-Waste, Inc., Laidlaw Environmental Services (Canada)
Ltd., Toronto Dominion (Texas) Inc., The Toronto-Dominion
Bank, TD Securities (USA) Inc., the Bank of Nova Scotia,
NationsBanc, N.A. and The First National Bank of Chicago
and NationsBanc, N.A. as Syndication Agent dated as of
April 3, 1997.*
4(e) -- Supplement to the Amended and Restated Credit Agreement
dated as of April 3, 1998 among the Company, Laidlaw
Environmental Services (Canada) Ltd., the Lenders,
Toronto Dominion (Texas), Inc., The Toronto Dominion
Bank, TD Securities (USA) Inc., The Bank of Nova Scotia,
The First National Bank of Chicago, Wachovia Bank and
NationsBank, N.A. as Syndication Agent.*
4(f) -- Waiver and First Amendment to the Amended and Restated
Credit Agreement dated as of May 15, 1998 among the
Company, Laidlaw Environmental Services (Canada) Ltd.,
the Lenders, Toronto Dominion (Texas), Inc., The Toronto
Dominion Bank, TD Securities (USA) Inc., The Bank of Nova
Scotia, NationsBank, N.A., The First National Bank of
Chicago and Wachovia Bank.*
4(g) -- Commitment Increase Supplement to the Amended and
Restated Credit Agreement dated as of June 3, 1998 among
the Company, Laidlaw Environmental Services (Canada)
Ltd., the Lenders, Toronto Dominion Bank (Texas), Inc.,
The Toronto Dominion Bank, TD Securities (USA) Inc., The
Bank of Nova Scotia, NationsBank, N.A., The First
National Bank of Chicago and Wachovia Bank.*
(4)(h) -- Amendment No. 1 dated as of March 31, 1995 to the Rights
Agreement between the Parent and First Chicago Trust
Company as successor to Registrar and Transfer Company,
as Rights Agent filed as an Exhibit to the Parent's Form
8-K filed on June 13, 1995, and incorporated herein by
reference.
</TABLE>
II-2
<PAGE> 224
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(4)(i) -- Amendment No. 2 dated as of April 30, 1997 to the Rights
Agreement between the Parent and First Chicago Trust
Company as successor to Registrar and Transfer Company,
as Rights Agent, filed as Exhibit 4(c) to the Parent's
Form 10-Q for the quarter ended November 30, 1997.
(4)(j) -- $350,000,000 5% Subordinated Convertible Pay-In-Kind
Debenture due 2009 issued by the Parent on May 15, 1997
to Laidlaw Inc. the form of which was included as an
appendix to the Parent's Definitive Proxy Statement on
Form DEF 14A, filed on May 1, 1997, and incorporated
herein by reference.
(4)(k) -- Registration Rights Agreement dated May 15, 1997 between
the Parent, Laidlaw Transportation, Inc. and Laidlaw Inc.
included as appendix to the Parent's Definitive Proxy
Statement on Form DEF 14A, the form of which was filed on
May 1, 1997, and incorporated herein by reference.
(4)(l) -- Indenture dated as of May 1, 1993 between the Industrial
Development Board of the Metropolitan Government of
Nashville and Davidson County (Tennessee) and NationsBanc
of Tennessee, N.A., filed as Exhibit 4(f) to the Parent's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(m) -- Indenture of Trust dated as of August, 1995 between
Tooele County, Utah and West One Bank, Utah, now known as
U.S. Bank, as Trustee, filed as Exhibit 4(h) to the
Parent's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(n) -- Indenture of Trust dated as of July 1, 1997 between
Carbon County, Utah and U.S. Bank, a national banking
association, as Trustee, filed as Exhibit 4(i) to the
Parent's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(o) -- Indenture of Trust dated as of July 1, 1997 between
Tooele County, Utah and U.S. Bank, a national banking
association, as Trustee, filed as Exhibit 4(j) to the
Parent's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(p) -- Indenture of Trust dated as of July 1, 1997 between
California Pollution Control Financing Authority and U.S.
Bank, a national banking association, as Trustee, filed
as Exhibit 4(k) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
4(q) -- Stock Purchase Agreement between Westinghouse Electric
Corporation (Seller) and Rollins Environmental Services,
Inc. (Buyer) for National Electric, Inc. dated March 7,
1995, filed as an Exhibit to the Parent's Form 8-K filed
on June 13, 1995, and incorporated hereby by reference.
(4)(r) -- Second Amendment to Stock Purchase Agreement (as
referenced in Exhibit (4)(l) above, dated May 15, 1997,
among Westinghouse Electric Corporation, Rollins
Environmental Services, Inc. and Laidlaw Inc., filed as
Exhibit 4(m) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(4)(s) -- Promissory Note dated May 15, 1997 for $60,000,000 from
the Parent to Westinghouse Electric Corporation, filed as
Exhibit 4(n) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(4)(t) -- Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to
Westinghouse Electric Corporation guaranteeing Promissory
Note dated May 15, 1997 (as referenced in Exhibit (4)(n))
from the Parent to Westinghouse Electric Corporation,
filed as Exhibit 4(o) to the Parent's Form 10-Q for the
Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(u) -- Instruments defining the rights of holders of
nonregistered debt of the Parent have been omitted from
this exhibit index because the amount of debt authorized
under any such instrument does not exceed 10% of the
total assets of the Parent and its subsidiaries. The
Parent agrees to furnish a copy of any such instrument to
the Commission upon request.
</TABLE>
II-3
<PAGE> 225
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(5) -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
the legality of the securities being offered.
(8) -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
certain tax matters.
(10)(a) -- Rollins Environmental Services, Inc. 1982 Incentive Stock
Option Plan, filed with Amendment No. 1 to the Company's
Registration Statement No. 2-84139 on Form S-1 dated June
24, 1983, and incorporated herein by reference.
(10)(b) -- Rollins Environmental Services, Inc. 1993 Stock Option
Plan, filed with the Company's Proxy Statement for the
Annual Meeting of Stockholders held January 28, 1994, and
incorporated herein by reference.
(10)(c) -- Stock Purchase Agreement dated February 6, 1997, among
the Parent, Laidlaw Inc., and Laidlaw Transportation,
Inc. included as an appendix to the Parent's Definitive
Proxy Statement on Form DEF 14A, filed on May 1, 1997,
and incorporated herein by reference.
(10)(d) -- Laidlaw Environmental Services, Inc. 1997 Stock Option
Plan filed as Exhibit 4.5 to the Parent's Registration
Statement on Form S-8 dated December 10, 1997.
(10)(e) -- Laidlaw Environmental Services, Inc. Director's Stock
Option Plan, filed as Exhibit 4.5 to the Parent's
Registration Statement on Form S-8 dated December 10,
1997 and incorporated herein by reference.
