UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from . . . . . to . . . . . . . . . . . .
Commission file number 0-11264
WESTERN WASTE INDUSTRIES
(Exact name of registrant as specified in its charter)
California 95-1946054
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21061 South Western Avenue
Torrance, California 90501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 328-0900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
or 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 for Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of September 20, 1994 there were 14,285,992 shares of Western Waste
Industries Common Stock, no par value outstanding held by approximately 784
shareholders of record. The aggregate market value of Western Waste
Industries common stock held by non-affiliates as of September 20, 1994,
was approximately $161,423,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement to be filed pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year
(June 30, 1994) are incorporated by reference in Part III. Exhibit Index
on page 50.
Total number of pages contained in this document: 53
<PAGE>
PART I
Item 1. Business
GENERAL
Western Waste Industries (the Company) is the successor to a
sole proprietorship that commenced the business of waste collection
and disposal in 1955. The Company was incorporated in California
in January 1964 as Western Refuse Hauling, Inc. The name later
became WRH Industries and then Western Waste Industries.
Western Waste Industries is a provider of integrated waste
services to commercial, industrial and residential customers.
These services consist of the collection, transfer and disposal of
solid waste in certain areas of California, Texas, Louisiana,
Florida, Colorado and Arkansas. The Company has approximately 90
franchise agreements, 82 of which designate the Company as the
exclusive provider of certain waste services within a particular
municipality or county. As part of its business, the Company
operates six landfills, three transfer stations and four recycling
facilities. The Company does not operate hazardous waste landfills
and limits its hazardous waste activities to the transportation of
such materials for others which accounted for approximately 1% of
the Company's revenue during fiscal 1994.
The Company has a diversified customer base with no single
customer accounting for more than 10% of the Company's revenue in
any one of its last three fiscal years. During fiscal 1992, 1993
and 1994, operations in California accounted for approximately 65%,
64% and 68%, respectively, of revenue.
Contribution to Revenue
Year Ended June 30,
1992 1993 1994
Collection Services 88% 86% 85%
Landfill Operations 5 6 7
Transfer Stations 2 2 3
Other 5 6 5
100% 100% 100%
COLLECTION SERVICES
Contracts. Substantially all of the Company's residential,
and a certain portion of its commercial and industrial collection
services are performed under approximately 90 municipal and
<PAGE>
regional authority contracts. These contracts presently represent
approximately 46% of the Company's revenue. A contract is an
agreement awarded by a municipality or regional authority to
provide collection and/or recycling services to commercial and
industrial or residential customers in the jurisdiction.
These contracts are normally awarded following competitive
bidding, usually have terms of five or more years, and contain
renewal options. Payment for residential services is generally
received directly from the municipality or authority. Such
contracts provide for rate adjustments including, but not limited
to, increases in the consumer price index and disposal cost
increases.
Most of the remaining collection revenues are provided under
one to three year service agreements.
The Company anticipates that more municipalities, in an effort
to reduce costs and capital expenditures related to waste services
and to deal with their budgetary fiscal constraints, will contract
for such services with private sector companies. Such action by
municipalities will continue to provide an incremental source of
revenue for the Company.
Commercial and Industrial. The Company provides collection
services to more than 63,000 commercial and industrial customer
locations, which accounted for approximately 57% of total fiscal
1994 revenue. Commercial and industrial collection services are
generally performed under agreements, and fees are determined by
such factors as collection frequency, type of equipment and
containers furnished, type and volume or weight of the waste
collected and the distance to the disposal site. A portion of
commercial and industrial services are performed under municipal
and regional authority contracts.
The Company's commercial and industrial customers utilize
containers that range from one to 45 cubic yards in size. The use
of containers enables the Company to service most of its commercial
and industrial customers with collection vehicles operated by a
single employee. Stationary compactors, which reduce the volume of
the stored waste prior to collection, are frequently installed by
the Company on the premises of large volume customers.
The Company has interstate industrial transportation
operations servicing primarily customers for the Company's Texas
and Arkansas industrial non-hazardous disposal sites. The Company
currently holds authority to transport waste in 21 states, mostly
in the southern portion of the United States. The Company believes
that further development of its industrial transportation
capabilities in close coordination with its disposal sites will
strengthen its ability to provide fully integrated industrial waste
handling services.
<PAGE>
Residential. During fiscal 1994, approximately 28% of total
revenue was derived from the curbside collection and transportation
of residential refuse to a landfill or transfer station. The
Company serviced approximately 677,000 homes and other residential
dwelling units. Substantially all of the services for homes and
other residential units are performed under exclusive franchise
agreements granted by municipalities or regional authorities. Fees
are based primarily on market factors, frequency and type of
service, distance to processing or disposal facilities and cost of
processing or disposal. Residential collection fees are normally
paid by the municipalities out of tax revenues or service charges
or, in a limited amount of cases, are paid directly by the
residents receiving the service.
Hazardous Waste. Hazardous waste hauling activities, included
in commercial and industrial services, accounted for approximately
1% of total revenue during fiscal 1994. The Company does not
operate any hazardous waste landfills. Its hazardous waste
activities are limited to the transportation of non-liquid
materials in drums and other containers provided and packaged by
its customers. The materials are hauled to licensed hazardous
waste landfills owned and operated by others. The transporting of
hazardous waste requires state and, for certain hauling, federal
licenses. Management believes that the Company has all necessary
licenses to carry on its current hazardous waste activities and is
in material compliance with applicable regulations. The Company
carries separate insurance to cover such activities.
LANDFILLS
Landfill disposal continues to be a primary depository for
solid waste in North America. With the enactment of the Resource
Recovery and Conservation Act Subtitle D regulations, the impact on
landfill design, permitting and construction has increased capital
resources required to develop additional disposal capacity. At the
same time, the Company believes that replacement of existing
disposal capacity with more costly, environmentally secure capacity
will result generally in an increase in the price of waste
disposal.
The Company operates disposal sites in California, Texas,
Louisiana and Florida. Six facilities are currently operating.
Certain of these sites have expansion plans and additional sites
are under development or in construction. Of the six operating
landfills, four are owned by the Company. None of the landfills
are permitted to accept hazardous waste, and the Company's policies
and controls are structured to minimize acceptance of such waste.
Disposal fees received from third parties generated approximately
7% of fiscal 1994 revenue.
In Southern California, the Company owns and operates the El
<PAGE>
Sobrante landfill which began receiving waste in July 1986. Solid
Waste Disposal Revenue Bonds were issued to finance its
development. The El Sobrante landfill operates under a joint
development agreement with the County of Riverside for an initial
term of 15 years with two successive five year renewal options. At
the present waste disposal rate, the site has an estimated
remaining life of approximately ten years. Commencing in September
1992, the Company was allowed to import, on a limited basis, solid
waste collected outside of Riverside County to the El Sobrante
Landfill site. The amount of out-of-county waste cannot exceed 1.8
million tons. In March 1994, the Company received a permit to
increase the daily tonnage from 2,000 to 4,000 tons per day.
The Company acquired 1,140 acres contiguous to the existing El
Sobrante operating site with the intent of expanding landfill
operations. The Company has begun the permitting process for this
acreage which, if successful, would add 100 million tons of
disposal capacity to this site. In April 1991, the Company signed
a preliminary memorandum of understanding (MOU) with the County of
Riverside regarding this acreage. This MOU included a provision
for up to a 10,000 tons per day operation, and increased the amount
of out-of-county waste which the site may accept. There is no
assurance that the expansion project will be permitted.
In Texas, the Company leases and operates a 64-acre disposal
site in Conroe for the City of Conroe. The lease term is for the
life of the site.
Adjacent to the Conroe, Texas leased site, the Company
operates a special waste (non-hazardous industrial) landfill on a
100-acre tract owned by the Company and repermitted by the Texas
Water Commission in April 1992. The Company began receiving waste
under this permit in August 1992. Current estimates of the
operating life of the facility is in excess of 25 years. The
Company acquired an additional 78-acre tract in May 1989 with the
intention of utilizing it for future development.
In 1990, the Company acquired a 90-acre landfill from the City
of New Boston, Texas, located 25 miles west of Texarkana. The
permit has been upgraded and the site is currently operating. The
life of this facility is estimated to exceed four years. The
Company is in the process of developing and submitting a permit
modification that will double the existing capacity of the
landfill.
In Florida, the Company operates a 65-acre site under contract
with the County of Nassau. The contract had an initial term of two
years through September 1989, and the Company subsequently received
a three year extension of the contract. In 1991, the Company
negotiated a $14 million contract with the County of Nassau, to
construct and operate an additional 140-acre landfill for an
initial term of five years with a five year extension option.
<PAGE>
Under the terms of the agreement, the Company will close the
existing 65-acre tract and construct a new disposal site. In 1992,
the Company negotiated a modification to the construction contract
to provide for an expansion of the site airspace capacity. The
construction project is scheduled for completion in fiscal 1995.
In Arkansas, the Company owns a 160-acre landfill in
Texarkana. The site, which stopped receiving waste in May 1993, is
filled to permit capacity and is being closed. The application for
a permit covering the 40 acre final phase of this site has been
denied and is the subject of an administrative appeal by the
Company.
In September 1991, the Company contracted to operate, under a
closure plan approved by the Louisiana Department of Environmental
Quality, a 320-acre landfill located in Jefferson Parish (near New
Orleans), Louisiana. The landfill commenced operations in February
1992. Due to changes in law and other unforeseeable circumstances,
the Company discontinued its operation of the site October 8, 1993.
In September 1990, the Company acquired a 240-acre waste
disposal facility in Livonia, Louisiana, approximately 22 miles
west of Baton Rouge. This facility, which is permitted to receive
municipal solid waste and special waste, is currently under
construction with operations expected to commence in fiscal 1995.
Included in the facility is a waste disposal facility which can
dispose of non-hazardous oilfield waste.
The Company has the right to acquire a 648-acre site for the
development of a municipal solid waste and special waste landfill
approximately five miles east of Lake Charles, Louisiana. The
permit application was denied by the Louisiana Department of
Environmental Quality and is currently the subject of appeal
through a state administrative proceeding.
The Company has entered into a joint development
arrangement with Gold Fields Mining, a wholly owned subsidiary of
Hanson PLC, and SP Environmental, a sister subsidiary of the
Southern Pacific Railroad for the purpose of developing a waste-by-
rail project called California InteRail. The parties are in the
process of permitting a landfill in Imperial County, California,
which has an approximate capacity of 600 million tons. As part of
this project, existing facilities owned by the Company, SP
Environmental, and others could be utilized and new facilities will
be developed on an as needed basis. Based upon the current
schedule, the landfill could be in operation as early as 1996.
In accordance with the Company's overall plan of corporate
development, other landfill sites are currently being evaluated
both in the Company's existing markets and new markets for joint
collection and disposal investment. Sites for certain projects
have been selected and preliminary engineering analyses are
<PAGE>
currently underway. Normally, the permitting process for landfill
sites takes three to five years.
TRANSFER STATIONS
The Company owns or operates three transfer stations. A
transfer station is a facility where solid waste is received from
collection vehicles and then transferred to and compacted in large,
specially constructed trailers for transportation to disposal
facilities. This procedure reduces costs by improving utilization
of collection personnel and equipment. The services of these
facilities are provided to municipalities or counties and in most
cases are also used by the Company and other collection companies.
Fees are generally based upon such considerations as market
factors, the type and volume or weight of the waste transferred,
the extent of recycling, the transport distance involved and the
cost of disposal.
The Company has a transfer station in Carson, California which
currently processes approximately 2,300 tons per day.
Approximately 86% of the tonnage delivered to this transfer station
is provided by the Company's collection operations with the
remainder received from municipalities which collect their own
residential refuse and from other refuse haulers. The Company has
applied for approval to increase the volume of waste processed at
the transfer station to 5,000 tons of solid waste per day. This
application is pending.
