<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended November 30, 1997
-----------------
Commission File Number 1-8368
------
LAIDLAW ENVIRONMENTAL SERVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0228924
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Gervais Street Columbia, Suite 300, South Carolina 29201
- ------------------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(803) 933-4210 (Registrant's telephone number, including area code)
--------------
---------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the issuer's common stock outstanding as of
December 31, 1997 was 182,282,097.
Page 1
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LAIDLAW ENVIRONMENTAL SERVICES, INC.
INDEX
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Income for the Three Month
Periods Ended November 30, 1997 and 1996 3
Consolidated Balance Sheets as of November 30, 1997 and
August 31, 1997 4
Consolidated Statements of Cash Flows for the Three
Month Periods Ended November 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 16
2
<PAGE> 3
LAIDLAW ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $211,552 $172,565
Expenses:
Operating 145,325 124,741
Depreciation and amortization 13,895 15,318
Selling, general and administrative 20,401 17,607
- ---------------------------------------------------------------------------------------------------------------------
Total expenses 179,621 157,666
- ---------------------------------------------------------------------------------------------------------------------
Operating income 31,931 14,899
Allocated interest expense - 10,450
Interest expense (net of amount capitalized) 15,139 -
Other income 500 1,166
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income tax 17,292 5,615
Income tax expense 7,227 1,200
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before minority interest 10,065 4,415
Minority interest 79 (827)
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations 10,144 3,588
Income from discontinued operations - 703
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 10,144 $ 4,291
=====================================================================================================================
Primary income per share:
Income from continuing operations $ 0.056 $ 0.030
Income from discontinued operations - 0.006
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 0.056 $ 0.036
=====================================================================================================================
Weighted average common and common
stock equivalents outstanding (000s) 180,822 120,000
=====================================================================================================================
Fully diluted income per share:
Income from continuing operations $ 0.047 $ 0.030
Income from discontinued operations - 0.006
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 0.047 $ 0.036
=====================================================================================================================
Weighted average common and common
stock equivalents outstanding (000s) 274,156 120,000
=====================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
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LAIDLAW ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30,
1997 August 31,
($ in Thousands) (Unaudited) 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,843 $ 11,160
Trade and other accounts receivable 218,534 210,914
Inventories 7,281 7,927
Income taxes recoverable 13,307 13,027
Other current assets 10,930 8,512
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 259,895 251,540
- ----------------------------------------------------------------------------------------------------------------------
Long-term investments 61,951 51,909
- ----------------------------------------------------------------------------------------------------------------------
Land, landfill sites and improvements 431,174 499,326
Buildings 421,030 419,779
Machinery and equipment 582,831 605,310
Construction in process 15,783 15,608
- ----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment 1,450,818 1,540,023
Less: Accumulated depreciation and amortization (298,895) (303,454)
- ----------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 1,151,923 1,236,569
- ----------------------------------------------------------------------------------------------------------------------
Assets held for sale 41,813 -
Goodwill 69,407 70,527
Deferred charges 5,231 333
- ----------------------------------------------------------------------------------------------------------------------
Total assets $1,590,220 $1,610,878
======================================================================================================================
LIABILITIES
Current liabilities
Accounts payable $ 67,504 $ 48,148
Accrued liabilities 102,332 115,211
Current portion of long-term debt 15,534 12,086
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 185,370 175,445
- ----------------------------------------------------------------------------------------------------------------------
Deferred items
Income taxes 57,472 49,790
Other 171,060 179,668
Long-term debt 479,805 528,010
Subordinated convertible debenture 350,000 350,000
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 1,243,707 1,282,913
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized 350,000,000;
issued and outstanding 182,271,597; August 31, 1997-180,435,311 182,272 180,435
Additional paid-in capital 392,641 385,200
Cumulative foreign currency translation adjustment (3,083) -
Net unrealized gain on securities available for sale 2,209 -
Accumulated deficit (227,526) (237,670)
- ----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 346,513 327,965
======================================================================================================================
Total liabilities and stockholders' equity $1,590,220 $1,610,878
======================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
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LAIDLAW ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 10,144 $ 4,291
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 13,895 15,905
Deferred income taxes 6,874 400
Change in accounts receivable (13,283) (15,433)
Change in accounts payable, accrued liabilities and deferred liabilities 2,325 (20,090)
Decrease in liabilities assumed upon acquisition (8,750) -
Change in other, net (3,706) 5,236
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 7,499 (9,691)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (8,490) (7,933)
Net increase in long-term investments (12,811) (424)
Proceeds from sales of property, plant and equipment 1,875 1,473
Increase in deferred charges (4,998) -
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (24,424) (6,884)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of common stock on exercise of stock options 528 -
Bank overdraft (included in accounts payable) 17,600 -
Repayment of long-term debt (2,520) (1,342)
Advances from Laidlaw Inc. - 17,917
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 15,608 16,575
- -------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,317) -
Cash and cash equivalents at:
Beginning of period 11,160 -
===============================================================================================================================
End of period $ 9,843 $ -
===============================================================================================================================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Net unrealized gain on securities available for sale $ 2,209 $ -
Issuance of common stock to satisfy interest payment due on
November 15, 1997 on subordinated convertible debenture $ 8,750 $ -
===============================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
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LAIDLAW ENVIRONMENTAL SERVICES, INC.
Notes to Consolidated Financial Statements
For the Three Months Ended November 30, 1997
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
three month period ended November 30, 1997 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 ("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 adoption
of this SOP did not have a material impact on the Company's financial condition
or net income.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
Legal Proceedings:
TAX MATTERS. 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 owning to related foreign persons. LTI has petitioned the United States
Tax Court (captioned as Laidlaw Transportation, Inc. & Subsidiaries et al. vs.
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 $84 million as of November 30, 1997). In October 1997,
LTI received a statutory notice of deficiency proposing that the subsidiaries
pay additional taxes of approximately $143.5 million (plus interest of
approximately $129 million as of November 30, 1997) relating to disallowed
deductions in federal income tax returns for the fiscal years ended August 31,
1989, 1990 and 1991, based on the same issues. LTI intends to vigorously contest
6
<PAGE> 7
these claimed deficiencies. The Company anticipates that the Internal Revenue
Service will propose adjustments for the same issue in subsequent taxation
years. Pursuant to the February 6, 1997 Stock Purchase Agreement between Rollins
Environmental Services, Inc. ("Rollins") and Laidlaw Inc. ("Laidlaw"), Laidlaw
and LTI agreed to be responsible for any tax liabilities resulting from these
matters. The Company believes that the ultimate disposition of these issues will
not have a materially adverse effect upon the Company's consolidated financial
position or results of operations.
NOTE 3 - STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity since September 1,
1997 have been as follows ($ in thousands):
<TABLE>
<CAPTION>
Cumulative Unrealized
Foreign Gain on
Additional Currency Assets Total
Common Paid-in Translation Available Accumulated Stockholders'
Stock Capital Adjustment for Sale Deficit Equity
--------- ---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 1, 1997 $ 180,435 $385,200 $ -- $ -- $(237,670) $327,965
Net income for period -- -- -- -- 10,144 10,144
Exercise of stock options 121 407 -- -- -- 528
Issuance of shares (Note A) 1,716 7,034 -- -- -- 8,750
Unrealized gain on securities
available for sale -- -- -- 2,209 -- 2,209
Cumulative foreign currency
translation adjustments -- -- (3,083) -- -- (3,083)
--------- -------- --------- ------ --------- --------
Balance at November 30, 1997 $ 182,272 $392,641 $ (3,083) $2,209 $(227,526) $346,513
========= ======== ========= ====== ========= ========
</TABLE>
Note A: To satisfy interest payment due on November 15, 1997 on subordinated
convertible debenture.
At November 30, 1997, the Company had issued and outstanding
182,271,597 shares of its $1 par value common stock. For accounting purposes,
120 million of these shares were deemed outstanding in all prior periods and
60,375,811 were deemed to have been issued on May 15, 1997, at $2.75 per share,
as consideration for the acquisition of Rollins by the Company.
