SAFETY-KLEEN CORP.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
(803) 933-4200
Writer's Direct Dial:
(803) 933-4274
Writer's Direct Fax:
(803) 933-4340
Writer's Direct E-mail:
[email protected]
May 27, 1999
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Current Report on Form 8-K
Safety-Kleen Corp.
SEC File No. 1-8368
---------------------------
Ladies and Gentlemen:
On behalf of Safety-Kleen Corp., a Delaware corporation (the "Company"),
enclosed for filing via EDGAR is a current report on Form 8-K.
If you have any questions or comments concerning the enclosed materials,
please call me.
Very truly yours,
/s/ Shawn Lavery DeJames
Shawn Lavery DeJames
Corporate Counsel
Enclosure
cc: John C. Kennedy, Esq. (w/enclosure)
Brian Nicholson, The New York Stock Exchange, Inc. (w/enclosure)
Tina Cheng, Pacific Exchange, Inc. (w/enclosure)
Standard & Poor's (w/enclosure) Moody's Investor Service (w/enclosure)
Anthony Barone, SEC (w/enclosure)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
May 27, 1999 (August 31, 1998) Date of Report (Date of
earliest event reported)
Safety-Kleen Corp.
(Exact name of registrant as specified in its charter)
Delaware 1-8368 51-0228924
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification
of incorporation) Number)
1301 Gervais Street, Columbia, South Carolina 29201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803)933-4200
<PAGE>
ITEM 7. Financial Statements, ProForma Financial Information and Exhibits
a) The unaudited pro forma combined financial information for the year ended
August 31, 1998 is as follows:
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unless the context requires otherwise, references to (i) the "Company," "we" or
"our" are to Safety-Kleen Corp. and its subsidiaries, (ii) "Safety-Kleen
Services" are to Safety-Kleen Services, Inc. (formerly known as LES, Inc.) and
its subsidiaries and (iii) "Old Safety-Kleen" are to Safety-Kleen Systems, Inc.
(formerly known as Safety-Kleen Corp.), the acquisition of which we completed in
May 1998. All information in the unaudited pro forma combined financial
information has been adjusted to reflect the one for four reverse stock split of
our common stock, which was effected at the close of business on November 30,
1998.
The accompanying unaudited pro forma combined statement of income for fiscal
1998 gives effect to the acquisition of Old Safety-Kleen and certain related
transactions as if they occurred on September 1, 1997. Since the acquisition of
Old Safety-Kleen occurred prior to August 31, 1998 and is reflected in the
consolidated balance sheet as of that date, we have not presented pro forma
combined balance sheet information.
At the time of the acquisition of Old Safety-Kleen, we believed that 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 acquisition of
Old Safety-Kleen would generate annual cash cost savings of approximately $103.5
million to $165 million. The unaudited pro forma combined financial information
has not been adjusted for the potential cost savings yet to be realized.
The unaudited pro forma combined financial statement does not purport to
represent what our results of operations would have been had the acquisition of
Old Safety-Kleen occurred on the date indicated or to predict our results of
operations in the future. The unaudited pro forma combined financial statement
should be read in conjunction with our consolidated financial statements
appearing elsewhere in this document.
1
<PAGE>
SAFETY-KLEEN CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended August 31, 1998
(Unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Historical
Laidlaw Safety-Kleen Pro Forma Pro Forma
Environmental Corp. Adjustments Combined
------------- ----- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $1,185,473 $569,508 $ - $1,754,981
---------- -------- ------- ----------
Expenses:
Operating 797,382 382,063 - 1,179,445
Depreciation and amortization 93,051 45,297 20,574 (D1) 158,922
Selling, general and administrative 108,817 72,729 - 181,546
Restructuring and other charges 65,831 - - 65,831
---------- - - ------
Total expenses 1,065,081 500,089 20,574 1,585,744
---------- -------- ------- ----------
Operating income (loss) 120,392 69,419 (20,574) 169,237
Interest expense 107,697 9,358 71,365 (D2) 188,420
Other income (expense) 7,657 (8,235) - (578)
---------- -------- - ----------
Income (loss) from continuing
operations before income tax 20,352 51,826 (91,939) (19,761)
Income tax expense (benefit) 9,133 18,996 (31,198) (D3) (3,069
---------- -------- -------- ----------
Income (loss) from continuing
operations before minority interest 11,219 32,830 (60,741) (16,692)
Minority interest (net of tax) 269 - - 269
---------- -------- - ----------
Net income (loss) from continuing
operations $11,488 $32,830 $(60,741) $ (16,423)
========== ======== ========= ==========
Basic loss per share (D5) $(0.19) (D4)
======
Weighted average common stock
outstanding (000's) 87,255 (D4)
======
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
2
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
A. SUMMARY OF TRANSACTIONS
In May 1998, we completed the acquisition of Old Safety-Kleen in which we
exchanged $18.30 and 0.7 shares of our common stock for each outstanding share
of common stock of Old Safety-Kleen. The total consideration of approximately
$2.2 billion, including debt assumed and transaction costs, was comprised of
approximately $1.5 billion cash and 41.6 million shares of our common stock.
In connection with the acquisition of Old Safety-Kleen, Safety-Kleen Services
established the Senior Credit Facility through an affiliate of TD Securities
(USA) Inc. The Senior Credit Facility is secured by all of our domestic tangible
assets and the tangible assets of certain of our subsidiaries. In addition, all
of the capital stock of our wholly-owned domestic subsidiaries has been pledged
as part of such security for the Senior Credit Facility, and such subsidiaries
have guaranteed Safety-Kleen Services' obligations.