In March 1993, the Company was awarded a contract to operate
the Sunnyvale Materials Recovery and Transfer Station (SMART). The
service area for the station is the cities of Sunnyvale, Mountain
View, and Palo Alto, California. The initial term of the contract
is for seven years with an option to extend by the City for up to
an additional seven years. The operation began on October 1, 1993.
The Company operates a transfer station adjacent to the
Company's Fresno operations. The transfer station, which includes
a commercial materials recycling building, is designed to receive
up to 2,500 tons per day of solid waste. The solid waste permit
currently allows up to 1,000 tons per day with a green waste
storage area.
RECYCLING/WASTE DIVERSION
The Company operates four recycling facilities in California,
one each in Redondo Beach, Chino, Carson, and San Jose. Recycling
involves the removal of reusable materials from the waste stream
for processing and sale for use in various applications. The
Company is assisting certain communities, with which it has
<PAGE>
municipal contracts, in implementing recycling programs, and has
entered into long-term recycling agreements with several
communities in the Company's markets. The Company is also involved
in receiving, processing, composting and end-market distribution of
green and wood waste material in California and Texas.
OTHER ACTIVITIES
Western Waste is involved in certain other business
activities, relating to waste services, including construction
support, earth-moving, excavation contracting, and engineering and
consulting services. In addition, in fiscal 1992, 1993 and 1994,
the Company was involved in the construction of a new landfill for
Nassau County, Florida.
REGULATION
The Company is currently subject to extensive and evolving
federal, state and local environmental, health, and safety laws and
regulations. These regulations are administered by the
Environmental Protection Agency ("EPA") and various other federal,
state and local agencies.
Collection Services: In the solid waste collection phase,
regulation takes such forms as licensing of collection vehicles,
vehicle safety requirements, vehicle weight limitation and, in
certain localities, limitations on rates, area, time, frequency of
collection and transportation of waste to disposal sites. Zoning
and land use restrictions are encountered in the solid waste
transfer, resource recovery and disposal phases of the Company's
business. Air quality and noise pollution regulations may also
affect the Company's operations. Governmental authorities have the
power to enforce compliance, and violators are subject to
injunctions or fines, or both. Private individuals may also have
the right to sue to enforce compliance. Safety standards under the
Occupational Safety and Health Act are also applicable.
Landfills: In 1980 the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund" or "CERCLA") was
issued. CERCLA addresses problems created by the release of
hazardous substances into the environment. CERCLA imposes strict,
joint and several liability on the present or former operators of
facilities which release hazardous substances into the environment.
Waste generators and transporters are also strictly liable. It is
possible that the EPA or others could contend that at least some
amounts of hazardous substances exist in the Company's operating
and closed disposal facilities. If these sites ever experience
environmental problems, there can be no assurance that the Company
will not face claims resulting in liability.
In 1991, the EPA issued revisions to Subtitle D of the
<PAGE>
Resource Conservation and Recovery Act of 1976 ("RCRA") which
regulates the handling, transportation and disposal of waste and
requires states to develop programs to ensure the safe disposal of
waste. These revisions affected comprehensive solid waste
management regulations, including location standards, facility
design and operating criteria, closure and post-closure
requirements, financial assurance standards, and groundwater
monitoring and corrective action standards which were not
previously in place or enforced at landfills. The Company believes
that all Company landfills meet or exceed compliance with these
regulations. In addition, the Company's planned landfill
expansions will be engineered to meet or exceed these requirements.
The Company has periodically undertaken, and may in the future
undertake or be required to implement and/or adhere to environmental
guidelines at existing facilities, and to add additional monitoring
post-closure maintenance or corrective measures at closed waste disposal
sites. The Company cannot predict the financial impact, if any, of such
matters on the Company's operations.
During the ordinary course of its landfill operations, the
Company is, as are others in the industry, subject to governmental
enforcement proceedings and resulting fines or other sanctions from
such authorities regarding full compliance with applicable
environmental or health or safety regulations. The Company
believes that based on the results of management's review of its
operations, that it has taken appropriate charges and that expense
accruals have been provided by the Company for its share of any of
these potential liabilities.
Transportation Services: The Company's transportation of
hazardous waste consists of the hauling of solid material in either
individual sealed containers or in specially designed, and licensed
bins. The State of California licenses the bins and trailers and
the tractors are subject to the Southern California Air Quality
Management District's regulations in regard to local enforcement of
the Clean Air Act. The Clean Air Act provides for the federal,
state, and local regulation of the emission of air pollutants. The
Company's transporting operation has not been subject to any
requirement of the Clean Air Act other than the required posting by
the Southern California Air Quality Management District in regard
to smog alert requirements, which is in effect for all of the
Company's fleet and most other companies in the same geographical
area.
The Company also engages in the interstate transportation of
hazardous and industrial non-hazardous waste. The Company has all
of the proper permits to operate in these states.
Summary: The Company believes that it is currently in
substantial compliance with all applicable federal, state and local
<PAGE>
laws, permits, orders, and regulations. The Company believes that
there will probably be increased regulation and legislation related
to the waste management industry in the future. The Company
attempts to anticipate future regulatory, political and legal
developments that might affect its operations and plans accordingly
to remain in compliance with the regulatory framework. The Company
cannot predict the extent to which any legislation or regulation
that may be enacted or enforced in the future may affect its
operations particularly in the event that regulations are applied
retroactively.
CORPORATE DEVELOPMENT
The Company's corporate development program emphasizes the
development of a broad range of waste services. These services
include collection, recycling, processing, composting, transfer and
disposal. This range enables the Company to compete for business
and expand current customer relationships.
Management envisions that this program will result in the
expansion of its landfill operations, further penetration of its
existing collection markets, and acquisitions which either
complement its existing operations or allow it to expand into new
geographic markets.
Waste reduction legislation in California, Florida and
Louisiana, and contemplated in other states in which the Company
operates, is causing municipalities to rethink their waste
programs. The Company views recycling and other municipal waste
service reduction programs as the catalyst which will enable the
Company to expand its services to communities and customers it
currently does not serve and further cement relationships with
current customers.
Management believes that as local governmental budgets face
fiscal constraints, an increasing number of municipalities will
turn to private sector companies to meet their waste disposal
demands. The Company, in an effort to expand its customer base,
has therefore focused a significant amount of its marketing efforts
on obtaining additional municipal franchises to supplement its
existing, approximately 90, franchises.
The Company's acquisition activity has been focused on
collection companies either within or located near current Western
Waste operations. The Company has also acquired companies to
expand into new markets. Over the past three years, the Company
purchased the routes and certain assets of eleven companies,
including one in fiscal 1994. The Company plans to increase
acquisition activity in fiscal 1995.
<PAGE>
BONDING AND INSURANCE
In order to submit a bid or proposal to a governmental or
corporate entity to provide collection, hauling and disposal
services, the Company is often required to submit simultaneously a
bid bond or a letter of credit and, upon contract award, provide a
bond or letter of credit to secure its performance of the contract.
Management believes that its current bonding coverage and borrowing
capacity are adequate for its present needs.
The Company has a risk management program whereby it retains
the liability, subject to maximum limits, for auto, general
liability, employee health and welfare benefits and workers'
compensation. The Company carries insurance coverage which
management considers sufficient to protect the assets and
operations of the Company, including excess umbrella and special
hazardous waste transportation coverage.
Management believes the self insured loss reserves of the
Company are adequate. The Company establishes reserves to cover
its estimated liabilities for unpaid loss and loss adjustment
expenses related to claims reported before the balance sheet date,
claims incurred but not yet reported, and the expenses of
investigating and adjusting all claims incurred prior to the
balance sheet date. All estimated liabilities are net of estimated
salvage and subrogation recoveries and net of insurance coverage
above self insurance retention levels.
The Company establishes self insured loss reserves based on
estimates of the ultimate cost of claims (including loss adjustment
expenses) which have been reported but not fully paid, and of
claims which have been incurred but not yet reported. The length
of time for which such costs must be estimated varies depending on
the coverage involved. Actual claim costs are dependent upon such
complex factors as inflation, changes in doctrine of legal
liability and size of damage awards. Because of the variables
involved, the reserving process results in an estimate rather than
an exact calculation of liabilities.
Liabilities for self insured losses, including loss adjustment
expenses, are revalued periodically using a variety of actuarial
and statistical techniques for producing current estimates of
expected claim costs. Claim frequency and severity and other
social and economic factors are considered in the valuation
process. A provision for inflation in the calculation of future
claim costs is implicit since reliance is placed on both actual
historical data which reflect past inflation and on factors which
are judged to be appropriate additions to or modifiers of past
experience such as industry experience. Adjustments to previously
estimated liabilities in connection with establishing self
insurance reserves are reflected in current operating results in
<PAGE>
the period in which they are determined.
COMPETITION
The waste services industry is very competitive and requires
substantial labor and capital resources. The Company encounters
competition from national, regional and local companies by locality
and by type of service. Some national waste services companies are
much larger and have greater resources than the Company. The
Company also competes with municipalities and industrial facilities
which provide their own waste management services. Competition in
the Company's markets is based primarily on service, reliability,
and price.
EMPLOYEES
The Company currently employs approximately 1,730 persons,
consisting of approximately 90 managers and executives,
approximately 1,050 persons employed in collection, transfer,
resource recovery and disposal activities, approximately 230
persons employed in equipment repair and maintenance, and
approximately 360 persons employed in sales, clerical, data
processing and other activities. Approximately 28% of the
Company's employees are represented by a union under collective
bargaining agreements. The Company did not experience a
significant work stoppage in any of the reporting periods covered
by this Form 10-K and believes its employee relations are good.
Item 2. Properties.
The principal fixed assets of the Company consist of vehicles
and equipment which include approximately 1,250 collection,
recycling, transfer and support vehicles, an estimated 810,000
storage containers, roll-off boxes and recycling bins, and
approximately 230 portable and stationary compactors.
The Company owns approximately 2,720 acres of real property,
including approximately 2,470 acres used or being developed as
landfills. It leases an additional 90 acres of which 64 acres are
for landfill. The total space of all buildings utilized by the
Company is approximately 500,000 square feet.
The Company purchased certain general office facilities in
Torrance, California in December 1991. A portion of these
facilities is being used for the Company's corporate headquarters.
The remaining facilities are currently being leased to outside
parties.
<PAGE>
Management believes that the Company's property and equipment
are adequate for its present business needs. The Company intends,
however, to continue to invest in additional property and equipment
for both expansion and replacement of existing assets.
Item 3. Legal Proceedings.
On or about October 13, 1993 the Company was served with a
class action lawsuit now entitled In re Western Waste Industries
Securities Litigation, Case No. CV-93 6126 KN filed in the United
States District Court for the Central District of California. The
complaint alleges that the Company violated federal securities laws
with regard to certain disclosures and representations made by the
Company and certain alleged omissions on the part of the Company in
connection with merger negotiations between the Company and
Browning-Ferris Industries ("BFI"). The plaintiffs allege that
they and all other persons or entities that bought the stock of the
Company during the period of September 2, 1993 through October 7,
1993 suffered damages as a result of changes in the market price of
the Company's common stock. The Company does not believe that it
has violated any laws with regard to the BFI matter and intends to
vigorously defend the lawsuit.