During the three month period ended November 30, 1997, the Company
purchased equity securities classified as available for sale and accordingly are
reported at fair value as November 30, 1997, with unrealized gains excluded from
earnings and reported as a separate component of stockholders' equity.
7
<PAGE> 8
NOTE 4 - ASSETS HELD FOR SALE
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
payable 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 results in no gain or loss. The
Company's net investment in this landfill of $41.8 million has been classified
as an asset held for sale at November 30, 1997.
NOTE 5 - SUBSEQUENT EVENTS
On November 4, 1997 the Company announced its intent to offer $14.00
cash and 2.4 common shares of the Company for all the 58.3 million outstanding
shares of Safety-Kleen Corp. On November 20, 1997 the Company announced revised
terms to offer $15.00 cash and $15.00 in Company common stock (the "Revised
Offer"). The cash portion is subject to reduction by certain termination
expenses related to a competing offer to a maximum of $75 million in the
aggregate. The common stock portion of the Revised Offer is subject to an
exchange ratio mechanism whereby the value of the common stock issued will total
$15.00 provided that the Company's common stock trades equal to or greater than
$4.28571 and equal to or less than $5.35714 per share, resulting in a
corresponding adjustment to the number of shares to be issued. If the Company's
common stock trades at a price below $4.28571 or above $5.35714, the share
exchange will be limited to 3.5 and 2.8, respectively. The Company has filed a
registration statement on Form S-4, as amended, with the Commission which
contains a preliminary prospectus setting forth the terms and conditions of the
Revised Offer. As of November 30, 1997, the Company incurred $5 million in costs
related to the Revised Offer which are included in deferred charges in the
Consolidated Balance Sheet. If the Revised Offer is not accepted, such costs
will be charged against income at that time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations: Three Months Ended November 30, 1997 compared with
Three Months Ended November 30, 1996
Operating results are as follows ($ in millions):
<TABLE>
<CAPTION>
Three Months Ended November 30,
-----------------------------------------------------
1997 1996 1997 1996
------ ------ ----- -----
<S> <C> <C> <C> <C>
Revenue $211.6 $172.6 100.0% 100.0%
Operating expense 145.4 124.8 68.7% 72.3%
Depreciation & amortization 13.9 15.3 6.6% 8.9%
Selling, general & administrative 20.4 17.6 9.6% 10.2%
------ ------ ------ ------
Operating income $ 31.9 $ 14.9 15.1% 8.6%
====== ====== ====== ======
</TABLE>
8
<PAGE> 9
Revenues
Components of revenue ($ in millions):
<TABLE>
<CAPTION>
Three Months Ended November 30,
-----------------------------------------------
1997 1996
------------------- -------------------
<S> <C> <C> <C> <C>
Service Center $ 93.4 37% $ 75.1 37%
Landfill 44.2 17% 49.6 25%
Incinerator 51.1 20% 14.6 7%
Transportation 21.1 8% 27.4 14%
Specialty Services 44.9 18% 35.2 17%
------ ---- ------ ----
254.7 100% 201.9 100%
==== ====
Less: Intercompany eliminations (43.1) (29.3)
------ ------
Total revenue $211.6 $172.6
====== ======
</TABLE>
Revenues increased $39.0 million, or 22.6%, during the three months
ended November 30, 1997 compared to the three months ended November 30, 1996.
Revenue for incinerators increased $36.5 million, or 250.0%, while service
center revenues increased $18.3 million, or 24.4%, each reflecting the inclusion
of the acquired Rollins business. Revenue from specialty service operations
increased $9.7 million, or 27.6%, due to increased harbor related dredging,
treatment and disposal management activities. Revenue from landfill operations
decreased $5.4 million, or 10.9%, due to lower receipts at industrial and
municipal solid waste sites, partially offset by higher volumes at the Company's
hazardous waste landfills. Revenues from transportation operations decreased
$6.3 million, or 23.0%, impacted by the lower non-hazardous landfill waste
volumes. Revenue from intercompany sources increased $13.8 million, or 47.1%,
due to the redirection of waste streams for internal disposal. As a result, the
Company increased the internalization of waste disposal activities to 76% in the
current quarter, up from 68% in fiscal year 1997.
Management's estimates of the components of changes in the Company's
consolidated revenue are as follows:
<TABLE>
<CAPTION>
Percentage Increase (Decrease)
Three Months Ended November 30,
---------------------------------------
1997 over 1996 1996 over 1995
-------------- --------------
<S> <C> <C>
Expansion of customer base by acquisition 23.5 % 1.6 %
Other, primarily through volume and price changes 4.5 %
(4.7)%
Divestitures and closures (4.9)% (0.8)%
Foreign exchange rate changes (0.5)% (0.1)%
----- -----
Total 22.6 % (4.0)%
===== =====
</TABLE>
The comparative increase in revenue for the quarter ended November 30,
1997 was primarily due to the inclusion of the acquired operations of Rollins.
Current revenues from existing operations were supported by additional volumes
at certain hazardous waste landfills and from continuing harbor related
dredging, treatment and disposal activities. Volume related increases were
somewhat offset by previous rationalization measures at Gulf Coast remedial
services operations and by reduced volumes at certain industrial and municipal
solid waste landfills. Prior period revenues included contributions from a
wastewater facility and the Clive, Utah incineration facility, which were closed
in fiscal 1997.
9
<PAGE> 10
Operating Expenses
Operating expenses increased $20.6 million, or 16.5%, during the three
months ended November 30, 1997, compared to the three months ended November 30,
1996. The increase was primarily attributable to additional business obtained as
part of the acquisition of Rollins. As a percentage of revenue, operating
expense decreased to 68.7% from 72.3% in the comparable prior year period,
primarily due to stabilized pricing, the increased utilization of existing
facilities and ongoing cost reduction initiatives.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $1.4 million, or 9.3%,
during the quarter ended November 30, 1997, compared to the prior year quarter.
The decrease was related to reduced non-hazardous landfill cell space
consumption and the closures of a wastewater facility and the Clive, Utah
incineration facility. As a percentage of revenue, depreciation and amortization
expense decreased to 6.6% from 8.9% in the prior year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $2.8 million, or
15.9% during the three months ended November 30, 1997, versus the prior year
quarter. As a percentage of revenue, selling, general and administrative
expenses decreased to 9.6% from 10.2% in the prior year quarter due to cost
reduction measures and economies of scale gained through the Rollins
acquisition.
Interest Expense
Interest expense increased $4.7 million, or 44.9% during the three
months ended November 30, 1997, over the prior year period primarily as a result
of the recapitalization related to the Rollins acquisition. Prior to May 15,
1997 interest expense was allocated from the parent corporation, Laidlaw.
Income Tax Expense
Prior to May 15, 1997, income tax expense was allocated from the parent
corporation. Effective May 15, 1997, the Company is subject to full federal and
state income tax effects.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This report contains various forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
financial, operating and other projections. These statements are based on
current plans and expectations of the Company and involve risks and
uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the
forward-looking statements.
10
<PAGE> 11
Important factors that could cause actual results to differ include,
among others, risks associated with acquisitions, fluctuations in operating
results because of acquisitions and variations in stock prices, changes in
applicable government regulations, competition, and risks associated with the
operations and growth of the newly acquired business of Rollins. As a result of
these factors, the Company's revenue and income could vary significantly from
quarter to quarter, and past financial performance should not be considered a
reliable indicator of future performance.
LIQUIDITY AND CAPITAL RESOURCES
The cash generated by operating activities in the three months ended
November 30, 1997 totaled $7.5 million. This was composed of $35.0 million from
operations before financing working capital and the impact of acquisition
related spending, $18.7 million to finance working capital (primarily accounts
receivable) and $8.8 million related to spending on prior period acquisition
liabilities.