(10)(f) -- Management Incentive Plan for fiscal year 1996, filed as
Exhibit 10(e) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(10)(g) -- Laidlaw Environmental Services, Inc. Supplemental
Executive Retirement Plan filed as Exhibit 10(g) to the
Registrant's Form 10-Q for the quarter ended November 30,
1997.
(11) -- Statement regarding computation of earnings per share,
filed as Exhibit (11) to the Parent's Form 10-K for the
year ended August 31, 1997, and incorporated herein by
reference.
(12) -- Computation of ratio of earnings to fixed charges.*
(21) -- Subsidiaries of the Registrant.*
(23)(a) -- Consent of PriceWaterhouseCoopers, LLP, independent
accountants.
(23)(b) -- Consent of KPMG Peat Marwick LLP.
(23)(c) -- Consent of Arthur Andersen, LLP.
(23)(d) -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits (5) and (8)).
(24) -- Powers of Attorney (included on the signature pages of
this Registration Statement and previously filed).
(25) -- Statement of Eligibility of Trustee.*
(99)(a) -- Letter of Transmittal.
(99)(b) -- Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Previously filed.
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus
II-4
<PAGE> 226
and furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information is required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference to
provide such interim financial information.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(4) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 and 13 of this Form within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(5) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-5
<PAGE> 227
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
LAIDLAW ENVIRONMENTAL SERVICES, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and October 9, 1998
- --------------------------------------------------- Director
James R. Bullock
* President, Chief Executive October 9, 1998
- --------------------------------------------------- Officer and Director
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
* Director October 9, 1998
- ---------------------------------------------------
John R. Grainger
* Director October 9, 1998
- ---------------------------------------------------
Leslie W. Haworth
* Director October 9, 1998
- ---------------------------------------------------
John W. Rollins, Sr.
* Director October 9, 1998
- ---------------------------------------------------
John W. Rollins, Jr.
* Director October 9, 1998
- ---------------------------------------------------
David E. Thomas, Jr.
* Director October 9, 1998
- ---------------------------------------------------
Henry B. Tippie
</TABLE>
II-6
<PAGE> 228
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director October 9, 1998
- ---------------------------------------------------
James L. Wareham
* Director October 9, 1998
- ---------------------------------------------------
Grover C. Wrenn
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN SERVICES, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN
(LONE AND GRASSY MOUNTAIN), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 231
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (TULSA), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-10
<PAGE> 232
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (SAN ANTONIO), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-11
<PAGE> 233
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (WICHITA), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-12
<PAGE> 234
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (DELAWARE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-13
<PAGE> 235
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (ROSEMOUNT), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-14
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (SAWYER), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-15
<PAGE> 237
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (PPM), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-16
<PAGE> 238
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
NINTH STREET PROPERTIES, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-17
<PAGE> 239
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (SAN JOSE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-18
<PAGE> 240
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
CHEMCLEAR, INC. OF LOS ANGELES
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-19
<PAGE> 241
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
USPCI, INC. OF GEORGIA
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-20
<PAGE> 242
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN HOLDINGS, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-21
<PAGE> 243
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (WESTMORLAND), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-22
<PAGE> 244
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (BUTTONWILLOW), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-23
<PAGE> 245
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (NE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-24
<PAGE> 246
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (CROWLEY), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-25
<PAGE> 247
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (LAPORTE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-26
<PAGE> 248
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (TG), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer (principal
financial and accounting officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-27
<PAGE> 249
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (ROEBUCK), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-28
<PAGE> 250
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (TS), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-29
<PAGE> 251
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (COLFAX), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-30
<PAGE> 252
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
GSX CHEMICAL SERVICES OF OHIO, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-31
<PAGE> 253
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
LEMC, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-32
<PAGE> 254
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN CHEMICAL SERVICES, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-33
<PAGE> 255
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (ALTAIR), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-34
<PAGE> 256
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (FS), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-35
<PAGE> 257
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (BDT), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-36
<PAGE> 258
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (GS), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
* By: /s/ PAUL R. HUMPHREYS
--------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-37
<PAGE> 259
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (CLIVE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-38
<PAGE> 260
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (WT), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-39
<PAGE> 261
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN OSCO HOLDINGS, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-40
<PAGE> 262
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (NASHVILLE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-41
<PAGE> 263
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (BARTOW), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-42
<PAGE> 264
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (CALIFORNIA), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-43
<PAGE> 265
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (CHATTANOOGA), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-44
<PAGE> 266
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (PECATONICA), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-45
<PAGE> 267
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th of October, 1998.
SAFETY-KLEEN (PINEWOOD), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-46
<PAGE> 268
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th of October, 1998.
SAFETY-KLEEN (WHITE CASTLE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-47
<PAGE> 269
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th of October, 1998.
LES MERGER, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-48
<PAGE> 270
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th of October, 1998.
SAFETY-KLEEN (PUERTO RICO), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By:/s/ PAUL R. HUMPHREYS
----------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-49
<PAGE> 271
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (BRIDGEPORT), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-50
<PAGE> 272
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (DEER PARK), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
- ---------------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-51
<PAGE> 273
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (BATON ROUGE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-52
<PAGE> 274
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (PLAQUEMINE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-53
<PAGE> 275
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (CUSTOM TRANSPORT), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance October 9, 1998
- --------------------------------------------------- and Chief Financial Officer
Paul R. Humphreys (principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-54
<PAGE> 276
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (LOS ANGELES), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief
Paul R. Humphreys Financial Officer
(principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-55
<PAGE> 277
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (TIPTON), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief
Paul R. Humphreys Financial Officer
(principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-56
<PAGE> 278
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (GLOUCESTER), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief
Paul R. Humphreys Financial Officer
(principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-57
<PAGE> 279
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (DEER TRAIL), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief
Paul R. Humphreys Financial Officer
(principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-58
<PAGE> 280
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (MT. PLEASANT), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief
Paul R. Humphreys Financial Officer
(principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-59
<PAGE> 281
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (MINNEAPOLIS), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief
Paul R. Humphreys Financial Officer
(principal financial and
accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-60
<PAGE> 282
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (ARAGONITE), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-61
<PAGE> 283
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (SUSSEX), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-62
<PAGE> 284
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN (ENCOTEC), INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Senior Vice President of Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of October 9, 1998
- --------------------------------------------------- Finance and Chief Financial
Paul R. Humphreys Officer (principal financial
and accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-63
<PAGE> 285
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN SYSTEMS, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Chief Financial Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth Winger, Paul Humphreys and Henry
Taylor and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing), to sign
any and all amendments, including post-effective amendments, to this
Registration Statement, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or his or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KENNETH W. WINGER President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Chief Financial Officer October 9, 1998
- --------------------------------------------------- (principal Financial and
Paul R. Humphreys accounting officer)
</TABLE>
II-64
<PAGE> 286
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
DIRT MAGNET, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer and Director October 9, 1998
- --------------------------------------------------- (principal financial and
Paul R. Humphreys accounting officer)
* Director October 9, 1998
- ---------------------------------------------------
Henry H. Taylor
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-65
<PAGE> 287
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
THE MIDWAY GAS AND OIL CO.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-66
<PAGE> 288
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
ELGINT CORP.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
* Director October 9, 1998
- ---------------------------------------------------
Monte Miller
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-67
<PAGE> 289
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN ENVIROSYSTEMS
COMPANY
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Chief Financial Officer October 9, 1998
- --------------------------------------------------- (principal financial and
Paul R. Humphreys accounting officer)
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-68
<PAGE> 290
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN ENVIROSYSTEMS
COMPANY OF PUERTO RICO, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-69
<PAGE> 291
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
PETROCON, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-70
<PAGE> 292
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
PHILLIPS ACQUISITION CORP.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-71
<PAGE> 293
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN AVIATION, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-72
<PAGE> 294
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SK INSURANCE COMPANY
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
* Director October 9, 1998
- ---------------------------------------------------
Alan D. Port
* Director October 9, 1998
- ---------------------------------------------------
Henry H. Taylor
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-73
<PAGE> 295
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SK REAL ESTATE, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-74
<PAGE> 296
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN INTERNATIONAL, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-75
<PAGE> 297
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN OIL RECOVERY CO.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-76
<PAGE> 298
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
SAFETY-KLEEN OIL SERVICES, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-77
<PAGE> 299
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia, South
Carolina, on the 9th day of October, 1998.