On or about August 9, 1994 a complaint was filed in Rancho
Disposal Services, Inc., et al. v. Western Waste Industries, et
al., San Bernardino Superior Court Case No. SCB 14473. The
Complaint seeks damages and an injunction for the alleged violation
of California Business and Professions Code Sections 17047, 17200,
and 17500 and for intentional interference with existing and
prospective economic relations. The complaint alleges that the
Company does not hold a validly issued permit to operate within a
certain geographic area in the County of San Bernardino and that
the Company has engaged in predatory pricing. The complaint also
alleges that the Company has violated a San Bernardino County
ordinance by engaging in discriminatory and non-uniform pricing of
its refuse hauling services. In addition to the injunction, the
complaint prays for three times the actual damages incurred by
plaintiffs, punitive and exemplary damages in the amount to be
proven at the time of trial, reasonable attorneys' fees and costs
of suit. The Company believes it has valid defenses to the
allegations and intends to vigorously defend the suit. The Company
also intends to file a cross-complaint against the plaintiffs for
engaging in improper pricing activities.
In July 1994, the Company reached an agreement to settle the
claims asserted against it in a lawsuit captioned County of Los
Angeles, et al. v. Browning-Ferris Industries, Inc., et al., Case
No. 93-1807-WMS filed in the Los Angeles County Superior Court. The
complaint sought indemnification on behalf of the County of Los
Angeles for alleged damages resulting from hauling waste from
<PAGE>
county garbage districts to the Operating Industries Landfill. The
settlement was within the range previously accrued. The settlement
includes a release by the EPA with regard to the Operating
Industries site.
In addition to the above-described litigation, there are
number of claims and suits pending against the Company for alleged
damages to persons and property, alleged violation of certain laws
and for alleged liabilities arising out of matters occurring during
the normal operation of the waste services business. In the
opinion of management, the uninsured liability, if any, under these
claims and suits would not materially affect the financial position
of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of fiscal 1994, no matter was
submitted to a vote of the Company's security holders.
<PAGE>
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock is traded on the New York Stock
Exchange under the symbol "WW". The following table below sets
forth by quarter for the last two years the high and low sales
prices of the Company's common stock on the New York Stock
Exchange.
1993 1994
High Low High Low
Quarter ended September 30 12-1/4 9-5/8 22-1/2 9-5/8
Quarter ended December 31 12-3/4 8-3/4 19-3/4 10-3/8
Quarter ended March 31 11-5/8 8-3/4 16-1/2 13-3/8
Quarter ended June 30 12 9 20-1/2 13-5/8
The Company is limited with respect to the amount of cash
dividends which can be paid, by certain terms of its revolving
credit agreement.
No cash dividends have been paid to date by the Company. The
current policy of the Company is to retain earnings to provide
funds for the operation and expansion of its business. The Company
does not anticipate paying dividends in the foreseeable future.
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<TABLE>
Item 6. Selected Consolidated Financial Data.
The Selected Consolidated Financial Data presented below should be read in conjunction with
the accompanying Consolidated Financial Statements of Western Waste Industries and the
related notes thereto and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Western Waste Industries
Consolidated Five-Year Summary of Selected Financial Data
(In thousands, except for employee and per share data)
Year Ended June 30,
OPERATING RESULTS 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Revenue $172,009 $199,820 $219,376 $231,205 $257,005
Income (loss) from operations 21,257 22,476 19,083 (14,562)** 26,423
Interest expense, net (5,041) (5,982) ( 3,379) ( 2,639) ( 3,035)
Other nonoperating
income/(expense) ( 62) 1,385 (11,444)* 2,735 ( 767)
Income (loss) before
income taxes 16,154 17,879 4,260 (14,466) 22,621
Net income (loss) 9,962 11,234 2,370 (10,116) 12,941
Net income (loss) per
share - primary .78 .81 .17 (.73) .86
Average number of
shares outstanding 12,428 13,854 14,031 13,818 15,048
No cash dividends have been declared to date.
*Includes a $6,600 writedown related to G.I. Industries and a provision of $4,050
related to a estimated loss on disposal of a division.
**Includes $21,043 of special charges and other charges of: $6,000 related to a
estimated loss on a municipal contract, $4,000 related to increased self-
insurance loss reserves and $1,000 for other reserves.
OTHER FINANCIAL AND At June 30,
STATISTICAL DATA 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Total assets $195,652 $225,874 $248,509 $268,386 $284,681
Property and equipment, net 112,537 127,306 155,316 172,662 185,598
Total long-term debt 60,197 75,405 90,037 91,618 93,390
Shareholders' equity 103,470 116,004 122,556 122,421 139,177
Shareholders' equity per share 8.33 8.37 8.73 8.86 9.25
Number of employees 1,550 1,580 1,670 1,610 1,730
The average number of shares outstanding and per share data have been restated to reflect the
two-for-one stock split which occurred in July 1990.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Revenue
The increases in revenue over the last three fiscal years have
resulted from price increases, obtaining additional franchise
agreements, expanding the customer base, acquiring certain assets of
other waste management businesses and expanding landfill operations.
Components of the increases in revenue are as follows:
Year Ended June 30,
1992 1993 1994
Purchased assets . . . . . . . . . 3.7% 2.8% .2%
Price and volume changes . . . . . 6.1 2.6 11.0
9.8% 5.4% 11.2%
The Company's revenue growth was impacted negatively in fiscal
1993 by (i) the reduction in commercial waste volumes due to the
economic recession which affected many of its markets, particularly
California, (ii) state and local waste minimization requirements, (iii)
the emphasis of many commercial collection customers, as a result of
the recession, on controlling and reducing operating costs, which leads
to downward pressure on pricing, and (iv) the downward pressure on
pricing as a result of increased competition.
The principal factor in the decline of revenue growth in fiscal
1993 was the continuation of the nationwide economic recession,
particularly in California. Recent evidence indicates that the economy
is recovering from the recession, albeit slowly. This improvement in
the economy was a ingredient in the revenue growth realized in fiscal
1994, in conjunction with new operations in San Jose and Sunnyvale,
California. It is very difficult to predict the future of the economy
and as such, no assurances can be given about future operations, but it
is anticipated that as the recession abates, revenue and operating
results should continue to improve.
Costs of Operation
Operating expenses, consisting primarily of wages and benefits for
operating personnel, insurance costs, disposal site fees and equipment
<PAGE>
operating costs, were 75.3% of revenue in fiscal 1992, 81.2% in fiscal
1993 and 74.7% in fiscal 1994. Operating costs increased in fiscal
1993, as a percentage of revenue, due primarily to charges of (i)
$6,000,000 related to a estimated loss on a municipal contract, and
(ii) $4,000,000 related to increases in self-insurance reserves.
Operating costs decreased in fiscal 1994, as a percentage of revenue,
due principally to (i) charges incurred in fiscal 1993 previously noted
(ii) increases in volume at the Companys' landfill operations,
including an increase in the volume of out-of-county waste at the
Company's El Sobrante California landfill site, which generally have
lower operating costs than waste collection operations and (iii)
revenue growth resulting from rate increases.
On June 30, 1992, the Company entered into an agreement with the
City of San Jose, to provide refuse and recycling services, for a term
of six years, with service beginning July 1, 1993. During the initial
months of the contract, it became apparent that the level of services
required for the contract and related costs of operation would be
greater than originally envisioned. This occurred, in part, by factors
outside of the control of the Company. As a consequence, most of the
increased cost could not have been anticipated or estimated prior to
the start of the contract. The Company estimated that it would incur
a loss of $6,000,000 over the life of the contract, in order to satisfy
the service requirements of the contract and accordingly accrued that
amount in the fourth quarter of fiscal 1993. The balance of this
accrual was approximately $3,000,000 as of June 30, 1994. Based upon
facts presently known to it, the Company believes that the balance of
this accrual is adequate to cover any future losses related to this
contract.
In the fourth quarter of fiscal 1993 the Company performed a
detailed analysis, considering the trend of increasing development of
known claims, along with the pattern shown by payments made in
settlement of self-insured losses. As a result of this analysis, the
Company increased its reserve for self-insured losses by $4,000,000.
The Company performed a similar analysis in fiscal 1994 and determined
that the estimated reserve balances remain adequate. The process of
estimating loss reserves is a difficult and complex exercise involving
many variables, uncertainties, and subjective judgements, and
therefore, there is no assurance that the reserve balance will reduce
the possibility of adverse reserve developments in subsequent reporting
periods.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, as a percentage of
revenue approximated 16.0% in fiscal 1992 and 1993, and 15.0% in 1994.
Selling, general and administrative expenses decreased as a percentage
of revenue in fiscal 1994 due primarily to the Company's continuing
effort to control costs in conjunction with the revenue growth
discussed above. In early fiscal 1994, the Company reviewed its
<PAGE>
selling, general and administrative expense levels as compared to the
industry and subsequently set a goal to reduce these levels below 15%.
Special Charges
Special charges of $21,043,000 were included in fiscal year 1993's
results of operations. The Company re-evaluated its landfill
activity in fiscal 1993, focusing on the economic viability of landfill
projects under development and closure and post-closure requirements.
As a result of revised projections, estimates, and certain regulatory
communications on permitting activity in progress, the Company recorded
special charges in the third quarter of fiscal 1993 of (i) $10,143,000
related to writeoffs and reserves for certain landfill development
projects and (ii) $6,900,000 to establish additional reserves, above
those estimated to be required on an ongoing annual basis, for
potential future expenditures relating to the long-term requirements
for closure/post closure management of certain Company landfills.
Also as a part of the Company's review of facilities and land
requirements, the Company recorded a $2,000,000 general reserve for
property no longer needed for operations and established a loss reserve
of $2,000,000 for other matters. The balance of this accrual was
$12,029,000 as of June 30, 1994. Company management believes that the
components of this reserve remain adequate as of June 30, 1994.
Interest Expense
Interest expense decreased $437,000 or 11.2% in fiscal 1993, and
then increased $354,000 or 10.2% in fiscal 1994. The decrease in
fiscal 1993 was due to lower borrowing rates, partially offset by
increased borrowings. The increase in interest expense in fiscal 1994
was due primarily to higher average debt levels as compared to the
prior fiscal year. Total debt in fiscal 1994 averaged approximately
$93,000,000 as compared to approximately $87,000,000 in fiscal 1993.
The Company capitalized interest costs of $1,753,000, $1,151,000 and
$953,000 in fiscal 1992, 1993 and 1994, respectively, related to the
development of certain landfill and other construction projects.
Non-Operating Income (Expense)
A writedown of $6,600,000 related to G.I. Industries was included
in Other non-operating income (expense) in fiscal 1992. In April of
1992, negotiations with G.I. Industries over the proposed acquisition
of that company were terminated. As a result, the Company
substantially wrote down its investment in GII to reflect the estimated
net realizable value. No material changes to this item have occurred
since the reserve was established.
The Company recorded a gain of $2,800,000 in the third quarter of
fiscal 1993 related to the sale of the Company's equity investment in
<PAGE>
common stock of Best Pak Disposal. This gain is included in Other non-
operating income (expense) in fiscal 1993.
During May of 1992, the Company made the decision to cease
operations and sell or otherwise dispose of its truck body
manufacturing division, Stagg Equipment Company (Stagg). The decision
to dispose of Stagg came after the Company reassessed the division's
prospects in light of the continuing economic downturn, which
significantly affected anticipated outside demand. In connection with
the decision to dispose of Stagg, the Company recorded a fiscal 1992
provision of $4,050,000 to reflect the estimated loss on disposition,
including estimated future costs and operating results from Stagg until
the completion of the disposal. In November 1993, the Company
completed the disposal with the exception of payments to be made on a
long-term lease which will expire in November 1995. These payments
were provided for in the estimated loss. The balance of the reserve was
approximately $1,262,000 as of June 30, 1994.