The cash used in investing activities totaled $24.4 million including
$6.6 million for capital expenditures (net of proceeds of disposal), $12.8
million for purchases of long-term investments (primarily an investment in the
shares of Safety-Kleen Corp.) and a $5.0 million increase in deferred charges
related to the Company's offer to acquire Safety-Kleen Corp.
The Company believes that it has adequate liquidity to finance its
planned capital expenditure and debt retirement needs through cash generated by
operations and available sources of liquidity under its bank credit facilities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
TAX MATTERS. The consolidated federal income tax returns of 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 owning to related foreign persons. LTI has petitioned the United States
Tax Court (captioned as Laidlaw Transportation, Inc. & Subsidiaries et al. vs.
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 $84 million as of November 30, 1997). In October 1997,
LTI received a statutory notice of deficiency proposing that the subsidiaries
pay additional taxes of approximately $143.5 million (plus interest of
approximately $129 million as of November 30, 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 February 6, 1997 Stock Purchase Agreement between Rollins
and Laidlaw, Laidlaw and LTI agreed to be responsible for any tax liabilities
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.
11
<PAGE> 12
Other than as herein reported there have been no additional significant
legal proceedings nor any material changes in the legal proceedings reported on
pages 8 through 11 of the Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders was held on November 25,
1997. At the meeting, the Company's stockholders (i) elected the four
individuals who had been nominated to be members of the Board of Directors, (ii)
approved the 1997 Stock Option Plan encouraging stock ownership by key
employees, and (iii) approved the Directors Stock Option Plan encouraging stock
ownership by the directors. The following table sets forth the voting results:
<TABLE>
<CAPTION>
For Against Withheld Abstentions
--- ------- -------- -----------
<S> <C> <C> <C> <C>
Election of Directors:
Leslie W. Haworth 166,082,800 - 2,380,171 -
Henry B. Tippie 165,996,420 - 2,466,551 -
James L. Wareham 166,079,959 - 2,383,012 -
Kenneth W. Winger 166,059,633 - 2,403,338 -
Approval of the 1997 Stock Option Plan 166,694,860 1,477,398 - 290,713
Approval of the Directors Stock Option Plan 166,142,172 1,991,110 - 329,689
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3)(a) Restated Certificate of Incorporation of the Company dated May 13, 1997
and Amendment to Certificate of Incorporation dated May 15, 1997 filed as
Exhibit 3(a) to the Registrant's Form 10-Q for the Quarter ended May 31, 1997
and incorporated herein by reference.
(3)(a)(i) Certificate of Correction Filed to Correct a Certain Error in the
Restated and Amended Certificate of Incorporation of the Company dated October
15, 1997 filed as Exhibit (3)(a)(i) to the Registrant's Form 10-K for the Year
ended August 31, 1997, and incorporated herein by reference.
(3)(b) Amended and Restated Bylaws of the Company 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) Rights Agreement dated as of June 14, 1989 between the Company and First
Chicago Trust Company as successor to Registrar and Transfer Company, as Rights
Agent filed as Exhibit 4(e) to the Registrant's Current Report on Form 8-K filed
on June 13, 1995 and incorporated herein by reference.
(4)(b) Amendment No. 1 dated as of March 31, 1995 to the Rights Agreement
between the Company and First Chicago Trust Company as successor to Registrar
and Transfer Company, as Rights Agent filed as Exhibit 4(f) to the Registrant's
Current Report on Form 8-K on June 13, 1995 and incorporated herein by
reference.
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<PAGE> 13
(4)(c) Amendment No. 2 dated as of April 30, 1997 to the Rights Agreement
between the Company and First Chicago Trust Company as successor to Registrar
and Transfer Company, as Rights Agent.
(4)(d) 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 NationsBank, N.A. as Syndication Agent
dated as of May 9, 1997, filed as Exhibit 4(c) to the Registrant's Form 10-Q for
the Quarter ended May 31, 1997, and incorporated herein by reference.
(4)(e) $350,000,000 5% Subordinated Convertible Pay-In-Kind Debenture due 2009
issued by Registrant on May 15, 1997 to Laidlaw Inc. the form of which was
included as an appendix to the Registrant's Definitive Proxy Statement on Form
DEF 14A, filed on May 1, 1997 and incorporated herein by reference.
(4)(f) Registration Rights Agreement dated May 15, 1997 between Registrant,
Laidlaw Transportation, Inc. and Laidlaw Inc. included as an appendix to the
Registrant's Definitive Proxy Statement on Form DEF 14A, the form of which was
filed on May 1, 1997 and incorporated herein by reference.
(4)(g) Indenture dated as of May 1, 1993 between the Industrial Development
Board of the Metropolitan Government of Nashville and Davidson County
(Tennessee) and NationsBank of Tennessee, N.A., filed as Exhibit 4(f) to the
Registrant's Form 10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(4)(h) Indenture of Trust dated as of February 1, 1995 between Carbon County,
Utah and West One Bank, Utah, now known as U.S. Bank, as Trustee, filed as
Exhibit 4(g) to the Registrant's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(i) 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 Registrant's form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(j) 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 Registrant's Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(k) 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 Registrant's Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(l) 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 Registrant's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(4)(m) Stock Purchase Agreement between Westinghouse Electric Corporation
(Seller) and Rollins Environmental Services, Inc. (Buyer) for National Electric,
Inc. dated March 7, 1995 filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K filed on June 13, 1995 and incorporated herein by reference.
13
<PAGE> 14
(4)(n) Second Amendment to Stock Purchase Agreement (as referenced in Exhibit
(4)(m) above, dated May 15, 1997 among Westinghouse Electric Corporation,
Rollins Environmental Services, Inc. and Laidlaw Inc., filed as Exhibit 4(m) to
the Registrant's Form 10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(4)(o) Promissory Note dated May 15, 1997 for $60,000,000 from Laidlaw
Environmental Services, Inc. to Westinghouse Electric Corporation, filed as
Exhibit 4(n) to the Registrant's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(p) 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)(o)) from Laidlaw Environmental Services, Inc. to
Westinghouse Electric Corporation, filed as Exhibit 4(o) to the Registrant's
Form 10-Q for the Quarter ended May 31, 1997, and incorporated herein by
reference.
(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 Shareholders held
January 28, 1994 and incorporated herein by reference.
(10)(c) Laidlaw Environmental Services, Inc. 1997 Stock Option Plan, filed as
Exhibit 4.4 to the Company's Registration Statement on Form S-8 dated December
10, 1997 and incorporated herein by reference.
(10)(d) Laidlaw Environmental Services, Inc. Director's Stock Option Plan, filed
as Exhibit 4.5 to the Company's Registration Statement on Form S-8 dated
December 10, 1997 and incorporated herein by reference.
(10)(e) Stock Purchase Agreement dated February 6, 1997 among the Registrant,
Laidlaw Inc., and Laidlaw Transportation, Inc. included as an appendix to the
Definitive Proxy Statement on Form DEF 14A filed on May 1, 1997 and incorporated
herein by reference.
(10)(f) Management Incentive Plan for fiscal year 1998.
(10)(g) Laidlaw Environmental Services, Inc. U.S. Supplemental Executive
Retirement Plan.
(11) Statement of Computation of Per Share Earnings.
(27) Financial Data Schedule.
(99)(a) Definitive Proxy Statement on Form DEF 14A, filed with the Securities
and Exchange Commission on May 1, 1997 and incorporated herein by reference.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated November 5, 1997, which
contained Item 5 related to a press release publicizing the intent to file
documents with the Securities and Exchange Commission pertaining to an offer for
Safety-Kleen Corp.
14
<PAGE> 15
The Company filed a Current Report on Form 8-K, dated November 14, 1997, which
contained Item 5 related to a press release publicizing the filing of a Form
S-4.
The Company filed a Current Report on Form 8-K, dated November 14, 1997, which
contained Item 5 related to a press release publicizing an additional harbor
dredging contract.
The Company filed a Current Report on Form 8-K, dated November 19, 1997, which
contained Item 5 related to a press release publicizing the response to the
Safety-Kleen Corp. lawsuit filed against it.