THE SOLVENTS RECOVERY SERVICE
OF NEW JERSEY, INC.
By: /s/ PAUL R. HUMPHREYS
------------------------------------
Paul R. Humphreys
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director October 9, 1998
- ---------------------------------------------------
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Treasurer (principal financial October 9, 1998
- --------------------------------------------------- and accounting officer)
Paul R. Humphreys
*By: /s/ PAUL R. HUMPHREYS
---------------------------------------------
Paul R. Humphreys
Attorney-in-Fact
</TABLE>
II-78
<PAGE> 300
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
2 -- Agreement and Plan of Merger dated as of March 16, 1998,
by and among the Parent, LES Acquisition Inc. and
Safety-Kleen included as Annex A of Safety-Kleen's
Revised Amended Prospectus on Form 14D-9, filed as
Exhibit 62 to Safety-Kleen's Amendment No. 28 to Schedule
14D-9A on March 17, 1997, and incorporated herein by
reference. ..............................................
3(a) -- Restated Certificate of Incorporation of the Parent dated
May 13, 1997, and Amendment to Certificate of
Incorporation dated May 15, 1997, filed as Exhibit 3(a)
to the Parent's Form 10-Q for the Quarter ended May 31,
1997, and incorporated herein by reference. .............
3(b) -- Certificate of Correction Filed to Correct a Certain
Error in the Restated and Amended Certificate of
Incorporation of the Parent dated October 15, 1997, filed
as Exhibit 3(a)(i) to the Parent's Form 10-K for the
Fiscal Year ended August 31, 1997, and incorporated
herein by reference. ....................................
3(c) -- Certificate of Amendment of Restated Certificate of
Incorporation of the Parent dated February 19, 1998,
filed as Exhibit (3)(a)(ii) to the Registrant's Form 10-Q
for the Quarter ended February 28, 1998..................
3(d) -- Amended and Restated Bylaws of the Parent filed as
Exhibit 4(ii) to the Parent's Current Report on Form 8-K
dated July 29, 1997, and incorporated herein by
reference. ..............................................
4(a) -- Registration Rights Agreement dated as of May 29, 1998
between the Company, the Parent, the Subsidiary
Guarantors, TD Securities (USA) Inc. and NationsBanc
Montgomery Securities LLC.* .............................
4(b) -- Indenture dated as of May 29, 1998 between the Company,
the Parent, the Subsidiary Guarantors and The Bank of
Nova Scotia Trust Company of New York, as trustee.*......
4(c) -- Rights Agreement dated as of June 14, 1989 between the
Parent and First Chicago Trust Company as successor to
Registrar and Transfer Company, as Rights Agent filed as
an Exhibit to the Parent's Form 8-K filed on June 13,
1995, and incorporated herein by reference. .............
4(d) -- Amended and Restated Credit Agreement among Laidlaw
Chem-Waste, Inc., Laidlaw Environmental Services (Canada)
Ltd., Toronto Dominion (Texas) Inc., The Toronto-
Dominion Bank, TD Securities (USA) Inc., The Bank of Nova
Scotia, NationsBank, N.A. and The First National Bank of
Chicago and NationsBanc, N.A. as Syndication Agent dated
as of April 3, 1997.* ...................................
4(e) -- Supplement to the Amended and Restated Credit Agreement
dated as of April 3, 1998 among the Company, Laidlaw
Environmental Services (Canada) Ltd., the Lenders,
Toronto Dominion (Texas), Inc., The Toronto Dominion
Bank, TD Securities (USA) Inc., The Bank of Nova Scotia,
The First National Bank of Chicago, Wachovia Bank and
NationsBank, N.A., as Syndication Agent.* ...............
4(f) -- Waiver and First Amendment to the Amended and Restated
Credit Agreement dated as of May 15, 1998 among the
Company, Laidlaw Environmental Services (Canada) Ltd.,
the Lenders, Toronto Dominion (Texas), Inc., The Toronto
Dominion Bank, TD Securities (USA) Inc., The Bank of Nova
Scotia, NationsBank, N.A., The First National Bank of
Chicago and Wachovia Bank.*..............................
</TABLE>
<PAGE> 301
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
4(g) -- Commitment Increase Supplement to the Amended and
Restated Credit Agreement dated as of June 3, 1998 among
the Company, Laidlaw Environmental Services (Canada)
Ltd., the Lenders, Toronto Dominion Bank (Texas), Inc.,
The Toronto Dominion Bank, TD Securities (USA) Inc., The
Bank of Nova Scotia, NationsBank, N.A., The First
National Bank of Chicago and Wachovia Bank.* ............
4(h) -- Amendment No. 1 dated as of March 31, 1995 to the Rights
Agreement between the Parent and First Chicago Trust
Company as successor to Registrar and Transfer Company,
as Rights Agent filed as an Exhibit to the Parent's Form
8-K filed on June 13, 1995, and incorporated herein by
reference. ..............................................
4(i) -- Amendment No. 2 dated as of April 30, 1997 to the Rights
Agreement between the Parent and First Chicago Trust
Company as successor to Registrar and Transfer Company,
as Rights Agent, filed as Exhibit 4(c) to the Parent's
Form 10-Q for the quarter ended November 30, 1997.