Income Taxes
The effective income tax rates for fiscal 1992, 1993, and 1994
were 44%, 30% and 45%, respectively. The effective rates for all years
were higher than the statutory federal rate (34% for 1992 and 1993 and
35% for 1994) due primarily to the effect of state income taxes and
nondeductible expenses. The effective rate for 1994 reflects a $86,000
reduction related to the recent change in the federal corporate income
tax rate from 34% to 35%, retroactive to July 1, 1993 in accordance
with the Revenue Reconciliation Act of 1993. In fiscal 1994, the
Company recognized a benefit of $414,000 from the adoption of FASB 109.
The Company has a net deferred tax asset of $2,372,000 at June 30,
1994, all of which the Company has determined is more likely than not
to be realized due to available taxable income in the carryback period.
FINANCIAL CONDITION
Liquidity and Capital Resources
The solid waste industry is capital intensive. The Company has
financed its operations and capital expenditures through cash flow from
operations, borrowings and issuances of common stock. Cash provided by
operations was $36,242,000 and $35,320,000 in fiscal 1993 and 1994,
respectively, while additions to debt provided $13,515,000 and
$15,028,000 in those fiscal years, respectively. These funds have been
used to purchase property and equipment, to acquire certain assets of
other waste services companies, to develop and expand new and existing
landfill sites, and to finance the Company's expansion of services.
The Company's $100 million revolving line of credit ("the
agreement"), which currently matures on June 1, 1997, has a $16.5
million quarterly commitment reduction commencing March 1, 1996. On or
before the first day of October of each year, the Company has an option
<PAGE>
to request an extension of the revolving period and the termination
date with the approval of its banks. The Company has exercised this
option and is currently awaiting the approval of its banks. If this
option is approved, the termination date shall be extended to June 1,
1999, the quarterly commitment reduction date shall be extended to
March 1, 1997, and the quarterly commitment reduction will be reduced
from $16.5 million to $10 million. Thereafter, each extension request
shall be for a period of one year.
Working Capital
At June 30, 1993 and 1994, working capital amounted to $13,261,000
and $20,660,000, respectively. The current ratio was 1.6 to 1 at June
30, 1994 as compared to 1.4 to 1 a year earlier. The increase in the
current ratio was due primarily to (i) a decrease of $2,661,000 in the
current portion of a contract loss accrual recorded as of June 30, 1993
and (ii) an increase of $7,676,000 in cash and short-term investments.
The increase in cash and short-term investments was used principally
for certain commitments and debt reduction totaling $7,600,000 which
were paid at the beginning of fiscal 1995. Trade receivables represent
the largest portion of current assets totaling $24,297,000 and
$30,244,000 at June 30, 1993 and 1994, respectively. The increase in
trade receivables was due primarily to new operations in San Jose and
Sunnyvale, California. Days sales in trade receivables were 36 days
for fiscal 1993 and 37 days for fiscal 1994. The allowance for
doubtful accounts as a percentage of trade receivables was 5.6% and
5.3% at the end of fiscal 1993 and fiscal 1994, respectively.
Capital Resources
In December 1992, the Company renegotiated its revolving line of
credit thereby increasing the amount available from $80,000,000 to
$100,000,000. At the Company's option, borrowings under the agreement
bear interest at the bank's prime rate and/or at the London Interbank
Offered Rate (LIBOR) plus .75 to 2.0 per cent, (1.25 per cent at June
30, 1994), depending upon certain ratios. Outstanding borrowings
under the agreement were $82,000,000 at June 30, 1994.
During the year ended June 30, 1994, the Company made capital
additions of approximately $35 million. The Company estimates that
capital additions for fiscal 1995 will be approximately $30 million.
The Company believes that cash provided by operations, cash available
under its revolving credit agreement, lease agreements, and cash from
other external sources will be sufficient for its financing needs.
<PAGE>
<TABLE>
The following table summarizes the dollar amount of capital asset
additions by major category:
Year ended June 30,
1992 1993 1994
<S> <C> <C> <C>
Land $ 5,626,000 $ 367,000 $ 233,000
Landfill sites 9,188,000 11,278,000 6,125,000
Building and leasehold improvements 6,528,000 7,202,000 7,098,000
Vehicles 8,497,000 15,640,000 14,743,000
Containers and other 13,833,000 9,230,000 7,257,000
$43,672,000 $43,717,000 $35,456,000
</TABLE>
Inflation
Inflation has had a minimal impact on the Company's operations for
the periods referred to above as most of the Company's collection
operations are under contracts that provide for rate adjustments based
upon increases in the consumer price index. These contracts reduce the
Company's vulnerability to inflation. However, in the case of rapid
changes in certain costs, such as fuel and disposal costs, rate
increases may lag behind cost increases.
Environmental Matters
Closure and post-closure costs are accrued and charged to cost of
operations over the estimated useful lives of such facilities. These
accruals are based on estimates from management reviews performed
periodically. The closure and post-closure requirements for the
Company's municipal solid waste landfills are established by Subtitle
D or the applicable states' adopted and EPA approved Subtitle D
implementation plan. In performing the review for each facility, the
Company analyzes actual costs incurred versus total estimated costs,
updates prior cost estimates to reflect current regulatory requirement,
and considers requirements of proposed regulatory changes.
Closure and post-closure accruals consider final capping of the
site, site inspections, ground-water monitoring, leachate management,
methane gas control and recovery, and operation and maintenance costs
to be incurred during the period after the facility closes.
The Company accounts for closure and post-closure accruals by
comparing the total estimated closure and post-closure cost with the
existing reserve. The difference is accrued and charged to cost of
operations as airspace is consumed.
<PAGE>
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Western Waste Industries
We have audited the accompanying consolidated balance sheets of Western
Waste Industries and subsidiaries as of June 30, 1993 and 1994 and the
related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended June 30,
1994. Our audits also included the financial statement schedules
listed in the Index at Item 14(a). These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Western Waste Industries and subsidiaries at June 30, 1993
and 1994, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended June 30,
1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information set
forth therein.
As discussed in Note 8 to the consolidated financial statements, in
1994 the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
August 26,1994
<PAGE>
<TABLE>
<PAGE>
Western Waste Industries Consolidated Statement of Operations
Year Ended June 30,
1992 1993 1994
<S> <C> <C> <C>
Revenue $219,376,000 $231,205,000 $257,005,000
Costs and expenses:
Operating 165,232,000 187,648,000 192,099,000
Selling, general and administrative 35,061,000 37,076,000 38,483,000
Special charges - 21,043,000 -
Total costs and expenses 200,293,000 245,767,000 230,582,000
Income (loss) from operations 19,083,000 (14,562,000) 26,423,000
Nonoperating income (expense):
Interest income 538,000 841,000 799,000
Interest expense (3,917,000) (3,480,000) (3,834,000)
Other (7,394,000) 2,735,000 ( 767,000)
Disposal of a division (4,050,000) - -
Net nonoperating income (expense) (14,823,000) 96,000 (3,802,000)
Income (loss) before income taxes
and cumulative effect of
accounting change 4,260,000 (14,466,000) 22,621,000
Income taxes (benefit) 1,890,000 (4,350,000) 10,094,000
Income (loss) before cumulative
effect of accounting change 2,370,000 (10,116,000) 12,527,000
Cumulative effect of accounting change - - 414,000
Net income (loss) $ 2,370,000 $(10,116,000) $ 12,941,000
Earnings (loss) per common share:
Primary
Income (loss) before cumulative
effect of accounting change $ .17 $ (.73) $ .83
Cumulative effect of
accounting change - - .03
Net income (loss) $ .17 $ (.73) $ .86
Fully Diluted
Income (loss) before cumulative
effect of accounting change $ .17 $ (.73) $ .80
Cumulative effect of
accounting change - - .03
Net income (loss) $ .17 $ (.73) $ .83
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<PAGE>
Western Waste Industries Consolidated Balance Sheet
June 30,
1993 1994
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments $ 2,259,000 $ 9,935,000
Receivables, less allowance of $1,354,000 in 1993
and $1,611,000 in 1994 27,287,000 31,367,000
Supplies 3,059,000 3,349,000
Prepaid expenses 8,462,000 2,842,000
Other current assets 3,544,000 1,323,000
Deferred income tax benefit 4,959,000 5,319,000
Total current assets 49,570,000 54,135,000
Property and equipment, net 172,662,000 185,598,000
Purchased routes, net 11,424,000 9,410,000
Goodwill, net 22,556,000 21,818,000
Other assets 12,174,000 13,720,000
$268,386,000 $284,681,000
Liabilities and Shareholders' Equity
Current liabilities:
Current instalments of long-term debt $ 1,728,000 $ 1,526,000
Accounts payable 8,935,000 8,764,000
Accrued payroll and related costs 3,780,000 3,325,000
Other current liabilities 21,866,000 19,860,000
Total current liabilities 36,309,000 33,475,000
Long-term debt, excluding current instalments 89,890,000 91,864,000
Other liabilities 18,092,000 17,218,000
Deferred income taxes 1,674,000 2,947,000
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, no par value; 2,000,000
shares authorized; none issued or
outstanding -- --
Common stock, no par value; 50,000,000 shares
authorized; issued and outstanding 13,866,561
shares in 1993 and 14,333,612 in 1994 71,844,000 75,659,000
Retained earnings 50,577,000 63,518,000
Total shareholders' equity 122,421,000 139,177,000
$268,386,000 $284,681,000
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<PAGE>
Western Waste Industries Consolidated Statement of Shareholders' Equity
Common Stock Retained
Shares Amount Earnings Total
<S> <C> <C> <C> <C>
Balance at July 1, 1991 13,476,021 $57,752,000 $58,252,000 $116,004,000
Stock issued in connection with:
401(k) plan 32,663 504,000 -- 504,000
Stock option plans 120,550 1,304,000 -- 1,304,000
Acquisitions 145,968 2,374,000 -- 2,374,000
Net Income -- -- 2,370,000 2,370,000
Balance at June 30, 1992 13,775,202 61,934,000 60,622,000 122,556,000
Stock issued in connection with:
401(k) plan 47,309 506,000 -- 506,000
Stock option plans 44,050 449,000 -- 449,000
Acquisitions - 8,955,000 71,000 9,026,000
Net Loss -- (10,116,000) (10,116,000)
Balance at June 30, 1993 13,866,561 71,844,000 50,577,000 122,421,000
Stock issued in connection with:
401(k) plan 39,441 566,000 -- 566,000
Stock option plans 284,610 4,219,000 -- 4,219,000
Guaranteed value commitments 240,000 -- -- --
Cancellation of stock (97,000) (970,000) -- ( 970,000)
Net Income -- -- 12,941,000 12,941,000
Balance at June 30, 1994 14,333,612 $75,659,000 $63,518,000 $139,177,000
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<PAGE>
Western Waste Industries Consolidated Statement of Cash Flows
Year Ended June 30,
1992 1993 1994
Operating Activities:
<S> <C> <C> <C>
Net income (loss) $ 2,370,000 $(10,116,000) $ 12,941,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 17,315,000 18,678,000 22,047,000
Bad debt expense 2,021,000 1,858,000 1,965,000
Uninsured claims 1,325,000 3,723,000 1,728,000
Employer portion--401(k) contribution 504,000 506,000 566,000
Deferred income taxes (5,616,000) (8,976,000) 1,327,000
Loss on municipal contract - 6,000,000 -
Gain on sale of minority investment - (2,829,000) -
Cumulative effect of accounting change - - (414,000)
(Gain) loss on disposition of assets (463,000) 157,000 1,164,000
Loss on disposal of division and other
writedowns 10,650,000 - -
Special charges - 21,043,000 -
Changes in operating assets and liabilities
net of effects of purchased businesses:
Increase in receivables (4,510,000) (1,882,000) (6,045,000)
Decrease in other assets 1,645,000 1,891,000 4,979,000
Increase (decrease) in accounts payable 856,000 48,000 (171,000)
Increase (decrease) in other liabilities (1,384,000) 6,141,000 (4,767,000)
Net cash provided by operating activities 24,713,000 36,242,000 35,320,000
Investing activities:
Purchases of property and equipment (39,543,000) (35,025,000) (44,138,000)
Purchased businesses, net of cash acquired
and purchase price adjustments (4,242,000) 45,000 (155,000)
Proceeds from sale of equity investment - 7,000,000 -
Proceeds from disposition of assets 3,743,000 270,000 1,976,000
Net cash used in investing activities (40,042,000) (27,710,000) (42,317,000)
Financing activities:
Proceeds from revolving lines of credit and
long-term borrowings 22,098,000 13,515,000 15,028,000
Principal payments on debt (13,718,000) (20,954,000) ( 4,574,000)
Proceeds from sale of stock 1,304,000 449,000 4,219,000
Net cash provided (used) by
financing activities 9,684,000 (6,990,000) 14,673,000
Increase (decrease) in cash and short-term
investments (5,645,000) 1,542,000 7,676,000
Cash and short-term investments at
beginning of year 6,362,000 717,000 2,259,000
Cash and short-term investments
at end of year $ 717,000 $ 2,259,000 $ 9,935,000
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
Western Waste Industries Notes to Consolidated Financial Statements
Western Waste Industries is a integrated solid waste services company,
providing collection, recycling, composting and disposal services for
commercial, industrial and residential customers. The Company operates
as a single business segment.