The Company filed a Current Report on Form 8-K, dated November 21, 1997, which
contained Item 5 related to a press release announcing a revised offer for
Safety-Kleen Corp.
The Company filed a Current Report on Form 8-K, dated November 25, 1997, which
contained Item 5 related to a press release publicizing the filing of a Form
S-4/A and the filing of a lawsuit against Safety-Kleen Corp.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: January 13, 1998 LAIDLAW ENVIRONMENTAL SERVICES, INC.
---------------- --------------------------------------
(Registrant)
/s/ Kenneth W. Winger
--------------------------------------
Kenneth W. Winger
President and Chief Executive Officer
/s/ Paul R. Humphreys
--------------------------------------
Paul R. Humphreys
Senior Vice President-Finance and
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 4(c)
AMENDMENT NO. 2
TO
RIGHTS AGREEMENT
BETWEEN
ROLLINS ENVIRONMENTAL SERVICES, INC.
AND
REGISTRAR AND TRANSFER COMPANY
This Amendment No. 2 dated as of the 30th day of April, 1997 amending
that certain Rights Agreement (the "Rights Agreement") dated as of June 14, 1989
between Rollins Environmental Services, Inc. (the "Company") and Registrar and
Transfer Company (the "Rights Agent").
WHEREAS, Section 26 to the Rights Agreement provides that as long as
the Rights defined in and created by the Rights Agreement (the "Rights") are
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of the
Rights Agreement without the approval of any holders of the Rights or the Common
Stock of the Company (the "Common Stock"), provided that no such supplement or
amendment shall be made which changes the Redemption Price (as defined in the
Rights Agreement), the Final Expiration Date (as defined in the Rights
Agreement) or the number of shares of Common Stock for which a Right is
exercisable; and
WHEREAS, pursuant to Amendment No. 1 to the Rights Agreement, the
definition of Acquiring Person in Section 1(a) to the Rights Agreement was
amended such that Westinghouse Electric Corporation, a Pennsylvania corporation
("Westinghouse"), would not be deemed an Acquiring Person under certain
circumstances due to its ownership of the Company's 7.25% Convertible
Subordinated Debentures Due 2005 (the "Securities"); and
WHEREAS, in connection with a Stock Purchase Agreement dated February
6, 1997 between the Company and Laidlaw Inc., a Canadian corporation
("Laidlaw"), the Company intends to redeem the Securities and issue additional
securities to Laidlaw (the "Additional Securities"); and
WHEREAS, unless the Rights Agreement is amended, the sale of the
Additional Securities to Laidlaw would result in Laidlaw being an Acquiring
Person (as defined in the Rights Agreement) and result in a Triggering Event (as
defined in the Rights Agreement); and
<PAGE> 2
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement as provided herein in order to avoid a Triggering Event;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Amendment No. 1 Terminated.
Amendment No. 1 is hereby terminated and of no further force
or effect effective at such time as the Securities are
redeemed.
2. Amendment to Definition of Acquiring Person.
Effective on the date hereof, the following shall be added to
the end of the definition of Acquiring Person in Section 1 (a) to the Rights
Agreement:
"Notwithstanding the foregoing, neither Laidlaw Inc., a
Canadian corporation, nor any Affiliate thereof, shall be deemed to be
an Acquiring Person as long as this Amendment No. 2 is in effect. The
Company may, by order of its Board of Directors, make subsequent
amendments to the Rights Agreement to eliminate or modify this
Amendment No. 2 at any time."
3. Representation and Warranties of the Company.
The Company represents and warrants to the Rights Agent that
(i) this Amendment No. 2 is permitted under the terms of the Rights Agreement,
and (ii) this Amendment No. 2 does not change the Redemption Price, the Final
Execution Date or the number of shares of Common Stock for which a Right is
exercisable under the Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this amendment No. 2
to the Rights Agreement to be duly executed, all as of the day and year first
above written.
Rollins Environmental Services, Inc.
By: /s/ Klaus Belohoubek
--------------------------------------
Registrar and Transfer Company
By: /s/ William P. Tatler
--------------------------------------
<PAGE> 1
EXHIBIT 10(f)
[LAIDLAW
ENVIRONMENTAL
SERVICES
LOGO]
================================================================================
MANAGEMENT
INCENTIVE PLAN
FISCAL YEAR: 1998
Rev: December 10th, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
--------
I. OVERVIEW 1
II. PLAN OBJECTIVES 1
III. ATTAINING GOALS 2
IV. ELIGIBILITY FOR PLAN PARTICIPATION 3
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
1. EBIT 3
2. Revenue 3
3. Earnings Per Share 4
4. Individual Performance 4
Table 1: Performance Rating Qualitative Categories 4
B. PERFORMANCE AND AWARD CRITERIA
1. Target Bonus Levels 5
2. Units of Measure 5
Table 2: Units of Measure and Payout as Percent
of Base Pay by Position 5
3. Payout Schedule 5
4. Bonus Cap 5
Table 3: Payout Schedule as Percentage of Target
Percent for Annual EBIT/Revenue/EPS Achieved Against
Committed Targets 6
VI. PAYMENT OF AWARDS 7
VII. PLAN ADMINISTRATION 7
VIII. SUMMARY AND CONCLUSION 8
<PAGE> 3
I. OVERVIEW
The Management Incentive Compensation Plan is a short-term cash incentive bonus
plan covering the executive staff, Facility Managers, Operations Managers, and
other selected managers. The plan allows selected management employees to share
directly in the success of the Company through the payment of annual incentive
awards which are in turn based on the attainment of business unit goals and
individual performance objectives.
The plan will provide the Company with a mechanism to communicate its
expectations for Company performance while at the same time allowing the
management team the opportunity to earn a total compensation package that is
competitive for the industry.
II. PLAN OBJECTIVES
The purpose of a bonus compensation plan is to motivate key management
performance and to reward those individuals considered responsible for the
success of the business. Laidlaw Environmental Services has developed a
Management Incentive Plan for key managerial personnel which will provide a
significant economic opportunity based on their business unit contribution to
the Corporation and on their own individual performance.
The objectives of the Plan are:
-- Effectively maintain cost control measures.
-- Ensure optimum revenue mix.
-- Ensure effective waste stream pricing.
In order to accomplish these objectives, a certain percentage of a key manager's
total compensation package will be at risk. Therefore, plan participants must
direct their efforts and set goals which will maximize the success of their
business unit as defined by the Plan.
1
<PAGE> 4
III. ATTAINING GOALS
The success of the Management Incentive Plan will be measured by attaining
preset goals for earnings before interest and taxes, revenue, earnings per
share, and by showing a significant level of commitment and personal
contribution to the Company throughout the year. This can only be accomplished
by the combined support of the Company's management team.
Each participant should understand that their earnings opportunities are
dependent upon the attainment of these goals. To enhance this understanding,
each participant will be given an explanation of the Plan along with their
individual goals and bonus potentials. This will allow each participant to
clearly understand that effort that increases results will produce higher
rewards.
In implementing and maintaining this Plan, the following factors are of critical
importance:
-- Measures of achievement will be quantitative and qualitative in
nature. The quantitative measures of achievement will be financial
goals that are tied to the Company's annual financial budget. The
use of such goals will help generate and reinforce a commitment to
the budgeting process. The qualitative measure of achievement will
be based on the participant's level of commitment to the Company
and their overall contribution to the Company's success.
-- Incentive awards will be based upon the achievement of aggressive
objectives. These aggressive objectives will help assure that the
Plan pays for itself out of incremental additional profits; and
that stockholders receive an appropriate return of investment in
the incentive payments.
-- The threshold of incentive awards will only be at a "competent"
level of performance but appreciable more award will result from
extra efforts and results achieved due to higher levels of
performance.
2
<PAGE> 5
IV. ELIGIBILITY FOR PLAN PARTICIPATION
For fiscal year 1998, participation in the Management Incentive Plan will be
limited to:
Executive Staff Operations Managers
Directors Key Managers
Facility Managers
These positions are targeted because of their direct accountability for the
operating results of a major business unit(s) and their accountability for
structuring a function under them.