4(j) -- $350,000,000 5% Subordinated Convertible Pay-In-Kind
Debenture due 2009 issued by the Parent on May 15, 1997
to Laidlaw Inc. the form of which was included as an
appendix to the Parent's Definitive Proxy Statement on
Form DEF 14A, filed on May 1, 1997, and incorporated
herein by reference. ....................................
4(k) -- Registration Rights Agreement dated May 15, 1997 between
the Parent, Laidlaw Transportation, Inc. and Laidlaw Inc.
included as appendix to the Parent's Definitive Proxy
Statement on Form DEF 14A, the form of which was filed on
May 1, 1997, and incorporated herein by reference. ......
4(l) -- Indenture dated as of May 1, 1993 between the Industrial
Development Board of the Metropolitan Government of
Nashville and Davidson County (Tennessee) and NationsBanc
of Tennessee, N.A., filed as Exhibit 4(f) to the Parent's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference. .......................
4(m) -- Indenture of Trust dated as of August, 1995 between
Tooele County, Utah and West One Bank, Utah, now known as
U.S. Bank, as Trustee, filed as Exhibit 4(h) to the
Parent's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference. ...................
4(n) -- Indenture of Trust dated as of July 1, 1997 between
Carbon County, Utah and U.S. Bank, a national banking
association, as Trustee, filed as Exhibit 4(i) to the
Parent's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference. ...................
4(o) -- Indenture of Trust dated as of July 1, 1997 between
Tooele County, Utah and U.S. Bank, a national banking
association, as Trustee, filed as Exhibit 4(j) to the
Parent's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference. ...................
4(p) -- Indenture of Trust dated as of July 1, 1997 between
California Pollution Control Financing Authority and U.S.
Bank, a national banking association, as Trustee, filed
as Exhibit 4(k) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by
reference. ..............................................
4(q) -- Stock Purchase Agreement between Westinghouse Electric
Corporation (Seller) and Rollins Environmental Services,
Inc. (Buyer) for National Electric, Inc. dated March 7,
1995, filed as an Exhibit to the Parent's Form 8-K filed
on June 13, 1995, and incorporated hereby by
reference. ..............................................
4(r) -- Second Amendment to Stock Purchase Agreement (as
referenced in Exhibit (4)(l) above, dated May 15, 1997,
among Westinghouse Electric Corporation, Rollins
Environmental Services, Inc. and Laidlaw Inc., filed as
Exhibit 4(m) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by
reference. ..............................................
4(s) -- Promissory Note dated May 15, 1997 for $60,000,000 from
the Parent to Westinghouse Electric Corporation, filed as
Exhibit 4(n) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by
reference. ..............................................
</TABLE>
<PAGE> 302
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
4(t) -- Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to
Westinghouse Electric Corporation guaranteeing Promissory
Note dated May 15, 1997 (as referenced in Exhibit (4)(n))
from the Parent to Westinghouse Electric Corporation,
filed as Exhibit 4(o) to the Parent's Form 10-Q for the
Quarter ended May 31, 1997, and incorporated herein by
reference. ..............................................
4(u) -- Instruments defining the rights of holders of
nonregistered debt of the Parent have been omitted from
this exhibit index because the amount of debt authorized
under any such instrument does not exceed 10% of the
total assets of the Parent and its subsidiaries. The
Parent agrees to furnish a copy of any such instrument to
the Commission upon request. ............................
5 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
the legality of the securities being offered. ...........
8 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
certain tax matters. ....................................
10(a) -- Rollins Environmental Services, Inc. 1982 Incentive Stock
Option Plan, filed with Amendment No. 1 to the Company's
Registration Statement No. 2-84139 on Form S-1 dated June
24, 1983, and incorporated herein by reference. .........
10(b) -- Rollins Environmental Services, Inc. 1993 Stock Option
Plan, filed with the Company's Proxy Statement for the
Annual Meeting of Stockholders held January 28, 1994, and
incorporated herein by reference. .......................
10(c) -- Stock Purchase Agreement dated February 6, 1997, among
the Parent, Laidlaw Inc., and Laidlaw Transportation,
Inc. included as an appendix to the Parent's Definitive
Proxy Statement on Form DEF 14A, filed on May 1, 1997,
and incorporated herein by reference. ...................
10(d) -- Laidlaw Environmental Services, Inc. 1997 Stock Option
Plan filed as Exhibit 4.5 to the Parent's Registration
Statement on Form S-8 dated December 10, 1997. ..........
10(e) -- Laidlaw Environmental Services, Inc. Director's Stock
Option Plan, filed as Exhibit 4.5 to the Parent's
Registration Statement on Form S-8 dated December 10,
1997 and incorporated herein by reference. ..............
10(f) -- Management Incentive Plan for fiscal year 1996, filed as
Exhibit 10(e) to the Parent's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by
reference. ..............................................
10(g) -- Laidlaw Environmental Services, Inc. Supplemental
Executive Retirement Plan filed as Exhibit 10(g) to the
Registrant's Form 10-Q for the quarter ended November 30,
1997. ...................................................
11 -- Statement regarding computation of earnings per share,
filed as Exhibit (11) to the Parent's Form 10-K for the
year ended August 31, 1997, and incorporated herein by
reference.* .............................................
12 -- Computation of ratio of earnings to fixed charges.* .....
21 -- Subsidiaries of the Registrant.* ........................
23(a) -- Consent of PriceWaterhouseCoopers, LLP, independent
accountants. ............................................
23(b) -- Consent of KPMG Peat Marwick LLP. .......................
23(c) -- Consent of Arthur Andersen, LLP. ........................
23(d) -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits (5) and (8)). .....................
24 -- Powers of Attorney (included on the signature pages of
this Registration Statement and previously filed). ......
25 -- Statement of Eligibility of Trustee.* ...................
99(a) -- Letter of Transmittal. ..................................
99(b) -- Notice of Guaranteed Delivery. ..........................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 5
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
October 9, 1998
Safety-Kleen Services, Inc.
Laidlaw Environmental Services, Inc.
1301 Gervais Street
Suite 300
Columbia, SC 29201
Registration Statement on Form S-4 (File No. 333-57587)
Dear Ladies and Gentlemen:
In connection with the referenced Registration Statement on Form S-4
(the "Registration Statement") filed by Safety-Kleen Services, Inc., a Delaware
corporation (the "Issuer"), Laidlaw Environmental Services, Inc., a Delaware
corporation (the "Parent") and the Subsidiary Guarantors (the "Subsidiary
Guarantors" and, together with the Parent, the "Guarantors"), with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Act"), and the rules and regulations under the Act, we have
been requested to render our opinion as to the legality of the securities being
registered. The Registration Statement relates to the registration under the Act
of the Issuer's 9 1/4% Senior Subordinated Notes due 2008 (the "New Notes") and
the guarantees of each of the New Notes by the Guarantors (the "New
Guarantees"). The New Notes are to be offered in exchange for the Issuer's
outstanding 9 1/4% Senior Subordinated Notes due
<PAGE> 2
Safety-Kleen Services, Inc.