Note 1 Summary of significant accounting policies:
Principles of consolidation-The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
Cash and short term investments-Short term investments generally
consist of highly liquid investments with a maturity of three months or
less.
Property and equipment-Property and equipment are recorded at cost.
Landfill sites and site improvements are carried at cost and to the
extent this exceeds estimated end use realizable value, such excess is
amortized over the remaining estimated useful life of the site.
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset
to which it relates and is amortized over the asset's useful life. In
fiscal 1993 and 1994, respectively, $1,151,000 and $953,000 of interest
cost was capitalized. Depreciation and amortization of other property
and equipment are provided for by using the straight-line method over
their estimated useful lives. Leasehold improvements are amortized
over the shorter of the life of the improvement or the term of the
lease.
Purchased routes-Purchased routes are amortized on a straight-line
basis over the contract periods or estimated service periods, generally
10 years. Accumulated amortization at June 30, 1993 and 1994 was
$15,932,000 and $16,640,000, respectively.
Goodwill-Consideration paid in excess of the fair market value of net
assets acquired is recorded as goodwill and is amortized on a straight-
line basis over 40 years. Accumulated amortization at June 30, 1993
and 1994 was $2,088,000 and $2,794,000, respectively.
Deferred bond issue costs-Expenses related to the issuance of Pollution
Control Revenue Bonds and Solid Waste Disposal Revenue Bonds (see Note
7) are included in other assets and are amortized over the life of the
bonds using the straight-line method. At June 30, 1993 and 1994, the
unamortized portion of deferred bond issue costs amounted to $341,000
and $286,000, respectively.
Closure and post-closure reserves-The Company will have material
financial obligations relating to closure and post-closure costs of
landfill facilities it operates or for which it is otherwise
<PAGE>
<TABLE>
responsible. While the precise amount of these future obligations
cannot be determined, the Company has estimated that total costs for
final closure of its existing facilities and post-closure activities,
will approximate $22,760,000. Closure and post-closure accruals
consider final capping of the site, site inspections, ground-water
monitoring, leachate management, methane gas control and recovery, and
operation and maintenance costs to be incurred during the period after
the facility closes.
Closure and post-closure costs are accrued and charged to cost of
operations over the estimated useful lives of such facilities. These
accruals are based on estimates from management reviews performed
periodically. The closure and post-closure requirements for the
Company's municipal solid waste landfills are established by Subtitle
D or the applicable states' adopted and EPA approved Subtitle D
implementation plan. In performing the review for each facility, the
Company analyzes actual costs incurred versus total estimated costs,
updates prior cost estimates to reflect current regulatory requirement,
and considers requirements of proposed regulatory changes.
The Company accounts for closure and post-closure accruals by
comparing the total estimated closure and post-closure cost with the
existing reserve. The difference is accrued and charged to cost of
operations as airspace is consumed.
The Company had closure and post-closure reserves as follows:
June 30,
1993 1994
<S> <C> <C>
Current portion included in
Other Current Liabilities $ 3,665,000 $ 2,019,000
Non-current portion included in
Other Liabilities 5,926,000 5,617,000
$ 9,591,000 $ 7,636,000
</TABLE>
Marketable Securities-In May 1993, the FASB issued Statement No. 115
"Accounting for Certain Investments in Debt and Equity Securities".
The Statement would require the Company to report its investment in
marketable securities (see Note 5) at fair value, with unrealized gains
and losses reported in a separate component of shareholders' equity.
The Company is required to adopt this statement in fiscal 1995 and the
effect of this adoption is not anticipated to be material to the
financial position or results of operations of the Company.
Note 2 Special Charges
In fiscal 1993, the Company incurred special charges in the amount
of $21,043,000. These charges included principally (i) writeoffs and
reserves of $10,143,000 related to certain landfill development
<PAGE>
projects (ii) a provision of $6,900,000 for additional reserves for
potential future expenditures relating to the long-term requirements
for closure/post closure management of certain of the Company's
landfills and (iii) a general reserve of $4,000,000 for property no
longer needed for operations and other matters.
Note 3 Acquisitions/Divestitures:
The Company purchased the routes and certain other assets of six,
four and one company(ies) in 1992, 1993 and 1994, respectively. All of
the acquisitions have been accounted for by the purchase method. The
results of the acquired operations have been included in the Company's
operations since the date of acquisition.
Total consideration paid for the 1992 acquisitions was
$13,676,000, consisting of $4,141,000 cash, $6,252,000 notes payable,
$1,075,000 assumed debt and $2,208,000 in capital stock. In exchange
for this consideration, the Company allocated $5,538,000 to tangible
assets and purchased routes and the remainder of $8,138,000 was
recorded as goodwill.
Total consideration paid for the 1993 acquisitions was $654,000,
consisting of $356,000 cash and of $298,000 notes payable.
Total consideration paid for the 1994 acquisition was $35,000,
paid in cash.
The Company's financial results for the years ended June 30, 1992,
1993, and 1994 would not be materially different if the results of all
acquisitions were included as though the acquisitions occurred at the
beginning of each period.
In October 1990, the Company issued 300,000 shares of its common
stock in exchange for all the outstanding capital stock of a waste
collection company. This transaction, which was not material to the
Company's financial position or results of operations when originally
recorded in fiscal 1991, was accounted for as a pooling-of-interests at
that time. However, as a result of new information, it was determined
in fiscal 1993 that the transaction would have been more properly
recorded by using the purchase method. Accordingly, the financial
statements for the year ended June 30, 1993 reflect this revision. As
the effect was not material, financial statements for prior years were
not restated. Total consideration paid for this acquisition was
$9,310,000 consisting of 300,000 shares of capital stock at a
guaranteed price of $30 per share and $310,000 in assumed debt in
excess of assets acquired. In exchange for this consideration, the
Company allocated $1,215,000 to purchased routes and $8,095,000 to
goodwill. As part of this transaction the Company issued 240,000
shares of common stock in fiscal 1994 as renumeration for a stock price
guarantee.
<PAGE>
In April 1992, the Company sold certain assets and routes in
California for $1,949,000. The Company recognized a gain of
approximately $537,000, which is included in Nonoperating income
(expense) - Other in the Consolidated Statement of Operations.
In February 1993, the Company sold its equity investment in the
outstanding common stock of Best Pak Disposal resulting in a gain of
$2,800,000. As part of this transaction, the Company received 75,000
shares of common stock of USA Waste, the value of which is included in
other current assets. The gain of $2,800,000 was included in
nonoperating income (expense)-other in the Consolidated Statement of
Operations for the year ended June 30, 1993.
<TABLE>
Note 4 Property and equipment:
Property and equipment is composed of the following:
June 30,
1993 1994
<S> <C> <C>
Land $ 26,834,000 $ 27,271,000
Landfill sites 47,935,000 52,445,000
Buildings and leasehold improvements 35,642,000 40,080,000
Vehicles 72,172,000 74,854,000
Equipment and other 76,842,000 81,800,000
259,425,000 276,450,000
Less accumulated depreciation and amortization 86,763,000 90,852,000
$172,662,000 $185,598,000
Note 5 Other assets:
Other non-current assets consist of the following:
June 30,
1993 1994
<S> <C> <C>
Marketable securities, at cost $ 2,275,000 $ 2,260,000
Secured note receivable 2,788,000 3,113,000
Joint development venture 2,175,000 3,073,000
Other 4,936,000 5,274,000
$12,174,000 $13,720,000
</TABLE>
In April 1992, negotiations with GII over the proposed acquisition
of that company were terminated. As a result, the Company
substantially wrote-down its investment in GII to reflect the estimated
net realizable value. Writedowns related to GII totaled $6,600,000,
including investments, advances and certain direct acquisition costs.
This writedown was included in nonoperating income (expense) - other,
in the Consolidated Statement of Operations for the year ended June 30,
1992. In April 1993, the Company received an Order of the Bankruptcy
Court allowing the Company to setoff a debt to a GII Industries
<PAGE>
<TABLE>
shareholder in the amount of $2,465,000 against the advances to GII,
which were personally guaranteed by this shareholder.
In fiscal 1992, the Company entered into a joint development
arrangement with two other companies, for the purpose of developing a
waste-by-rail project called California Inter-Rail. The project is in
the preliminary permitting stage and expects to receive solid waste
from throughout Southern California. The preliminary permitting cost
estimate is approximately $5,000,000 for each member of the joint
development team. The Company's investment in this venture totaled
$2,175,000 and $3,073,000 at June 30, 1993 and 1994, respectively.
Note 6 Other current liabilities:
Other current liabilities consist of the following:
June 30,
1993 1994
<S> <C> <C>
Uninsured claims $ 5,426,000 $ 6,698,000
Closure and post-closure reserves 3,665,000 2,019,000
Reserve for loss on municipal contract 3,161,000 500,000
Other 9,614,000 10,643,000
$21,866,000 $19,860,000
The Company has a risk management program whereby it retains the
liability, subject to maximum limits, for auto, general liability,
employee health and welfare benefits and workers' compensation. As
required by law, the Company has pledged certain marketable securities,
and has established a letter of credit in the amount of $1,024,000 as
of June 30, 1994, to guarantee its workers' compensation obligations in
California. The Company establishes self insured losses and loss
adjustment expenses based on estimates of the ultimate cost of claims
which have been reported but not fully paid, and of claims which have
been incurred but not yet reported. The length of time for which such
costs must be estimated varies depending on the coverage involved.
Actual claim costs are dependent upon such complex factors as
inflation, changes in doctrine of legal liability and size of damage
awards. Because of the variables involved, the reserving process
results in an estimate rather than an exact calculation of liabilities.