To receive an annual incentive award, participants must occupy a bonus eligible
position in the Management Incentive Plan as of April 1, 1998, and be employed
by Laidlaw Environmental Services at the time incentive awards are paid.
Participants who have not occupied an incentive eligible position for the full
fiscal year will be prorated based on the number of full months of
participation. These eligibility criteria apply to current employees promoted to
eligible positions, new hires hired into eligible positions, or employees in
positions subsequently selected to participate in the Plan.
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
Participants will be judged against achieving separate criteria which will be
set at the beginning of the year. These are EBIT, revenue, earnings per share
("quantitative"), and individual performance ("qualitative"). Each participant
should read the Plan carefully to attain a proper understanding of the Plan and
its dynamics.
1. EBIT
EBIT is defined as earnings before interest, taxes, and non-sales incentive
expense. EBIT will be derived from the final monthly Financial Results Report of
the fiscal year after appropriate adjustments. For FY1998, the EBIT goal will be
budgeted EBIT.
2. REVENUE
Revenue includes outside and inter-company revenue and will be derived from the
final monthly Financial Results Report of the fiscal year after appropriate
adjustments. For FY98, the revenue goal will be budgeted revenue. However, for
Operations Sr. Vice Presidents and Regional Vice Presidents the revenue goal
will be rolled up billed revenue of the Directors of Sales under their
direction. Proposals Group participants will also be measured on billed revenue.
3
<PAGE> 6
V. PLAN STRUCTURE
(CONTINUED)
3. EARNINGS PER SHARE
Earnings per share is defined as basic earnings per share as disclosed on the
income statement after adding back the after tax impact of the non-sales
incentive expense.
4. INDIVIDUAL PERFORMANCE
OPERATIONS
The Qualitative Assessment Summary Sheet (see attachments) is used to identify
specific goals and measures for performance of personal objectives. The overall
achievement level will determine the bonus earned for Qualitative Goals.
Specific goals are set in five different areas: Health and Safety, Employee
Turnover, Regulatory Training, Customer Service, and Financial Improvement. Each
goal has a weight and a rating. The ratings earned and goal weight are combined
to determine the appropriate bonus payment percentage. This method provides a
more objective measure and a more goals driven means to focus individual
performance.
STAFF
Individual performance will be judged against measurable personal objectives set
at the beginning of the year. Participants and their supervisors will discuss
and agree to specific personal objectives and measures for the year. At end of
the year each participant's performance will be evaluated against the pre-set
measures to determine the bonus achievement level.
B. PERFORMANCE AND AWARD CRITERIA
1. TARGET BONUS LEVELS
The target bonus payout is the monetary award that will be paid if all
quantitative and qualitative goals are achieved exactly as set. This will be
calculated as a percentage of base pay called the target bonus percent. For
example, a participant whose base pay is $50,000 and whose target bonus percent
is 30% will receive a $15,000 award if all the performance goals are met
exactly. This award can fluctuate if separate goals are missed or exceeded. The
base pay level used to calculate bonus awards will be the base annualized salary
paid as of August 31, 1998. Target bonus percents can be found in Table 2.
2. UNITS OF MEASURE
The performance criteria for each plan participant should focus upon the
appropriate areas in which the position has opportunity to impact. The
performance criteria is based upon specific operating center(s) under which each
participant has influence or
4
<PAGE> 7
V. PLAN STRUCTURE
(CONTINUED)
control. It should be noted that any unit of measure is not permanently fixed
and could vary from year to year.
The units of measure used and their associated contribution to the overall
payout are based upon the position's level of control within the organization.
These are presented in Table 2:
TABLE 2
UNIT OF MEASURE AND PAYOUT AS
PERCENT OF BASE PAY BY POSITION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TARGET CORP. CORP. DIV. DIV. REG. REG. FAC. FAC.
POSITION PAYOUT EPS EBIT EBIT REV EBIT REV EBIT REV. QUAL.
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEO 60% 70% 30%
COO 50% 70% 30%
Senior VP 40% 20% 30% 30% 20%
Regional VP 35% 20% 30% 30% 20%
Staff VP 35% 70% 30%
Staff Dir - Corp. 20% 70% 30%
Staff Dir - Div 20% 20% 60% 20%
Staff Dir - Reg. 20% 20% 60% 20%
Facility Manager 30% 20% 30% 30% 20%
Operations Mgr. 15% 20% 60% 20%
Key Manager 15% 70% 30%
Key Staff 10% 20% 60% 20%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Note that Facility Managers and Operations Managers must first achieve the
threshold of their facility EBIT goal to be eligible to receive a qualitative
award.
3. PAYOUT SCHEDULE
The achievement level attained against each goal will determine how much
incentive award arising from each goal will be paid. The schedule in Table 3
presents the payout percentages for various achievement levels of the
quantitative measures. In order to be paid an award for EBIT, revenue, or EPS,
the threshold level must first be met
4. BONUS CAP
Facility Managers, Operations Managers and others whose bonus is judged
primarily on facility measures will be paid from a pool of funds limited to 5%
of actual EBIT for that facility. Facility Managers and/or Operations Managers
who are responsible for more than one facility will be paid from a combined
pool.
5
<PAGE> 8
V. PLAN STRUCTURE
(CONTINUED)
TABLE 3
PAYOUT SCHEDULE AS PERCENTAGE OF TARGET PERCENT
FOR ANNUAL EBIT/REVENUE/EPS ACHIEVED AGAINST COMMITTED TARGETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EBIT/REVENUE/EPS
ACHIEVED AGAINST COMMITTED
INCENTIVE STEP TARGETS PAYOUT LEVEL
- --------------------------------------------------------------------------------
<S> <C> <C>
30 110% + 135%
29 109% 131%
28 108% 127%
27 107% 123%
26 106% 119%
25 105% 115%
24 104% 112%
23 102% 106%
22 101% 103%
21 100% 100%
20 99% 99%
19 98% 98%
18 97% 97%
17 96% 96%
16 95% 95%
15 94% 94%
14 93% 93%
13 92% 92%
12 91% 91%
11 90% 90%
10 89% 86%
9 88% 82%
8 87% 78%
7 86% 74%
6 85% 70%
5 84% 66%
4 83% 62%
3 82% 58%
2 81% 54%
1 80% 50%
0 less than 80% 0%
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
V. PLAN STRUCTURE
(CONTINUED)
An example of a bonus calculation follows:
Facility Manager
Annual Salary: $50,000
Target Bonus Percent: 30%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
UNIT OF TARGET ANNUAL GOAL
GOAL ACHIEVEMENT PAYOUT MEASURE PERCENT SALARY PAYOUT
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REGION EBIT 95.6% 96% x 20% x 30% x $50,000 = $2,880
FACILITY EBIT 101.2% 103% x 30% x 30% x $50,000 = $4,635
FACILITY REV. 105.0% 115% x 30% x 30% x $50,000 = $5,175
QUALITATIVE GOALS 450 Pts. 80% x 20% x 30% x $50,000 = $2,400
------------------------------------------------------------------------------------------------
Total: $15,090
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
VI. PAYMENT OF AWARDS
Each incentive award will be reviewed and approved by the appropriate senior
Vice President, the Chief Operating Officer, the Vice President -
Administration, and the Chief Executive Officer. Payments will be made no later
than November 15, 1998. Participants who voluntarily terminate their employment
with Laidlaw Environmental Services prior to awards being issued will forfeit
their right to receive any award.
Any adjustment of bonus amounts or any consideration of special circumstances
must be approved by the Vice President - Administration, and the Chief Executive
Officer.
VII. PLAN ADMINISTRATION
The Chief Executive Officer of Laidlaw Environmental Services is the sole
interpreter and arbitrator of these provisions and has the right to amend,
withdraw or revoke the Plan or any of its provisions at any time.