October 9, 1998
Page -2-
2008 (the "Existing Notes") and the guarantees of each of the Existing Notes by
the Guarantors (the "Existing Guarantees"). The New Notes and the New Guarantees
will be issued by the Issuer under the terms of the Indenture (the "Indenture"),
dated as of May 29, 1998, among the Issuer, the Guarantors and The Bank of Nova
Scotia Trust Company of New York, as trustee (the "Trustee"). Capitalized terms
used and not otherwise defined in this letter shall have the respective meanings
given them in the Registration Statement.
In connection with this opinion, we have examined originals,
conformed copies or photocopies, certified or otherwise identified to our
satisfaction, of the following documents (collectively, the "Documents"):
(i) the Registration Statement (including its exhibits);
(ii) the Indenture included as Exhibit 4(b) to the Registration
Statement;
(iii) the proposed form of the New Notes included as Exhibit A-1 to
the Indenture; and
(iv) the Registration Rights Agreement, dated as of May 29, 1998,
among the Issuer, the Guarantors, TD Securities (USA) Inc. and
NationsBanc Montgomery Securities LLC (the "Registration
Rights Agreement").
In addition, we have examined: (i) those corporate records of each of the Issuer
and the Guarantors as we have considered appropriate; and (ii) those other
certificates,
<PAGE> 3
Safety-Kleen Services, Inc.
October 9, 1998
Page -3-
agreements and documents as we deemed relevant and necessary as a basis for the
opinions expressed below.
In our examination of the documents and in rendering the opinions
set forth below, we have assumed, without independent investigation, (i) the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity of the original documents of all documents
submitted to us as certified, photostatic, reproduced or conformed copies of
validly existing agreements or other documents, the authenticity of all the
latter documents and the legal capacity of all individuals who have executed any
of the documents which we examined, (ii) that the each of the Guarantors (other
than the Parent) has taken all necessary corporate action to authorize the
Documents and the transactions provided for them and to which any Guarantor is a
party and that each Document has been duly authorized, executed and delivered by
each of the Guarantors (other than the Parent), (iii) that the execution and
delivery by the parties of each Document and the consummation by each party of
the transactions provided for in the Documents does not violate or result in a
breach of or default under the party's certificate or articles of incorporation,
by-laws, or other organizational documents, as the case may be, or the laws of
the jurisdiction of incorporation of any such party, (iv) that the New Notes
will be issued as described in the Registration Statement, (v) that the
Indenture was duly authorized, executed and delivered by the parties to them
(other than the Issuer and the Guarantors), (vi) that the New Notes will be in
substantially the form attached to the Indenture and that any information
omitted from any such form will be properly added. We have relied
<PAGE> 4
Safety-Kleen Services, Inc.
October 9, 1998
Page -4-
upon the factual matters contained in the representations and warranties of the
Issuer and the Guarantors made in the Documents and upon certificates of public
officials and officers of the Issuer and the Guarantors.
Based on the foregoing, and subject to the assumptions, exceptions
and qualifications set forth in this letter, we are of the opinion that:
1. When duly issued, authenticated and delivered in accordance with
the terms of the Indenture and the Registration Rights Agreement, the New Notes
will be legal, valid and binding obligations of the Issuer enforceable against
it in accordance with their terms.
2. When the New Notes are duly issued, authenticated and delivered
in accordance with the terms of the Indenture and the Registration Rights
Agreement, the New Guarantees will be legal, valid and binding obligations of
each of the Guarantors enforceable against each Guarantor in accordance with
their terms.
The foregoing opinions are subject to the following qualifications:
the enforceability of the Indenture, the New Notes and the New Guarantees may be
(i) subject to bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity).
Our opinion is limited to matters of New York law and Delaware
corporate law. Please be advised that no member of this firm is admitted to
practice
<PAGE> 5
Safety-Kleen Services, Inc.
October 9, 1998
Page -5-
in the State of Delaware. Our opinion is rendered only with respect to the laws,
and the rules, regulations and orders under them, which are currently in effect.
We hereby consent to the use of our name in the Registration
Statement and in the prospectus contained in the Registration Statement as it
appears in the caption "Legal Matters" and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not admit
that we come within the category of persons whose consent is required by the Act
or by the rules and regulations under the Act.
Very truly yours,
/S/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE> 1
EXHIBIT 8
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
October 9, 1998
Safety-Kleen Services, Inc.
Laidlaw Environmental Services, Inc.
1301 Gervais Street
Suite 300
Columbia, SC 29201
Registration Statement on Form S-4
Registration No. 333-57587
Dear Ladies and Gentlemen:
In connection with the above captioned Registration Statement and the
amendments thereto on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder (the
"Rules"), we have been requested to render our opinion as to the matters
hereinafter set forth.
In this regard, we have reviewed copies of the Registration
Statement. We have also made such other investigations of fact and law and have
examined the originals, or copies authenticated to our satisfaction, of such
documents, records, certificates or other instruments as in our judgment are
necessary or appropriate to render the opinion expressed below.
The opinion set forth below is limited to the Internal Revenue
Code of 1986, as amended, administrative rulings, judicial decisions, Treasury
regulations and other applicable authorities, all as in effect on the date
hereof. The statutory provisions, regulations, and interpretations upon which
our opinion is based are subject to change, and such changes could apply
retroactively. Any such change could affect the continuing validity of the
opinion set forth below. We assume no responsibility to advise you of any
subsequent changes in existing law or facts, nor do we assume any responsibility
to update this opinion with respect to any matters expressly set forth herein,
and no opinions are to be implied or may be inferred beyond the matters
expressly so stated.
<PAGE> 2
Based upon and subject to the foregoing, the discussion set
forth in the Registration Statement under the heading "Certain Federal Income
Tax Considerations" constitutes our opinion with respect to such matters.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
and to the reference to our name under the heading "Validity of the Notes." In
giving this consent, we do not hereby agree that we come within the category of
persons whose consent is required by the Act or the Rules.
Very truly yours,
/S/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File No.
333-57587) of our report, which includes an explanatory paragraph relating to
the revised statement of cash flows for the years ended August 31, 1996 and
1995, dated October 7, 1997, except for the first two paragraphs of Note 17 as
to which is dated is May 21, 1998, on our audits of the consolidated financial
statements and financial statement schedule of Laidlaw Environmental Services,
Inc. as of August 31, 1997 and 1996 and for each of the three years in the
period ended August 31, 1997. We also consent to the references to our firm
under the caption "Independent Accountants."
/s/ PRICEWATERHOUSECOOPERS, LLP
PriceWaterhouseCoopers, LLP
Charlotte, North Carolina
October 6, 1998
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Laidlaw Environmental Services, Inc.