The estimated liability for uninsured claims at June 30, 1994, included
in other current liabilities and other liabilities, consists of the
following:
Current Long-term Total
<S> <C> <C> <C>
Liability and property damage $2,746,000 $2,746,000 $ 5,492,000
Workers' compensation 2,828,000 2,829,000 5,657,000
Employee health and welfare 1,124,000 - 1,124,000
$6,698,000 $5,575,000 $12,273,000
</TABLE>
<PAGE>
<TABLE>
Under its current risk management programs, the Company's maximum
liability per occurrence is listed below:
Auto and general liability $100,000
Workers' compensation $ 325,000 - $500,000
Employee health and welfare $ 75,000
Note 7 Long-term debt:
Long-term debt, which approximates market value, consists of the
following:
June 30,
1993 1994
<S> <C> <C>
Notes payable to banks, unsecured,
with interest rates at LIBOR plus 1.25%
(averaging 5.42% at June 30, 1994) $78,682,000 $82,000,000
Solid Waste Disposal Revenue Bonds
with variable interest rates (2.625%
at June 30, 1994) maturing through 2000 8,200,000 8,200,000
Pollution Control Revenue Bonds with
interest rates from 5.4% to 6.0%,
maturing 1994 to 2000 1,808,000 1,489,000
Capitalized lease obligations with imputed
interest rates up to 15.95% 738,000 261,000
Other notes payable, secured and unsecured,
with interest rates up to 15.95% 2,190,000 1,440,000
Total long-term debt 91,618,000 93,390,000
Less current instalments 1,728,000 1,526,000
Long-term debt, excluding current instalments $89,890,000 $91,864,000
Aggregate principal amounts of long-term debt at June 30, 1994,
including capital leases, are due as follows:
Year Ended
June 30,
1995 $ 1,526,000
1996 15,610,000
1997 66,469,000
1998 1,293,000
1999 265,000
Thereafter 8,227,000
$93,390,000
The revolving line of credit (the "agreement"), which currently
matures on June 1, 1997, permits borrowings up to $100,000,000. At the
Company's option, borrowings under the agreement bear interest at the
</TABLE>
<PAGE>
bank's prime rate and/or at the London Interbank Offered Rate (LIBOR)
plus .75 to 2.0 per cent, (1.25 per cent at June 30, 1994), depending
upon certain ratios. The agreement has a $16.5 million quarterly
commitment reduction commencing March 1, 1996. On or before the first
day of October of each year, the Company has an option to request an
extension of the revolving period and the termination date with the
approval of its banks. The Company has exercised this option and
currently is awaiting the approval of its banks. If this option is
approved, the termination date shall be extended to June 1, 1999, the
quarterly commitment reduction date shall be extended to March 1, 1997,
and the quarterly commitment reduction will be reduced from $16.5
million to $10 million. Thereafter, each extension request shall be
for a period of one year. The agreement requires no compensating
balances. Under the terms of the agreement, the Company is subject to
various debt covenants including maintenance of certain financial
ratios, and in addition, it limits the amount of cash dividends.
At June 30, 1993, obligations related to capital expenditures in
the amount of $8,682,000 were classified as long-term debt. Funds
available under the revolving line of credit provided management with
the ability to refinance this debt, in early 1994, on a long-term
basis. The obligations were classified as long-term debt and included
in the notes payable to banks classification above.
Solid Waste Disposal Revenue Bonds issued by the California
Pollution Control Financing Authority are secured by a solid waste
landfill facility constructed with bond proceeds. The bonds bear
interest at a floating rate set weekly until conversion to a fixed
rate, at the option of the Company, for the remaining term of the
bonds. As of June 30, 1994, the company has not exercised its option
of conversion to a fixed rate. The Company also has an option to
redeem the bonds prior to maturity at the redemption price ranging
from 100% to 103% depending on the redemption date. At June 30, 1994,
the Company established in the trustee's favor an irrevocable letter of
credit for the principal amount of $8,200,000 plus 123 days accrued
interest on the bonds to guarantee repayment.
Pollution Control Revenue Bonds issued by the California Pollution
Control Financing Authority are secured by a solid waste disposal
facility constructed with bond proceeds. Revenue from the operation of
the solid waste disposal facility is pledged to secure repayment of the
bonds. The Company is required to deposit into a Reserve Fund an
amount equal to three months' debt service (principal and interest).
The Reserve Fund balances at June 30, 1993 and 1994 were $527,000 and
$546,000 respectively, and have been deducted from bond principal
outstanding. Bond repayment is guaranteed up to a maximum of 80
percent by the Federal Small Business Administration.
At June 30, 1994, $10,328,000 of long-term debt was collateralized
by land, buildings and equipment with a carrying value of $8,965,000.
Interest paid during fiscal years 1992, 1993 and 1994 was $5,217,000,
$5,010,000, and $4,652,000, respectively.
<PAGE>
The fair value of the Company's long term debt calculated using
current rates offered to the Company for debt of the same remaining
maturities is not materially different from the amounts included in the
Consolidated Balance Sheet.
Note 8 Income taxes:
Effective July 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes". Under the liability
method, deferred tax liabilities and assets are determined based on the
difference between financial reporting and tax basis of assets and
liabilities, using the enacted tax rates in effect for the year in which the
differences are expected to reverse. Taxes previously accrued will be
adjusted for changes in tax rates as they become effective as opposed to when
the taxes were recorded. The cumulative effect of adopting Statement 109 was
a $414,000 benefit to income. As permitted under the new rules, prior year
financial statements have not been restated.
Significant components of deferred tax assets and liabilities, as of
June 30, 1994 were as follows:
Deferred tax assets:
Self insurance $ 4,572,000
Asset valuation reserves 4,305,000
Reserve for landfill related costs 4,094,000
Reserve for loss on municipal contract 1,348,000
Reserve for litigation settlements 1,013,000
Reserve for disposal of a division 581,000
State taxes 595,000
Other, net 1,127,000
Total deferred tax assets 17,635,000
Deferred tax liabilities:
Tax over book depreciation 11,935,000
Deferred gain on sale of asset 1,465,000
Prepaid expenses 490,000
Other 1,373,000
Total deferred tax liabilities 15,263,000
Net deferred taxes $ 2,372,000
<PAGE>
<TABLE>
<PAGE>
Income tax expense (benefit) consists of the following:
Year Ended June 30,
1992 1993 1994
Deferred Method Liability Method
Current:
<S> <C> <C> <C>
Federal $5,588,000 $ 1,441,000 $ 7,085,000
State 1,257,000 555,000 1,682,000
6,845,000 1,996,000 8,767,000
Deferred:
Federal (4,115,000) (4,891,000) 1,174,000
State ( 840,000) (1,455,000) 153,000
(4,955,000) (6,346,000) 1,327,000
$1,890,000 $(4,350,000) $10,094,000
The provision for deferred taxes consists of the following:
Year Ended June 30,
1992 1993
<S> <C> <C>
Accelerated depreciation for
tax purposes $( 628,000) $ 1,811,000
Write down of investment in GI Industries (2,341,000) --
Change in allowance valuation of properties -- ( 820,000)
Reserves for landfill related costs -- ( 2,992,000)
Reserve for loss on municipal contract -- ( 2,460,000)
Reserve for litigation settlements -- ( 1,230,000)
Reserve for disposal of a division (1,479,000) 666,000
Valuation allowance on fixed assets ( 600,000) --
Change in estimated liability for
uninsured claims (454,000) (1,753,000)
Change in certain prepaid expenses 360,000 86,000
Equity investment income 49,000 ( 260,000)
Other, net 138,000 606,000
$(4,955,000) $(6,346,000)
A reconciliation of income tax expense (benefit) computed by applying the statutory federal
income tax rate to income (loss) before taxes and reported tax expense is presented below:
Year Ended June 30,
1992 1993 1994
<S> <C> <C> <C>
Income tax computed at statutory
federal income tax rate $1,448,000 $(4,918,000) $ 7,918,000
Tax credits, net (382,000) -- --
State income taxes, net of federal income
tax benefit 275,000 (594,000) 1,193,000
Provision for non-deductible items -- 764,000 600,000
Amortization and other expenses not
deductible for tax purposes, net 549,000 398,000 383,000
Income tax expense (benefit) as reported $1,890,000 $(4,350,000) $10,094,000
Effective tax rate 44.4% (30.1%) 44.6%
</TABLE>
<PAGE>
<TABLE>
The Company made income tax payments of $5,919,000, $5,014,000,
and $5,995,000 during fiscal years 1992, 1993 and 1994, respectively.
The Company's corporate tax returns are currently being audited by
the Internal Revenue Service for fiscal years 1989 through 1993. The
IRS has proposed adjustments for these years, which the Company is
vigorously protesting, which neither alone nor together would have a
material effect on the Company's financial statements, when resolved.
Note 9 Shareholders' equity:
Notes receivable of $598,000 and $154,000, due from employees for
the purchase of shares of the Company's common stock under stock option
plans, have been deducted from shareholders' equity at June 30, 1993
and 1994, respectively.
During fiscal 1994, the Company accepted as settlement of a
receivable, 97,000 shares of common stock valued at $970,000. The
shares were canceled and returned to authorized but unissued status.
The Company issued 240,000 shares of common stock in fiscal 1994
as renumeration for a stock price guarantee related to an acquisition
which took place in fiscal 1991 (See Note 3).
Primary and fully diluted earnings per share are computed on the
basis of the weighted average number of shares outstanding plus the
common stock equivalents which would arise from the exercise of stock
options as follows:
Year Ended June 30,
1992 1993 1994
<S> <C> <C> <C>
Primary 14,031,000 13,818,000 15,048,000
Fully diluted 14,031,000 13,818,000 15,525,000
The Company presently maintains three stock option plans affording
key employees and directors with the Company the right to purchase
shares of its common stock. At June 30, 1994, options were available
for future grants only under one of the plans, the Companys 1992 Stock
Option Plan. The options may be designated as incentive or non-
qualified in nature, at the discretion of the Compensation Committee of
the Board of Directors, though only employees are eligible to receive
incentive stock options. The Company has reserved 2,000,000 shares
under its Incentive Stock Option Plan (ISOP) and an additional
2,000,000 shares under its Non-Qualified Stock Option Plan. In
addition, the 1992 plan provides for the reserve of 2,000,000 shares
</TABLE>
<PAGE>
<TABLE>
which are to be designated as either qualified or non-qualified. The
plans provide for the granting of options at a purchase price of at
least 100% of the fair market value on the date the options are
granted. Options are generally exercisable in instalments beginning
one year after the grant date.
Information with respect to options granted under the plans is as
follows:
Non-qualified
ISOP Plan
<S> <C> <C>
Outstanding at July 1, 1992 992,500 1,367,466
Issued -- 476,850
Canceled (174,450) (168,750)
Exercised ( 39,050) ( 5,000)
Outstanding at June 30, 1993 779,000 1,670,566
Issued -- 740,400
Canceled ( 20,561) ( 48,333)
Exercised (168,209) (116,401)
Outstanding at June 30, 1994 590,230 2,246,232
Exercisable at June 30, 1994 546,406 1,097,792
Option price range $8.00-$11.41 $8.00-$15.13
Note 10 Commitments and other items:
The Company leases a portion of its equipment and facilities which
are classified as operating leases.
Minimum rental commitments (exclusive of property tax, insurance
and maintenance) under all non-cancelable operating leases are due at
June 30, 1994, as follows:
1995 $ 5,187,000
1996 2,188,000
1997 80,000
Included above is a lease with the Company's President, which is
due to expire in fiscal 1995, for the rental of one of the Company's
buildings. The rental rate is, in management's opinion, comparable to
that which would have been entered into with independent third parties.
</TABLE>
<PAGE>
Rental expense approximated $10,951,000, $11,415,000 and
$10,156,000 for the fiscal years ended June 30, 1992, 1993 and 1994,
respectively. These amounts include rental payments to the President
of approximately $167,000, $172,000 and $161,000 for the fiscal years
ended June 30, 1992, 1993 and 1994, respectively.
The Company has a 401(k) plan which covers all full time salaried
and clerical employees not represented by a bargaining agreement.
Eligible employees are allowed to contribute up to the maximum allowed
by law. At its discretion, the Company can match up to 50% of the
amount contributed by employees. The Company's contributions for 1992,
1993, and 1994, represented by issuance of Company common stock, were
$504,000 and $506,000, and $566,000, respectively.