7
<PAGE> 10
VIII. SUMMARY AND CONCLUSION
The conceptual framework and guidelines covered in this Plan represent those
elements that necessarily must be examined to assure the value to the Company of
the short-term cash incentive compensation plan. Several steps must be taken to
ensure that those objectives which the plan is designed to meet can be
accomplished. These steps are described as follows:
COMMUNICATION OF THE PLAN
It is important that the Plan be effectively communicated to all
participants. This would include individual discussions with each
participant. These discussions should include a review of the measures
and standards that should be developed to assess personal and/or
business unit performance, as well as a clarification of the details of
the plan and individual opportunities.
DEVELOPMENT OF PERFORMANCE MEASURES
Business unit(s) and any individual goals should be established and
communicated at the beginning of the fiscal year. Accepted standards
are those that are reasonable and realistic reflections of current
opportunity, as well as striving for improvement. Measurements of
performance should use relevant quantitative criteria.
8
<PAGE> 1
EXHIBIT 10(g)
THE LAIDLAW ENVIRONMENTAL SERVICES, INC.
U.S. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
================================================
This Plan was adopted by the Board of Directors of Laidlaw Environmental
Services, Inc. effective October 14, 1997.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE PAGE
1 Introduction 1
2 Definitions 2
3 Eligibility and Service 7
4 Supplemental Benefits 8
5 Normal and Optional Forms of Benefits 12
6 Death Benefits 13
7 Future of the Plan 15
8 General Provisions 16
<PAGE> 3
ARTICLE 1
INTRODUCTION
1.01 Laidlaw Environmental Services, Inc. (hereinafter known as "LES")
hereby establishes the Laidlaw Environmental Services, Inc. U.S.
Supplemental Executive Retirement Plan (the "Plan") for the purpose of
providing supplemental benefits as hereinafter described.
1.02 Supplemental benefits payable under this Plan will be paid in addition
to benefits paid under any other retirement arrangement sponsored by a
participating employer. However, this Plan supersedes the Laidlaw Inc.
U.S. Supplemental Executive Retirement Arrangement adopted by the Board
of Directors of Laidlaw Inc. effective April 1, 1995 (the
"Arrangement"). Duplicate benefits will not be paid from this Plan and
the Arrangement.
1.03 The effective date of this Plan is October 14, 1997.
1
<PAGE> 4
ARTICLE 2
DEFINITIONS
In this Plan, the following terms and expressions will have the following
meanings, unless a different meaning is required by the context.
2.01 ACTUARIAL EQUIVALENT means a supplemental benefit of an equivalent
value where such equivalent benefit is established using actuarial
tables, actuarial assumptions and methodology as may be selected by the
Company on the recommendation of the Actuary.
2.02 ACTUARY means a Fellow of the Society of Actuaries, as appointed by the
Company.
2.03 AFFILIATED COMPANY means any subsidiary company of LES or any company
related to or associated with LES.
2.04 BENEFICIARY means the person designated by a Member under Article 6 and
means the Member's estate where there is no such person.
2.05 BOARD OF DIRECTORS means the board of directors of Laidlaw
Environmental Services, Inc., or such Committee to which such board of
directors may delegate its authority in respect of this Plan.
2.06 COMPANY means Laidlaw Environmental Services, Inc. (LES) and any
related, affiliated, associated or subsidiary company which may be
designated as a participating employer by the Company and which has
agreed to participate in the Plan. Where any reference in the Plan is
made to any action to be taken, consent, approval or opinion to be
given,
2
<PAGE> 5
discretion or decision to be exercised by the Company, Company means
LES, acting through the Board of Directors or any person authorized by
the Board of Directors for purposes of the Plan.
2.07 CONTINUOUS SERVICE means the years and completed months of an
Employee's uninterrupted period of employment with the Company since
the Employee's last date of hire by the Company, except that where the
Employee was previously employed by another unrelated company,
Continuous Service shall mean the years and completed months of an
Employee's uninterrupted period of employment with the Company since
the date of acquisition of the shares of that unrelated company by the
Company. Notwithstanding the foregoing, Continuous Service shall not
include any notice period related to termination of employment
(including pay in lieu of notice of termination of employment), unless
required by law and only to the extent required by law.
2.08 CREDITED SERVICE of a Member means the aggregate of Credited Past
Service and Credited Future Service as follows:
(a) CREDITED PAST SERVICE
Continuous Service prior to the effective date of an Employee's
becoming a Member hereunder, provided the Human Resource and
Compensation Committee has consented to the granting of such past
service for the purposes of this Plan and has so notified the
Member in writing; and
(b) CREDITED FUTURE SERVICE
Continuous Service from the later of October 14, 1997 or the date
the Employee becomes a Member in this Plan in accordance with
Article 3.
3
<PAGE> 6
2.09 EARNINGS in respect of a month of service during a particular fiscal
year means one-twelfth of the aggregate of:
(a) the Employee's base salary received in such complete fiscal year
from the Company (exclusive of any allowances); and
(b) bonuses and other incentive payments received in cash that are
attributable to such fiscal year, up to a maximum of the targeted
bonus payable to the Member in respect of such fiscal year (as
determined under the Company's annual incentive program).
"Earnings" shall not include any severance payments (i.e. or pay in
lieu of reasonable notice of termination of employment), unless
required by law and only to the extent required by law.
For the purposes of this paragraph, where, at the time of determination
of an Employee's "Earnings", an Employee has not worked for the
entirety of a particular fiscal year, for the purposes of determining
the Employee's Earnings for that fiscal year, the salary received and
bonus attributed to that fiscal year under paragraph (a) and (b) above
shall be divided by the number of whole or partial months service in
that fiscal year.
2.10 EMPLOYEE means any person in full-time employment with the Company who
is a resident of the US.
2.11 FINAL AVERAGE EARNINGS calculated as of any date on or after April 1,
2000 means twelve times the highest average of the Member's Earnings
during any 60 consecutive months of service with the Company and/or an
Affiliated Company within the 10 year period preceding the Member's
retirement, death or termination of employment. If a Member has not
4
<PAGE> 7
completed 60 consecutive months of service as of the calculation date,
Final Average Earnings will be based on the average of the Member's
Earnings during the Member's period of consecutive service ending on
such calculation date.
Final Average Earnings calculated as of any calculation date prior to
April 1, 2000 means twelve times the average of the Member's earnings
during the 60 consecutive months of service with the Company and/or an
Affiliated Company ending on the calculation date. If a Member has not
completed 60 consecutive months of service as of the calculation date,
Final Average Earnings will be based on the average of the Member's
Earnings during the Member's period of consecutive service ending on
such calculation date.
2.12 HUMAN RESOURCE AND COMPENSATION COMMITTEE means the Human Resource and
Compensation Committee of the Board of Directors.
2.13 INTERNAL REVENUE CODE MAXIMUM COMPENSATION LIMIT at a particular time
means the "compensation limit" as defined under Section 415(d) of the
Internal Revenue Code of 1986 and the Regulations thereunder, as
amended from time to time. As at October 14, 1997, the "compensation
limit" is $150,000.
2.14 MEMBER means an Employee or former Employee who has been designated as
eligible to participate in the Plan under Article 3 and who continues
to be eligible to receive supplemental benefits under this Plan.
2.15 PLAN means this Laidlaw Environmental Services, Inc. U.S. Supplemental
Executive Retirement Plan, as amended or restated from time to time.
5
<PAGE> 8
2.16 RETIREMENT AGE at a particular time, means the age upon which an
individual can claim an unreduced pension under the United States
Social Security Act and Regulations thereunder.
2.17 STATUTORY BENEFIT OFFSET at a particular time means the maximum annual
"primary insurance amount" under the United States Social Security Act
and the Regulations thereunder, as amended from time to time, payable
at the date the Member attains the Retirement Age. Where a Member
demonstrates to the satisfaction of the Company that upon attaining the
Retirement age he or she is entitled to a pension benefit under the
Social Security Act and Regulations thereunder that is less than the
maximum annual primary insurance amount as described above, the
Statutory Benefit Offset in respect of that Member shall be that lesser
amount.