We consent to the use of our report dated November 8, 1996, except for the last
paragraph under the footnote, "Indebtedness", which is as of November 27, 1996,
incorporated by reference in this Amendment No. 1 to the Registration Statement
(No. 333-57587) on Form S-4 of Laidlaw Environmental Services, Inc. relating to
the consolidated financial statements of Rollins Environmental Services, Inc. as
of September 30, 1996 and 1995, and for each of the years in the three-year
period ended September 30, 1996.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Wilmington, Delaware
October 6, 1998
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
registration statement on Form S-4 of our report dated February 12, 1998, except
with respect to the matters discussed in Note 12 as to which the date is April
1, 1998, included herein and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN, LLP
Arthur Andersen, LLP
Chicago, Illinois
October 6, 1998
<PAGE> 1
EXHIBIT 99(a)
LETTER OF TRANSMITTAL
SAFETY-KLEEN SERVICES, INC.
OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008 (GUARANTEED BY
LAIDLAW ENVIRONMENTAL SERVICES, INC.), WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL OF
ITS OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
(GUARANTEED BY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
PURSUANT TO THE PROSPECTUS, DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT P.M. NEW YORK CITY TIME, ON ,
, UNLESS EXTENDED (THE "EXPIRATION DATE"), TENDERS MAY BE WITHDRAWN
PRIOR TO P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
DELIVERY TO: BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail, Overnight Courier or Hand: By Facsimile in New York:
Bank of Nova Scotia Trust Company of New York (212) 225-5436
One Liberty Plaza, 23rd Floor
New York, New York 10006 Confirm by Telephone:
Attention: Mr. George Timmes (212) 225-5000
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that it has received and reviewed the
Prospectus, dated , 1998 (the "Prospectus"), of Safety-Kleen
Services, Inc. (formerly known as LES, Inc.), a Delaware corporation (the
"Company" or the "Issuer"), and a wholly-owned subsidiary of Laidlaw
Environmental Services, Inc. ("Laidlaw"), and this Letter of Transmittal (the
"Letter"), which together constitute the Issuer's offer (the "Exchange Offer")
to exchange up to $325,000,000 in aggregate principal amount of its 9 1/4%
Senior Subordinated Notes Due 2008 (the "Exchange Notes"), for a like principal
amount of the issued and outstanding 9 1/4% Senior Subordinated Notes Due 2008
that were issued and sold in reliance upon an exemption from registration under
the Securities Act of 1933, as amended (the "Securities Act") (the "Senior
Subordinated Notes").
For each Senior Subordinated Note accepted for exchange, the holder of such
Senior Subordinated Note will receive an Exchange Note having a principal amount
equal to that of the surrendered Senior Subordinated Note. The Exchange Notes
will bear interest from the most recent date to which interest has been paid on
the Senior Subordinated Notes or, if no interest has been paid on the Senior
Subordinated Notes, from , 1998. Accordingly, if the relevant record
date for interest payment occurs after the consummation of the Exchange Offer
registered holders of Exchange Notes on such record date will receive interest
accruing from the most recent date to which interest has been paid or, if no
interest has been paid, from , 1998. If, however, the relevant
record date for interest payment occurs prior to the consummation of the
Exchange Offer, registered holders of Senior Subordinated Notes on such record
date will receive interest accruing from the most recent date to which interest
has been paid or, if no interest has been paid, from , 1998. Senior
Subordinated Notes accepted for exchange will cease to accrue interest from and
after the date of consummation of the Exchange Offer, except as set forth in the
immediately preceding sentence. Holders of Senior Subordinated Notes whose
Senior Subordinated Notes are accepted for exchange will not receive any payment
in respect of interest on such Senior Subordinated Notes otherwise payable on
any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer.
<PAGE> 2
This Letter is to be completed by a holder of Senior Subordinated Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Senior Subordinated Notes, if available, is to be made by
book-entry transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in "The Exchange Offer -- Procedures for Tendering Existing
Notes" section of the Prospectus and an Agent's Message (as defined herein) is
not delivered. Holders of Senior Subordinated Notes whose certificates are not
immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Senior Subordinated Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Senior Subordinated
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Procedures for Tendering Existing Notes" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Senior Subordinated Notes to which this Letter relates. If
the space provided below is inadequate, the certificate numbers and principal
amount of Senior Subordinated Notes should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SENIOR
SUBORDINATED NOTES 1 2 3
- ------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
AMOUNT OF
SENIOR PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE SUBORDINATED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* NOTE(S) TENDERED**
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------
* Need not be completed if Senior Subordinated Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Senior
Subordinated Notes represented by the Senior Subordinated Notes indicated in column 2. See Instruction
2. Senior Subordinated Notes tendered hereby must be in denominations of principal amount of $1,000 and
any integral multiple thereof. See Instruction 1.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED SENIOR SUBORDINATED NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number Transaction Code Number
------------------------------- -------------------------------
By crediting Senior Subordinated Notes to the Exchange Agent's Account at
the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") and by complying with
applicable ATOP procedures with respect to the Exchange Offer, including
transmitting an Agent's Message to the Exchange Agent in which the Holder of
Senior Subordinated Notes acknowledges and agrees to be bound by the terms of
this Letter, the participant in ATOP confirms on behalf of itself and the
beneficial owners of such Senior Subordinated Notes all provisions of this
Letter applicable to it and such
2
<PAGE> 3
beneficial owners as if it had completed the information required herein and
executed and transmitted this Letter to the Exchange Agent.
[ ] CHECK HERE IF TENDERED SENIOR SUBORDINATED NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Widow Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which guaranteed delivery
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number
------------------------------- Transaction Code Number
-------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Senior Subordinated Notes, it
represents that the Senior Subordinated Notes to be exchanged for Exchange Notes
were acquired by it as a result of market-making or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes; however, by
so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of
Senior Subordinated Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Senior Subordinated Notes tendered hereby, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Issuer all right, title and interest in and to such Senior Subordinated Notes as
are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Senior
Subordinated Notes tendered hereby and that the Issuer will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
by the Issuer. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Senior Subordinated Notes tendered hereby will have
been acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the undersigned, that neither the
holder of such Senior Subordinated Notes nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and that neither the holder of such Senior Subordinated
Notes nor any such other person is an "affiliate," as defined in Rule 405 under
the Securities Act of 1933, as amended (the "Securities Act"), of the Issuer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued in exchange for the Senior Subordinated
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Issuer does not intend to request the SEC to consider, and
the SEC has not considered the Exchange Offer in the context of a no-action
letter and there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer as in other
circumstances. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no arrangement or understanding to
participate in a distribution of Exchange Notes. If any holder is an affiliate
of the Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Senior
Subordinated Notes, it represents that the Senior Subordinated Notes to be
exchanged for the Exchange Notes were acquired by it as a result of
market-making or other trading activities and acknowledges that it will deliver
a prospectus in connection with any resale of such Exchange Notes; however, by
so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuer to be necessary or desirable to complete the
sale, assignment and transfer of the Senior Subordinated Notes tendered hereby.
All authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer -- Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Senior Subordinated Notes for any
4
<PAGE> 5
Senior Subordinated Notes not exchanged) in the name of the undersigned or, in
the case of a book-entry delivery of Senior Subordinated Notes, please credit
the account indicated above maintained at the Book Entry Transfer Facility.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, please send the Exchange Notes (and, if applicable,
substitute certificates representing Senior Subordinated Notes for any Senior
Subordinated Notes not exchanged) to the undersigned at the address shown above
in the box entitled "Description of Senior Subordinated Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF SENIOR
SUBORDINATED NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE SENIOR SUBORDINATED NOTES AS SET FORTH IN SUCH BOX ABOVE.
- ------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- ------------------------------------------------------------------------------
To be completed ONLY if certificates for Senior Subordinated Notes not
exchanged and/or Exchange Notes are to be issued in the name of and sent to
someone other than the person or persons whose signature(s) appear(s) on this
Letter above, or if Senior Subordinated Notes delivered by book-entry transfer
which are not accepted for exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue: Exchange Notes and/or Senior Subordinated Notes to:
Name(s)
-----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
-----------------------------------------------------------------------------
-----------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Senior Subordinated Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility account set forth below.
- ------------------------------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY)
ACCOUNT NUMBER, IF APPLICABLE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- ------------------------------------------------------------------------------
To be completed ONLY if certificates for Senior Subordinated Notes not
exchanged and/or Exchange Notes are to be sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter above or to such
person or persons at an address other than shown in the box entitled
"Description of Senior Subordinated Notes" on this Letter above.
Mail: Exchange Notes and/or Senior Subordinated Notes to:
Name(s)
- ------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
- ------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(ZIP CODE)
- ------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR SENIOR SUBORDINATED NOTES OR A
BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
5
<PAGE> 6
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
<TABLE>
<S> <C> <C> <C>
x ------------------------------------------ ------------------------------------------ , 1998
x ------------------------------------------ ------------------------------------------ , 1998
Signature(s) of Owner Date
</TABLE>
Area Code and Telephone Number
- -----------------------------------------------------------------------------
If a holder is tendering any Senior Subordinated Notes, this Letter must be
signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the Senior Subordinated Notes or by any person(s) authorized
to become registered holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity, please
set forth full title. See Instruction 3.
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated: , 1998
- --------------------------------------------------------------------------
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008 (GUARANTEED BY LAIDLAW ENVIRONMENTAL
SERVICES, INC.),
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL
OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2008 OF SAFETY-KLEEN SERVICES,
INC. (GUARANTEED
BY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by noteholders either if certificates are to
be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in "The Exchange Offer --
Procedures for Tendering Existing Notes" section of the Prospectus and an
Agent's Message is not delivered. Certificates for all physically tendered
Senior Subordinated Notes, or Book-Entry Confirmation, as the case may be, as
well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Senior Subordinated Notes tendered hereby
must be in denominations of principal amount of $1,000 and any integral multiple
thereof. The term "Agent's Message" means a message, transmitted to the
Book-Entry Transfer Facility and received by the Exchange Agent and forming a
part of the Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the tendering Participant
that such Participant has received and agrees to be bound by this Letter and
that the Issuer may enforce this Letter against such Participant.
Noteholders whose certificates for Senior Subordinated Notes are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date, or
who cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Senior Subordinated Notes pursuant to the guaranteed delivery
procedures set forth in "The Exchange Offer -- Procedures for Tendering Existing
Notes" section of the Prospectus. Pursuant to such procedures, (i) such tender
must be made through an Eligible Institution, (ii) prior to the Expiration Date,
the Exchange Agent must receive from such Eligible Institution a properly
completed and duly executed Letter (or a facsimile thereof or an Agent's Message
in lieu hereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Senior
Subordinated Notes and the amount of Senior Subordinated Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered
Senior Subordinated Notes, or a Book-Entry Confirmation, and any other documents
required by the Letter will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Senior
Subordinated Notes, in proper form for transfer, or Book-Entry Confirmation, as
the case may be, and all other documents required by this Letter, are received
by the Exchange Agent within three NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Senior Subordinated Notes and
all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If Senior Subordinated Notes are sent by mail,
it is suggested that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to p.m., New
York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Senior Subordinated Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Senior Subordinated Notes to be tendered in the
box above entitled "Description of Senior Subordinated Notes -- Principal Amount
Tendered." A reissued certificate representing the balance of nontendered Senior
Subordinated Notes will be sent to such tendering
<PAGE> 8
holder, unless otherwise provided in the appropriate box on this Letter,
promptly after the Expiration Date. All of the Senior Subordinated Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Senior
Subordinated Notes tendered hereby, the signature must correspond exactly with
the name as written on the face of the certificates without any change
whatsoever.
If any tendered Senior Subordinated Notes are owned of record by two or
more joint owners, all of such owners must sign this Letter.
If any tendered Senior Subordinated Notes are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Senior Subordinated Notes specified herein and tendered hereby, no endorsements
of certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Senior Subordinated Notes are to be
reissued, to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Issuer,
proper evidence satisfactory to the Issuer of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR SENIOR SUBORDINATED NOTES OR SIGNATURES ON
BOND POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS
A MEMBER OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR
TRUST COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN
"ELIGIBLE INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE SENIOR SUBORDINATED NOTES ARE TENDERED: (i) BY A
REGISTERED HOLDER OF SENIOR SUBORDINATED NOTES (WHICH TERM, FOR PURPOSES OF THE
EXCHANGE OFFER, INCLUDES ANY PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY
SYSTEM WHOSE NAME APPEARS ON A SECURITY POSITION LISTING AS THE HOLDERS OF SUCH
SENIOR SUBORDINATED NOTES) WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL
ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER, OR
(ii) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Senior Subordinated Notes should indicate in the
applicable box the name and address to which New Exchange issued pursuant to the
Exchange Offer and/or substitute certificates evidencing Senior Subordinated
Notes not exchanged are to be issued or sent, if different from the name or
address of the person signing this Letter. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. Holders tendering Senior Subordinated Notes
by book-entry transfer may request that Senior Subordinated Notes not exchanged
be credited to such account maintained at the Book-Entry Transfer Facility as
such noteholder may designate hereon. If no such instructions are given, such
Senior Subordinated Notes not exchanged will be returned to the name or address
of the person signing this Letter.