In May 1992, the Company made the decision to cease operations and
sell or otherwise dispose of its truck body manufacturing division,
Stagg Equipment Company (Stagg). The decision to dispose of Stagg came
after the Company reassessed the division's prospects in light of the
continuing economic downturn, which significantly affected anticipated
outside demand. In connection with the decision to dispose of Stagg,
the Company recorded a fiscal 1992 provision of $4,050,000 to reflect
the estimated loss on disposition and the estimated future operating
results from Stagg until the completion of its disposal. In November
1993, the Company completed the disposal with the exception of payments
to be made on a long-term lease which will expire in November 1995.
Note 11 Litigation:
The Company was served on October 13, 1993 with a class action
lawsuit. The complaint alleges that the Company violated federal
securities laws with regard to certain disclosures and representations
made by the Company and certain alleged omissions on the part of the
Company in connection with merger negotiations between the Company and
Browning-Ferris Industries ("BFI"). The plaintiffs allege that they
and all other persons or entities that bought the stock of the Company
during the period of September 2, 1993 through October 7, 1993 suffered
damages as a result of changes in the market price of the Company's
common stock. The Company does not believe that it has violated any
laws with regard to the BFI matter and intends to vigorously defend the
lawsuit.
The Company was served on August 9, 1994 with a complaint filed by
certain refuse haulers in San Bernardino County alleging that the
Company violated certain California Business and Professions Code
Sections and also intentionally interfered with existing and
prospective economic relations. The complaint alleges that the Company
does not hold a validly issued permit to operate within a certain
geographic area in the County of San Bernardino and that the Company
has engaged in a course of conduct of predatory pricing. The complaint
also alleges that the Company has violated a San Bernardino County
ordinance by engaging in discriminatory and non-uniform pricing of its
<PAGE>
refuse hauling services. In addition to the injunction, the complaint
prays for three times the actual damages incurred by plaintiffs,
punitive and exemplary damages in the amount to be proven at the time
of trial, reasonable attorneys' fees and costs of suit. The Company
believes it has valid defenses to the allegations and intends to
vigorously defend the suit. The Company also intends to file a cross-
complaint against the plaintiffs for engaging in improper pricing
activities.
The Company was named by the County of Los Angeles in regard to an
indemnification action by the County for collection of alleged damages
resulting from hauling waste from County garbage districts to the
Operating Industries Landfill. The Company and some of its prior
subsidiaries hauled waste to the Operating Industries site for certain
defendant cities and also hauled waste through two defendant county
garbage districts in the County of Los Angeles. In July 1994, the
Company reached an agreement to settle the claims for the amount of
$3,600,000, and received insurance proceeds of $1,200,000 as of June
30, 1994. This amount fell within the range previously accrued. The
settlement includes a release by the EPA with regard to the Operating
Industries site.
In addition to the above, there are a number of claims and suits
pending against the Company for alleged damages to persons and
property, alleged violation of certain laws and for alleged liabilities
arising out of matters occurring during the normal operation of the
waste management business. In the opinion of management, the uninsured
liability, if any, under the aforementioned claims and suits would not
materially affect the financial position of the Company.
Note 12 Loss on Municipal Contract:
On June 30, 1992, the Company entered into an agreement with the
City of San Jose, to provide refuse and recycling services, for a term
of six years, with service beginning July 1, 1993. During the initial
months of the contract, it became apparent that the level of services
required for the contract and related costs of operation would be
greater than originally envisioned. This occurred, in part, by factors
outside of the control of the Company. As a consequence, most of the
increased cost could not have been anticipated or estimated prior to
the start of the contract. The Company estimated that it would incur
a loss of $6,000,000 over the life of the contract, in order to satisfy
the service requirements of the contract and accordingly accrued that
amount. The balance of this accrual was approximately $3,000,000 as of
June 30, 1994. Based upon facts presently known to it, the Company
believes that the balance of this accrual is adequate to cover any
future losses related to this contract.
<PAGE>
<TABLE>
<PAGE>
UNAUDITED SELECTED QUARTERLY DATA
(dollars expressed in thousands,
except per share figures)
Income (loss) Net Income
from Net (loss) per
Revenue operations income (loss) share (primary)
Fiscal 1993
<S> <C> <C> <C> <C>
First quarter $ 58,138 $ 4,831 $ 2,366 $ .17
Second quarter 57,280 4,511 2,240 .16
Third quarter 57,067 (17,085)(a) ( 9,831) (.71)
Fourth quarter 58,720 ( 6,819)(b) ( 4,891) (.35)
$231,205 $(14,562) $(10,116) $ (.73)
Fiscal 1994
First quarter $ 62,911 $ 5,201 $ 2,975(c) $ .21(c)
Second quarter 63,323 5,906 2,836 .19
Third quarter 64,949 7,560 3,375 .22
Fourth quarter 65,822 7,756 3,755 .24
$257,005 $ 26,423 $ 12,941 $ .86
(a) Income (Loss) from operations for the third quarter of fiscal 1993
included charges of $21,043 related to landfills, real estate, and other
reserves.
(b) Income (Loss) from operations for the fourth quarter of fiscal 1993
includes charges of $6,000 related to a estimated loss on a municipal
contract, $4,000 related to increased self-insurance loss reserves, and
$1,000 for other reserves.
(c) Net income and net income per share for the first quarter of fiscal 1994
includes a tax benefit of $414 or $.03 per share related to the change
in accounting for income taxes.
</TABLE>
<PAGE>
<PAGE>
PART III
Items 10, 11, 12 and 13 of Part III (except for certain
information required with respect to executive officers of the Company
which is set forth below) have been omitted from this report, since the
Company will file with the Securities and Exchange Commission, not
later than 120 days after the close of the fiscal year, a proxy
statement, pursuant to Regulation 14A, which involves the election of
directors. The information required by Items 10, 11, 12 and 13 of this
report which will appear in the definitive proxy statement is
incorporated by reference into Part III of this report.
The executive officers of the Company are as follows:
Present Office
Name Age or Position (1)
Kosti Shirvanian (2) (3) 64 Chairman of the Board of
Directors and President
Ramsey DiLibero (3) 66 Chief Operating Officer, Director
Savey Tufenkian (2) (3) 65 Executive Vice President,
Secretary and Treasurer;
Director
Lawrence F. McQuaide (3) 46 Executive Vice President,
Finance
(1) Officers serve at the discretion of the Board of Directors.
(2) Kosti Shirvanian is the brother of Savey Tufenkian.
(3) Member, Management Committee. The Committee, composed of certain
officers and outside board members, coordinates Company
operations.
<PAGE>
Kosti Shirvanian founded the Company in 1955 as a sole
proprietorship. He became the Chairman of the Board and President when
the Company was incorporated in 1964.
Ramsey DiLibero joined the Company in 1993 as Chief Operating
Officer. Prior to joining the Company Mr. DiLibero served as Chief
Operating Officer of CECOS International, Inc. and Chief Executive
Officer of Browning-Ferris International, both subsidiaries of
Browning-Ferris Industries. Mr. DiLibero also served as Chief
Operating Officer of Waste Resources Corporation and SCA Services, Inc.
Savey Tufenkian helped to establish the Company in 1955 and has
served as the Secretary and Treasurer of the Company since its
incorporation in 1964. In 1988 she was elected as Executive Vice
President, Secretary and Treasurer.
Lawrence F. McQuaide, certified public accountant, joined the
Company in 1984 as Vice President, Finance. In 1988 he was elected as
Executive Vice President, Finance. Prior to joining the Company, Mr.
McQuaide was a Senior Manager with Price Waterhouse where he had served
for eleven years.
<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) Financial Statement, Schedules and Exhibits.
1. Financial Statement (included in Item 8)
Reports of Independent Auditors
Consolidated Balance Sheet - June 30, 1993 and 1994
Consolidated Statement of Operations for the Three Years
Ended June 30, 1994
Consolidated Statement of Shareholders' Equity for the
Three Years Ended June 30, 1994
Consolidated Statement of Cash Flows for the Three
Years Ended June 30, 1994
Notes to Consolidated Financial Statements
2. Schedules.
Schedule II - Amounts Receivable for Related Parties, and
Underwriters, Promoters, and Employees Other Than Related
Parties
Schedule V - Property and Equipment
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule X - Supplementary Income Statement
All other schedules have been omitted since the required
information is not significant or is included in the
financial statements or the notes thereto, or is not
applicable.
3. Exhibits
The exhibits to this Report are listed
in the Exhibit Index elsewhere herein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
fourth quarter of the fiscal year ended June 30, 1994
<PAGE>
<TABLE>
<PAGE>
SCHEDULE II
WESTERN WASTE INDUSTRIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES, AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN
RELATED PARTIES
Deductions Balance at
Balance at Amounts end of period
beginning Amounts written Not
of period Additions collected off Current Current
(A)
Fiscal year ended
June 30, 1992:
<S> <C> <C> <C> <C> <C> <C>
Savey Tufenkian $216,000 $75,000 -- $141,000 --
Kosti Shirvanian -- 318,737 -- -- 318,737 --
Fiscal year ended
June 30, 1993:
Savey Tufenkian 141,000 25,000 -- 116,000 --
Kosti Shirvanian 318,737 166,550 115,000 -- 370,287 --
Fiscal year ended
June 30, 1994:
Savey Tufenkian 116,000 58,000 -- 58,000 --
Kosti Shirvanian 370,287 150,000 -- 220,287 --
(A) Includes balances at the dates persons become reportable.
The Company has adopted a policy of making interest free loans to employees to
exercise stock options.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V
WESTERN WASTE INDUSTRIES
PROPERTY AND EQUIPMENT
Balance at Retirements Balance at
beginning Additions and end of
of period at cost Transfers period
Fiscal year ended
June 30, 1992:
<S> <C> <C> <C> <C>
Land $ 21,546,000 $ 5,626,000 $ -- $ 27,172,000
Landfill sites 38,655,000 9,188,000 782,000 47,061,000
Buildings & leasehold
improvements 23,119,000 6,528,000 (484,000) 30,131,000
Vehicles 53,615,000 8,497,000 4,500,000 57,612,000
Equipment and other 60,415,000 13,833,000 2,846,000 71,402,000
Total $197,350,000 $ 43,672,000 $ 7,644,000 $233,378,000
Fiscal year ended
June 30, 1993:
Land $ 27,172,000 $ 367,000 $ 705,000 $ 26,834,000
Landfill sites 47,061,000 11,278,000 10,404,000 47,935,000
Buildings & leasehold
improvements 30,131,000 7,202,000 1,691,000 35,642,000
Vehicles 57,612,000 15,640,000 1,080,000 72,172,000
Equipment and other 71,402,000 9,230,000 3,790,000 76,842,000
Total $233,378,000 $ 43,717,000 $17,670,000 $259,425,000
Fiscal year ended
June 30, 1994:
Land $ 26,834,000 $ 233,000 $ (204,000) $ 27,271,000
Landfill sites 47,935,000 6,125,000 1,615,000 52,445,000
Buildings & leasehold
improvements 35,642,000 7,098,000 2,660,000 40,080,000
Vehicles 72,172,000 14,743,000 12,061,000 74,854,000
Equipment and other 76,842,000 7,257,000 2,299,000 81,800,000
Total $259,425,000 $ 35,456,000 $18,431,000 $276,450,000
</TABLE>
<PAGE>
<TABLE>
<PAGE>
SCHEDULE VI
WESTERN WASTE INDUSTRIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
Additions
Balance at Charged to Retirements Balance at
beginning Costs and and end of
of period expenses Transfers period
Fiscal year ended
June 30, 1992:
<S> <C> <C> <C> <C>
Landfill sites $ 4,176,000 $ 2,032,000 $ 490,000 $ 5,718,000
Buildings & leasehold
improvements 4,788,000 1,122,000 -- 5,910,000
Vehicles 34,690,000 4,519,000 4,026,000 35,183,000
Equipment and other 26,390,000 6,086,000 1,225,000 31,251,000
Total $70,044,000 $13,759,000 $ 5,741,000 $78,062,000
Fiscal year ended
June 30, 1993:
Landfill sites $ 5,718,000 $ 1,415,000 $ 47,000 $ 7,086,000
Buildings & leasehold
improvements 5,910,000 1,190,000 531,000 6,569,000
Vehicles 35,183,000 5,161,000 2,641,000 37,703,000
Equipment and other 31,251,000 7,453,000 3,299,000 35,405,000
Total $78,062,000 $15,219,000 $ 6,518,000 $86,763,000
Fiscal year ended
June 30, 1994:
Landfill sites $ 7,086,000 $ 1,940,000 $ 732,000 $ 8,294,000
Buildings & leasehold
improvements 6,569,000 1,651,000 128,000 8,092,000
Vehicles 37,703,000 6,644,000 9,623,000 34,724,000
Equipment and other 35,405,000 8,849,000 4,512,000 39,742,000
Total $86,763,000 $19,084,000 $14,995,000 $90,852,000
</TABLE>
<PAGE>
<TABLE>
<PAGE>
SCHEDULE VIII
WESTERN WASTE INDUSTRIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
For the Three Years Ended June 30, 1994
Balance Additions Deductions Balance
beginning Charged to from end of
of year Expense Allowances year
<C> <C> <C> <C> <C>
1992 $1,291,000 $2,021,000 $1,935,000 $1,377,000
1993 1,377,000 1,858,000 1,881,000 1,354,000
1994 1,354,000 1,965,000 1,708,000 1,611,000<PAGE>
SCHEDULE X
</TABLE>
<PAGE>
WESTERN WASTE INDUSTRIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
During 1992, 1993 and 1994, maintenance and repairs charged to costs and
expenses in the Consolidated Statement of Operations were $16,770,000,
$18,951,000 and $20,547,000, respectively.