2.18 TOTAL DISABILITY means a disability in respect of which the Member is
entitled to benefits from the Company's long-term disability program.
2.19 VESTED CREDITED SERVICE has the meaning described in Section 4.04.
In this Plan, unless the context requires otherwise, reference to the male
gender will include the female gender and words importing the singular number
only include the plural number and vice versa.
6
<PAGE> 9
ARTICLE 3
ELIGIBILITY AND SERVICE
3.01 MEMBERSHIP
An Employee will become a Member under this Plan upon being:
(a) recommended by the Chief Executive Officer of the Company for
participation in this Plan; and
(b) approved for participation by the Human Resource and
Compensation Committee, and such membership shall be effective
on the date determined by the Human Resource and Compensation
Committee in respect of such Member.
3.02 DISABILITY
If the Member suffers from a Total Disability, such period of
disability will be excluded from Credited Service. If the Member's
Total Disability continues until he attains age 65, the Member will be
deemed to have retired from employment and his supplemental benefits
will be determined based on:
(a) the formula set out in Section 4.01;
(b) Credited Service accrued to the date the Total Disability
commenced;
(c) for the purposes of Article 4, Continuous Service accrued to
the date the Total Disability commenced; and
(d) Final Average Earnings at the date the Total Disability
commenced.
7
<PAGE> 10
ARTICLE 4
SUPPLEMENTAL BENEFITS
4.01 BENEFIT FORMULA
The annual supplemental benefit formula is equal to ({A +B} - C) x D as
follows:
where:
A is 1% of the lesser of (i) the Member's Final Average Earnings; and
(ii) the Internal Revenue Code maximum Compensation Limit;
B is 1.5% of the amount by which the Member's Final Average Earnings
exceeds the Internal Revenue Code Maximum Compensation Limit;
C is, assuming the Member has attained the Retirement Age, 1/35th of the
Statutory Benefit Offset, determined on the date of termination of
employment, or death, as the case may be, and prior to the Member
attaining the Retirement Age, nil; and
D is the aggregate of the number of whole or partial years of the
Member's Vested Credited Service, as determined under Section 4.04.
4.02 PENSION COMMENCEMENT
A Member will be entitled to an annual supplemental benefit calculated
according to the formula in Section 4.01 and based on Vested Credit
Service and Final Average Earnings as at the date of termination of the
Member's employment, commencing the first day of the month coincident
with or next following such Member attaining the age of 65.
8
<PAGE> 11
4.03 EARLY RETIREMENT
A Member who retires from employment with the Company on or after the
attainment of age 60 and before attainment of age 65 and who elects to
have this provision apply to him will be entitled to an annual
supplemental benefit, commencing on the first day of the month
coincident with or next following such Member's actual retirement date
and such other date selected by him that is prior to the Member's
attainment of age 65, equal to the supplemental benefit calculated
according to the formula in Section 4.01 and based on the Vested
Credited Service and the Member's Final Average Earning at the Member's
actual retirement date. Such supplemental benefit will be reduced by
0.1667% for each complete month that the date of commencement of
payment of benefits precedes the Member's attainment of age 65. A
Member can elect to have this provision apply to him by giving written
notice to the Company of such election, which notice must be received
by the Company prior to the day that the Member elects that
supplemental benefits will commence to become payable to him.
4.04 VESTED CREDITED SERVICE
For the purposes of this Plan, Vested Credited Service is the sum of
Vested Credited Future Service and Vested Credited Past Service, as
defined below:
(a) VESTED CREDITED FUTURE SERVICE
A Member's Vested Credited Future Service is equal to the Member's
Credited Future Service multiplied by the relevant vesting
percentage contained in the following chart, based on the number of
full years of the Member's Credited Future Service rendered after
becoming a Member of this Plan.
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS OF CREDITED FUTURE RELEVANT VESTING PERCENTAGE
SERVICE RENDERED AFTER
BECOMING A MEMBER
- --------------------------------------------------------------------------------
<S> <C>
less than 1 year 0%
- --------------------------------------------------------------------------------
1 or more years but less than 2 years 20%
- --------------------------------------------------------------------------------
2 or more years but less than 3 years 40%
- --------------------------------------------------------------------------------
3 or more years but less than 4 years 60%
- --------------------------------------------------------------------------------
4 or more years but less than 5 years 80%
- --------------------------------------------------------------------------------
5 or more years 100%
- --------------------------------------------------------------------------------
</TABLE>
Where a Member suffers from a Total Disability, such period of Total
Disability shall be considered to be Credited Future Service rendered
after becoming a Member for the purposes only of determining the
relevant vesting percentage in the above chart.
(b) VESTED CREDITED PAST SERVICE
A Member's Vested Credited Past Service is equal to the Member's
Credited Past Service if the Member:
(i) dies, at any age, and such death occurs prior to the
commencement of payment of supplemental benefits under
this Plan;
(ii) retires from employment with the Company on or after the
attainment age 60; or
(iii) terminates employment with the Company before age 60,
provided the Member neither voluntarily terminates his
employment with the Company nor is dismissed for just
cause.
10
<PAGE> 13
For the purposes of this Section 4.04(b), the Human Resource and
Compensation Committee will determine what constitutes "just cause"
and whether a particular Member has been dismissed for just cause
or has voluntarily terminated his employment with the Company.
In any other case, a Member's Vested Credited Past Service is nil.
11
<PAGE> 14
ARTICLE 5
NORMAL AND OPTIONAL FORMS OF BENEFITS
5.01 NORMAL FORM
The normal form of supplemental benefit payable under this Plan is an
annuity payable in monthly installments for the life of the Member and,
in any event, for a period of not less than 60 months. If the Member
dies before receiving 60 monthly payments, the Member's Beneficiary
will receive the remaining payments at the same time and in the same
amount that the Member would have received, had he not died.
5.02 OPTIONAL FORMS
In lieu of the normal form of supplemental benefit described in Section
5.01, the Member may elect, before supplemental benefit payments
commence, any other form of periodic lifetime annuity acceptable to the
Human Resource and Compensation Committee (the "Optional Form"), which
Optional Form will be the Actuarial Equivalent of the normal form of
supplemental benefit described in Section 5.01.
Where the Member wishes to elect an Optional Form, the Member must so
advise the Company, in writing, at least 30 days before the date
benefit payments would otherwise have commenced under this Plan.
Section 5.01 will apply where the Member has not provided such written
notice to the Company in the specified time period.
12
<PAGE> 15
ARTICLE 6
DEATH BENEFITS
6.01 BENEFICIARY DESIGNATION
A Member may designate, by written notice delivered to the Committee, a
Beneficiary to receive any benefits that are payable with respect to
the Member on or after the death of the Member. A Member may revoke or
amend such designation in the same manner at any time, subject to any
applicable laws governing the designation of beneficiaries.
6.02 NO BENEFICIARY
If no valid Beneficiary designation is in effect for the Member at his
death, or if the Beneficiary predeceases the Member, any benefit
payable to the Member's Beneficiary will be paid to the estate of the
Member in accordance with this Plan.
6.03 DEATH OF A BENEFICIARY
If a Beneficiary, as a result of a Member's death, is entitled to
payments under this Plan and the Beneficiary dies before receiving any
or all of the payments due to him, any remaining guaranteed monthly
payments will continue to be paid to the estate of the Beneficiary.
6.04 DEATH BEFORE SUPPLEMENTAL BENEFIT COMMENCEMENT
Notwithstanding Sections 4.02 and 4.03, if the Member dies before the
payment of supplemental benefits have commenced, the Member will be
deemed to have retired the day before his death and the Member's
Beneficiary will receive a supplemental benefit equal to the benefit
determined in accordance with Section 4.01, and payable for 60 months,
13
<PAGE> 16
commencing on the first day of the month coincident with or next
following the Member's death.