2
<PAGE> 9
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
Senior Subordinated Notes are accepted for exchange must provide the Issuer (as
payor) with such holder's correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 below, which in the case of a tendering holder who is an
individual, is his or her social security number. If the Issuer are not provided
with the current TIN or an adequate basis for an exemption, such tendering
holder may be subject to a $50 penalty imposed by the Internal Revenue Service.
In addition, delivery to such tendering holder of Exchange Notes may be subject
to backup withholding in an amount equal to 31% of all reportable payments made
after the exchange. If withholding results in an overpayment of taxes, a refund
may be obtained.
Exempt holders of Senior Subordinated Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed Guidelines of
Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9
Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Senior Subordinated
Notes must provide its correct TIN by completing the Substitute Form W-9 set
forth below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, or
(ii) the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of a failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
tendering holder of Senior Subordinated Notes is a nonresident alien or foreign
entity not subject to backup withholding, such holder must give the Issuer a
completed Form W-8, Certificate of Foreign Status. These forms may be obtained
from the Exchange Agent. If the Senior Subordinated Notes are in more than one
name or are not in the name of the actual owner, such holder should consult the
W-9 Guidelines for information on which TIN to report. If such holder does not
have a TIN, such holder should consult the W-9 Guidelines for instructions on
applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write
"applied for" in lieu of its TIN. Note: Checking this box and writing "applied
for" on the form means that such holder has already applied for a TIN or that
such holder intends to apply for one in the near future. If such holder does not
provide its TIN to the Issuer within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to the Issuer.
6. TRANSFER TAXES.
The Issuer will pay all transfer taxes, if any, applicable to the transfer
of Senior Subordinated Notes to it or its order pursuant to the Exchange Offer.
If, however, Exchange Notes and/or substitute Senior Subordinated Notes not
exchanged are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Senior Subordinated Notes
tendered hereby, or if tendered Senior Subordinated Notes are registered in the
name of any person other than the person signing this Letter, or if a transfer
tax is imposed for any reason other than the transfer of Senior Subordinated
Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SENIOR SUBORDINATED NOTES SPECIFIED IN
THIS LETTER.
7. WAIVER OF CONDITIONS.
The Issuer reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
3
<PAGE> 10
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Senior Subordinated Notes, by execution of
this Letter, shall waive any right to receive notice of the acceptance of their
Senior Subordinated Notes for exchange.
Neither the Issuer, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Senior
Subordinated Notes nor shall any of them incur any liability for failure to give
any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED SENIOR SUBORDINATED NOTES.
Any holder whose Senior Subordinated Notes have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the address indicated
above for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11. INCORPORATION OF LETTER OF TRANSMITTAL.
This Letter shall be deemed to be incorporated in and acknowledged and
accepted by any tender through the Book-Entry Transfer Facility's ATOP
procedures by any Participant on behalf of itself and the beneficial owners of
any Senior Subordinated Notes so tendered.
4
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PAYOR'S NAME:
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT TIN: ------------------------
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number or
Employer Identification Number
---------------------------------------------------------------------------------
Part 2 -- TIN Applied For [ ]
---------------------------------------------------------------------------------
DEPARTMENT OF TREASURY CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
INTERNAL REVENUE SERVICE
(1) the number shown on this form is my correct Taxpayer Identification Number (or
PAYOR'S REQUEST FOR I am waiting for a number to be issued to me).
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND (2) I am not subject to backup withholding either because: (a) I am exempt from
CERTIFICATION backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE ---------------------------------- DATE-------------------------
- ----------------------------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS that you are
subject to backup withholding because of underreporting of interest or dividends on your tax return and you
have not been notified by the IRS that you are no longer subject to backup withholding.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of the
exchange, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide a number.
<TABLE>
<S> <C>
- ----------------------------------------- -----------------------------------------
Signature Date
</TABLE>
5
<PAGE> 1
EXHIBIT 99(b)
NOTICE OF GUARANTEED DELIVERY
SAFETY-KLEEN SERVICES, INC.
OFFER TO EXCHANGE ITS 9 1/4% SENIOR SUBORDINATED NOTES DUE 2008 (GUARANTEED
BY LAIDLAW ENVIRONMENTAL SERVICES, INC.) WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL ITS OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
(GUARANTEED BY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Safety-Kleen Services, Inc. (formerly known as LES, Inc.) (the
"Company") made pursuant to the Prospectus dated , 1998 (the
"Prospectus"), if certificates for the outstanding 9 1/4% Senior Notes Due 2008
of the Company (the "Existing Notes") are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Company prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to The Bank of Nova Scotia Trust Company of New York (the
"Exchange Agent") as set forth below. In addition, in order to utilize the
guaranteed delivery, the Letter of Transmittal (or facsimile thereof) must also
be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
DELIVERY TO:
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
Exchange Agent
<TABLE>
<S> <C>
By Mail, Overnight Courier or Hand: By Facsimile:
The Bank of Nova Scotia Trust Company (for eligible institutions only)
of New York (212) 225-5436
One Liberty Plaza, 23rd Floor
New York, New York 10006
Attention: Mr. George Timmes Confirm by Telephone:
(212) 225-5000
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Existing Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Procedures for
Tendering Existing Notes" section of the Prospectus.
<PAGE> 2
Principal Amount of Existing Notes
Tendered*
$
- ----------------------------------------------------
Certificate Nos. (if available):
- ------------------------------------------------------
Total Principal Amount Represented by
Existing Notes Certificate(s):
$
- ----------------------------------------------------
If Existing Notes will be delivered by book-entry transfer to The Depository
Trust Company, provide account number.
Account Number
- -----------------------------------
ANY AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE
THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE
UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
<TABLE>
<S> <C>
PLEASE SIGN HERE
X
------------------------------------------------------------ ------------------------------
X
------------------------------------------------------------ ------------------------------
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY DATE
Area Code and Telephone Number:
- -----------------------------------------------------------------------------------------------
</TABLE>
Must be signed by the holder(s) of Existing Notes as their name(s)
appear(s) on certificate(s) for Existing Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
- ---------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
2
<PAGE> 3
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States, hereby guarantees that the certificates representing the principal
amount of Existing Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Existing Notes into the Exchange
Agent's account at The Depository Trust Company pursuant to the procedures set
forth in "The Exchange Offer -- Procedures for Tendering Existing Notes" section
of the Prospectus, together with a properly completed and duly executed Letter
of Transmittal (or a manually signed facsimile thereof) with any required
signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than three business days after the Expiration Date.
<TABLE>
<S> <C>
- ----------------------------------------------------- -----------------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ----------------------------------------------------- -----------------------------------------------------
ADDRESS TITLE
- ----------------------------------------------------- Name:
------------------------------------------------
ZIP CODE (PLEASE TYPE OR PRINT)
Area Code and Tel. No. ------------------------------ Dated:
------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR EXISTING NOTES WITH THIS FORM. CERTIFICATES
FOR EXISTING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