On May 29, 1998, Safety-Kleen Services issued the Safety-Kleen Services Notes in
a private offering under Rule 144A under the Securities Act. The net proceeds
from the sale of the Safety-Kleen Services Notes were approximately $316
million. The net proceeds were used to repay a portion of the borrowings
outstanding under the Senior Credit Facility. The payment of the Safety-Kleen
Services Notes is guaranteed on a senior subordinated basis by us and is jointly
and severally guaranteed on a senior subordinated basis by our wholly-owned
domestic subsidiaries (other than Safety-Kleen Services). No foreign direct or
indirect subsidiary or non-wholly-owned domestic subsidiary is an obligor or
guarantor with respect to the Safety-Kleen Services Notes.
B. ACCOUNTING TREATMENT (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The acquisition of Old Safety-Kleen was accounted for using the purchase method
of accounting applied in accordance with generally accepted accounting
principles. Accordingly, the assets and liabilities of Old 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. Our
operating results include the results of operations of Old Safety-Kleen from and
after the date of the acquisition.
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<PAGE>
The aggregate purchase price totals $2,015,243 and is comprised as follows:
Old Safety-Kleen common stock outstanding at March 28, 1998 60,052,141
Common stock acquired by us prior to the acquisition (601,100)
----------
Common stock acquired by us in the acquisition 59,451,041
==========
Cash cost at $18.30 per share of common stock acquired,
including cost of fractional shares $1,087,963
Cost of additional shares of our common stock issued:
Number of shares of our common stock issued at
Exchange Ratio of 0.7 41,615,088
Price per share $16.50
Total cost 686,649
1,774,612
Cost of Old Safety-Kleen common stock acquired by us
prior to the acquisition 13,000
Transaction costs, including stock options and severance 152,631
Termination fees associated with prior merger agreement 75,000
----------
Total purchase price $2,015,243
==========
The price per share of our common stock issued at $16.50 was 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 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:
Current assets $231,351
Property, plant and equipment 1,712,314
Goodwill 1,048,618
Other assets 14,680
Current liabilities (127,092)
Deferred income taxes (438,449)
Other deferred items (208,321)
Long-term debt (217,858)
----------
Total purchase price $2,015,243
==========
4
<PAGE>
C. Basis of Presentation
The unaudited pro forma combined statement of income for fiscal 1998 has been
adjusted for the acquisition of Old Safety-Kleen and certain related
transactions as if they had occurred as of September 1, 1997.
Since the acquisition of Old Safety-Kleen occurred prior to August 31, 1998 and
is reflected in the consolidated balance sheet as of that date, we have not
presented pro forma combined balance sheet information. The unaudited pro forma
combined statement of income for fiscal 1998 includes our results (which include
Old Safety-Kleen since April 1, 1998) for the twelve months ended August 31,
1998 and the results of Old Safety-Kleen for the aggregate of the 17 weeks ended
January 3, 1998 and the 12 weeks ended March 28, 1998.
The acquisition has 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 estimate of the fair values at
the time of the acquisition. Areas of particular complexity include valuation of
long-lived assets, environmental liabilities, pre-acquisition contingencies and
the related deferred tax consequences. The determination of the fair value of
these items has been substantially complete. The goodwill acquired is being
amortized over 40 years on a straight-line basis.
The unaudited pro forma combined financial information does not purport to be
indicative of our combined results of operations had the acquisition of Old
Safety-Kleen occurred on the date specified, nor are they indicative of our
future results of operations. The unaudited pro forma combined financial
information has not been adjusted for the potential cost savings yet to be
realized.
D. PRO FORMA ADJUSTMENTS (DOLLARS AND SHARES IN THOUSANDS)
The following adjustments have been made to the unaudited pro forma combined
statement of income to reflect the acquisition of Old Safety-Kleen using the
purchase method of accounting:
1. To adjust depreciation and amortization expense to reflect the fair value
value adjustment of property, plant and equipment and the effect of the
acquisition on goodwill amortization, as follows:
Fiscal Year Ended
August 31, 1998
-----------------
To eliminate Old Safety-Kleen's estimated historical
intangible and other asset amortization expense $(11,579)
To record amortization expense related to goodwill as
a result of the acquisition 15,292
To record depreciation expense related to the write-up
of property, plant and equipment (primarily buildings
and land improvements) to estimated fair value 16,861
--------
Total adjustment $ 20,574
========
5
<PAGE>
2. To adjust interest expense for the impact of the additional long-term
debt associated with the acquisition, as follows:
Fiscal Year Ended
August 31, 1998
-----------------
To eliminate Old Safety-Kleen historical interest $(9,358)
expense
To eliminate interest expense on refinanced debt of the
Company (17,491)
To record interest expense on $1,531,048 of borrowings
at 8.5% (1) under the Senior Credit Facility 75,914
To record interest expense on the Safety-Kleen Services 22,300
-------
Notes issued May 29, 1998
Total adjustment $71,365
=======
(1) Calculated based on current rates pursuant to the terms of the
Senior Credit Facility, other costs and the effect of interest rate swap
agreements.
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 stock outstanding comprises:
Fiscal Year Ended
August 31, 1998
-----------------
Shares of common stock outstanding 87,745
======
Historical weighted average shares outstanding 62,321
Adjustment for acquisition 24,934
------
Pro forma weighted average total 87,255
======
Basic pro forma loss per share $(0.19)
=======
4. Diluted earnings per share amounts, which reflect the assumption that
holders of options and the PIK Debenture exercise all of their options
to acquire our common stock or convert the PIK Debenture, have not been
included for the year ended August 31, 1998 as the effect of such
inclusion would be anti-dilutive.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAFETY-KLEEN CORP.
By: /s/ Kenneth W. Winger
-------------------------
Kenneth W. Winger, President
and Chief Executive Officer
Date: May 27, 1999
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