6.05 DEATH AFTER SUPPLEMENTAL BENEFIT COMMENCEMENT
If a Member dies after the Member's supplement benefits have commenced
being paid, any benefits payable under this Plan will be determined and
payable in accordance with Article 5.
14
<PAGE> 17
ARTICLE 7
FUTURE OF THE PLAN
7.01 RIGHT TO AMEND OR TERMINATE THE PLAN
The Human Resource and Compensation Committee reserves the right to
amend or discontinue this Plan at any time, either in whole or in part,
at its discretion, provided such amendment or termination, as
applicable, does not reduce benefits under this Plan accrued to the
date of amendment or termination of the Plan, as applicable, based on a
Member's Final Average Earnings and Credited Service at the date of
such amendment or termination, as applicable.
15
<PAGE> 18
ARTICLE 8
GENERAL PROVISIONS
8.01 ADMINISTRATION
The Company will administer this Plan. The Company:
(a) will be responsible for all matters relating to the administration
of this Plan;
(b) may delegate such matters as it deems appropriate to be performed
by the committee or by one or more agents;
(c) will decide conclusively all matters relating to the operation,
interpretation and application of the Plan; and
(d) may enact rules and regulations relating to the administration of
the Plan to carry out the terms of this Plan and may amend such
rules and regulations from time to time. Such rules and
regulations will not conflict with any provision of this Plan.
8.02 SUPPLEMENTAL BENEFITS PAYABLE BY THE COMPANY
(a) The Company is not required to establish or contribute to a trust
fund, annuity or other current funding arrangement of any kind
for the provision of supplemental benefits which may become, or
are, payable under this Plan.
(b) Supplemental benefits payable under this Plan are to be paid solely
from the general assets of the Company.
16
<PAGE> 19
8.03 FREQUENCY AND TIMING OF SUPPLEMENTAL BENEFIT BENEFITS
Unless specified otherwise, payments under this Plan will be payable
monthly upon the first day of the month in which they fall due. Where
such payments are subject to termination on death or loss of
eligibility ("termination event"), the last monthly payment will be
payable on the first day of the month in which the termination event
occurs.
8.04 NON-ALIENATION
Except as otherwise required by law, any transaction that purports to
assign, charge, anticipate, surrender or grant as security a Member's
right or interest under the Plan, or supplemental benefits payable
under this Plan, is void.
8.05 NON-COMMUTATION OF BENEFITS
A supplemental benefit payable under this Plan will not be capable of
being commuted, unless the Human Resource and Compensation Committee
decides it is in the best interests of the Company to do so.
8.06 RIGHTS OF EMPLOYEES
(a) No Member will have any right or interest, whatsoever, to
supplemental benefits under this Plan, except as provided in this
Plan.
(b) The establishment of this Plan will not constitute an enlargement
of any rights an Employee might otherwise have as to tenure,
retention of employment
17
<PAGE> 20
with the Company, continuity of work, advancement in employment or any
particular job or position.
8.07 LIMITATION OF LIABILITIES
Notwithstanding anything in this Plan to the contrary, the Company, its
directors, officers, employees, and agents will not be liable to any
person whatsoever because of any acts, omissions to act, or mistakes,
negligence or errors in judgment either by the Company or of any person
appointed or employed by it or providing service to it in connection
with its or their functions hereunder, except for any claims, demands
and proceedings arising from any act or omission which is due to
willful misconduct, fraud or lack of good faith by the Company or such
persons or any one of them.
8.08 INFORMATION TO BE PROVIDED BEFORE BENEFITS ARE PAID
Payment of supplemental benefits will not be made until the person
entitled to payment of supplemental benefits delivers to the Company:
(a) satisfactory proof of age of the person and other persons who may
become entitled to payment of supplemental benefits; and
(b) any such other information as may be required to calculate and pay
supplemental benefits, including a signed declaration of marital
status, if applicable.
8.09 COMPANY RECORDS
Whenever the records of the Company are used for the purposes of this
Plan, such records will be conclusive as to the facts with which they
are concerned.
18
<PAGE> 21
8.10 SUCCESSOR COMPANIES
If the Company (or participating employer contemplated by the
definition of "Company") sells or exchanges all or substantially all of
its assets, discontinues operation of its business or enters into a
statutory or non-statutory merger, consolidation of re-organization
with any other corporation, this Plan will be continued and the person,
firm or corporation to which the Company (or participating employer, as
the case may be) is sold or with which the Company (or participating
employer, as the case may be) is merged, consolidated or re-organized
will be deemed to be the successor of the Company (or participating
employer, as the case may be) and will be substituted hereunder for the
Company (or participating employer, as the case may be).
8.11 CONSTRUCTION
The Plan will be governed and construed in accordance with the laws of
South Carolina.
8.12 CURRENCY
All supplemental benefits payable under this Plan will be paid in the
lawful currency of the United States.
8.13 SEVERABILITY
If any provision of this Plan is held to be invalid or unenforceable by
a court of competent jurisdiction, its invalidity or unenforceability
will not affect any other
19
<PAGE> 22
provision of this Plan and the Plan will be construed and enforced as
if such provision had not been included therein.
8.14 CAPTIONS AND HEADINGS
The captions, heading and Table of Contents of this Plan are included
for convenience of reference only and will not be used in interpreting
the provisions of this Plan.
8.15 ARTICLES AND SECTIONS
"Article" or "Articles" means an article or articles as defined in the
Table of Contents and "Section" or "Sections" means a specific
provision or provisions within and Article or Articles, as applicable.
8.16 WAIVER
The Human Resource and Compensation Committee shall have the unfettered
right and sole discretion to waive any provision of this Plan, if it
deems such waiver to be in the best interests of the Company.
20
<PAGE> 1
EXHIBIT 11
LAIDLAW ENVIRONMENTAL SERVICES, INC.
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------
1997 1996
-------- --------
<S> <C> <C>
Primary:
Income from continuing operations $ 10,144 $ 3,588
Income from discontinued operations -- 703
-------- --------
Primary net income $ 10,144 $ 4,291
======== ========
Weighted average common stock outstanding (000s) 180,729 120,000
Dilutive stock options 93 --
-------- --------
Primary weighted average common stock
and common stock equivalents outstanding 180,822 120,000
======== ========
Income per share from continuing operations $ 0.056 $ 0.030
Income per share from discontinued operations -- 0.006
-------- --------
Primary net income per share $ 0.056 $ 0.036
======== ========
Fully diluted:
Primary income from continuing operations $ 10,144 $ 3,588
Add back: interest expense on conversion
of subordinated convertible debenture 2,625 --
-------- --------
Fully diluted income from continuing operations $ 12,769 $ 3,588
======== ========
Primary income from discontinued operations $ -- $ 703
-------- --------
Fully diluted income from discontinued operations $ -- $ 703
======== ========
Primary shares outstanding (000s) 180,822 120,000
Dilutive effect of conversion of $350,000,000
subordinated convertible debenture at $3.75 93,334 --
-------- --------
Fully diluted average shares outstanding 274,156 120,000
======== ========
Income per share from continuing operations $ 0.047 $ 0.030
Income per share from discontinued operations -- 0.006
-------- --------
Fully diluted net income per share $ 0.047 $ 0.030
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 9,843
<SECURITIES> 601
<RECEIVABLES> 218,534
<ALLOWANCES> 0
<INVENTORY> 7,281
<CURRENT-ASSETS> 259,895
<PP&E> 1,450,818
<DEPRECIATION> 298,895
<TOTAL-ASSETS> 1,590,220
<CURRENT-LIABILITIES> 185,370
<BONDS> 829,805
0
0
<COMMON> 182,272
<OTHER-SE> 164,241
<TOTAL-LIABILITY-AND-EQUITY> 1,590,220
<SALES> 0
<TOTAL-REVENUES> 211,552
<CGS> 0
<TOTAL-COSTS> 179,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,139
<INCOME-PRETAX> 17,292
<INCOME-TAX> 7,227
<INCOME-CONTINUING> 10,144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,144
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.05
</TABLE>