<PAGE>
<PAGE>
Exhibit Index
Exhibit
No. Description of Exhibit
3.1 Articles of Incorporation of registrant
as presently in effect (Exhibit 3.1 to
Form S-1 Registration Statement No. 2-
83121 and incorporated herein by
reference.)
3.2 By-laws of registrant as presently in
effect (Exhibit 3.2 to Form S-1
Registration Statement No. 2-83121 and
incorporated herein by reference.)
4.1 Specimen of Common Stock Certificate
(Exhibit 4.1 to Form S-1 Registration
Statement No. 2-8131 and incorporated
herein by reference.)
10.1 Twenty-five Year Lease dated May 1, 1968
between Kosti Shirvanian and Marian
Shirvanian as lessors and registrants as
lessee, as amended March 24, 1983 ("the
Lease") (Exhibit 10.1 to Form S-1
Registration Statement No. 2-83121 and
incorporated herein by reference.)
10.2 Second amendment to the Lease.
10.3 1983 Incentive Stock Option Plan of
Western Waste Industries (Exhibit 10.6
to Form S-1 Registration Statement No.
2-83121 and incorporated herein by
reference.)
10.4 Employee Stock Ownership Plan and
Employee Stock Ownership Trust Agreement
(Exhibit 10.7 to Form S-1 Registration
Statement No. 2-83121 and incorporated
herein by reference.)
10.5 1983 Non-Qualified Stock Option Plan
(Exhibit 10.10 to Form 10-K Annual
Report of Registrant for the fiscal year
ended June 30, 1984 and incorporated
herein by reference.)
10.6 Revolving Credit Agreement dated as of
November 19, 1992 among Western Waste
Industries, as Borrower and Citicorp,
USA, Inc., Bank of America National
Trust and Savings Association, ABN AMRO
<PAGE>
Bank, The Bank of Nova Scotia, The
First National Bank of Boston, and BHF-
Bank, as Lenders, and Citicorp USA, Inc.
as Agent for Lenders ("the Revolving
Credit Agreement"). (Exhibit 10.1 to
Form 10-Q for Quarter Ended December 31,
1992 and incorporated herein by
reference.)
10.7 First Amendment dated as of June 28,
1993 to the Revolving Credit Agreement
(Exhibit 10.9 to Form 10-Q for Quarter
Ended September 30, 1993 and
incorporated herein by reference.)
10.8 Second Amendment dated as of October 14,
1993 to the Revolving Credit Agreement
(Exhibit 10.10 to Form 10-Q for Quarter
Ended September 30, 1993 and
incorporated herein by reference.)
10.9 Third Amendment dated as of February 25,
1994 to the Revolving Credit Agreement
(Exhibit 10.11 to Form 10-Q for Quarter
Ended March 31, 1994 and incorporated
herein by reference.)
10.10 Western Waste Industries 401(k) Savings
and Investment Plan. (Exhibit 10.2 to
Form 10-Q for Quarter Plan Ended
September 30, 1988 and incorporated
herein by reference.)
10.11 1992 Stock Option Plan, as amended
10.12 Amendment to Stock Option Plan
21.1 Subsidiaries of registrant (Exhibit
22.1 to Form 10-K for year ended June
30, 1993 and incorporated herein by
reference.)
23.1 Consent of independent auditors.
99.1 Amendment to 1983 Incentive Stock Option
and 1983 Non-qualified Stock Option Plan
(undertakings to be incorporated by
reference into Form S-8 Registration
Statement No. 33-9358.)<PAGE>
SIGNATURES
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of
Torrance, State of California, on the 27th day of September, 1994.
WESTERN WASTE INDUSTRIES
By: KOSTI SHIRVANIAN
Kosti Shirvanian
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
KOSTI SHIRVANIAN Chairman of the Board
Kosti Shirvanian of Directors and President
(Principal Executive
Officer)
RAMSEY G. DILIBERO Chief Operating Officer and
Ramsey G. DiLibero Director
LAWRENCE F. MCQUAIDE Executive Vice President,
Lawrence F. McQuaide Finance (Principal
Financial and Accounting
Officer)
SAVEY TUFENKIAN Executive Vice President,
Savey Tufenkian Secretary-Treasurer and
Director
JOHN W. SIMMONS Director September 27, 1994
John W. Simmons
HARRY S. DERBYSHIRE Director
Harry S. Derbyshire
DR. A. N. MOSICH Director
Dr. A. N. Mosich
<PAGE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-70492) pertaining to the Western Waste Industries 1992 Stock Option
Plan and in the related Prospectus and in the Registration Statement (Form S-8
No. 33-9358) pertaining to the 1983 Incentive Stock Option Plan and the 1983
Non-Qualified Stock Option Plan of Western Waste Industries and in the related
Prospectus of our report dated August 26, 1994, with respect to the consolidated
financial statements and schedules of Western Waste Industries included in the
Annual Report (Form 10-K) for the year ended June 30, 1994.
ERNST & YOUNG LLP
September 27, 1994
EXHIBIT 10.11
WESTERN WASTE INDUSTRIES
1992 OPTION PLAN
1. Establishment and Purpose of Plan
Western Waste Industries (hereinafter referred to as the
"Company") proposes to grant to directors, officers and key
employees of the Company non-qualified options or incentive stock
options (hereinafter referred to in the aggregate as "Options")
or a combination of each to purchase shares of the Company's
Common Stock ("Common Stock"), for the purpose of attracting and
retaining directors, officers and key employees of ability and
experience. Such Options will be granted pursuant to the Plan
(hereinafter referred to as the "Plan"). As used in the Plan, the
term "Incentive Stock Option" means an option described in
Section 422 of the Internal Revenue Code of 1986, as amended. The
term "Non-Qualified Stock Option" means a stock option other than
an Incentive Stock Option.
2. Maximum Number of Shares Subject to Options.
A maximum of 2,000,000 shares of Common Stock (subject to
adjustment in accordance with Section 6 below), may be issued
upon exercise of the Options granted under the Plan. Subject to
the foregoing limitation upon the number of shares which may be
issued upon exercise of Options, shares covered by the
unexercised portion of any Option which has terminated by its
terms or which was canceled pursuant to Section 13 hereof may be
subject to a subsequent Option granted under the plan.
3. Administration of the Plan.
The authority to grant Options under the Plan shall be
vested in the Board of Directors of the Company (hereinafter
referred to as the "Board") or in such committee as may be
appointed form time to time by the Board (which committee is
hereinafter referred to as the "Committee"). Subject to the
provisions of the Plan, the Board, or the Committee, from time to
time on the recommendation of the chief executive officer of the
Company, shall determine the directors, officers and key
employees to whom, and the time or times at which, Options shall
be granted; the number of shares to be subject to each option;
the period of each option and other terms and provisions of each
option. Options need not be identical. The Board may also
interpret the Plan; prescribe, amend and rescind rules and
regulations relating to the plan; amend the plan from time to
time (subject to limitations set forth in Section 111); and make
all other determinations necessary or advisable for the
administration of the plan.
4. Eligibility.
a. Incentive Stock Options may be granted to any employee
of the Company. No Incentive Stock Option shall be granted under
<PAGE>
this Plan to any employee if the grant of such Incentive Stock
Options would cause the aggregate fair market value (determined
as of the date the Option is granted, hereinafter referred to as
the "Date of Grant") of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by
such individual during any calendar year to exceed an amount
equal to $100,000.00.
b. Non-Qualified Stock Options may be granted only to
directors, officers or key employees of the Company.
c. Any director, officer or key employee who has been
granted an Option under this or any other stock option plan of
the Company may be granted an additional Option or Options under
this or any other such plan; subject, however, to any
restrictions that may be contained in any other such plan.
5. Exercise Price.
a. The exercise price for shares under an Incentive Stock
Option shall be not less than 100% of the fair market value of
such shares (110% if the optionee at the time the Option is
granted owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company) as
determined by the Board of Directors or the Committee on the Date
of grant, subject to adjustment as provided in Section 6.
b. The price to be paid for shares covered by a Non-
Qualified Stock Option shall be not less than 50% of the fair
market value of such shares, as determined by the Board or the
Committee on the Date of Grant, subject to adjustment as provided
in Section 6, except that, with respect to Non-Qualified Stock
Options granted to directors, the price to be paid shall be not
less than 100% of the fair market value of such shares as
determined by the Board or Committee on the Date of Grant,
subject to adjustment as provided in Section 6.
In determining the fair market value of such shares, the
Board or Committee shall take into consideration the net book
value of such shares, the net income per share, liquidation value
and, if the Company's stock is publicly traded, the last sale
price reflected on an automated quotations system or listed on a
national securities exchange, as applicable, as of the Date of
Grant, or if no sale price is reported for such date, the last
sale price reported as of the last business day immediately
preceding the Date of Grant. The price of any shares purchased
under exercise of an Option shall be paid in full by any lawful
means at the time of each such exercise
6. Adjustments.
In the event of any change in the Common Stock through
merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, or other change in the corporate or
capital structure (not including the issuance of additional
<PAGE>
shares of any class of the Company's stock for adequate
consideration received by the Company), appropriate adjustment
shall be made by the Board in the number of shares and the price
per share subject to outstanding Options, and in the number of
shares and, if any, the par value thereof of the aggregate number
of shares available for such Options as set forth in Section 2
hereof. Such adjustment shall be made so that the plan and
Options theretofore or thereafter to be issued thereunder shall
remain substantially the same as before such change, and so that
the benefits receivable under any outstanding Option shall not be
increased or decreased from those which the optionee had before
such change. The determination of any such adjustment by the
Board shall be final, binding and conclusive. Anything herein
contained to the contrary notwithstanding, upon the dissolution
of the Company, or upon any merger or consolidation of the
Company where the Company is not the surviving corporation and
the surviving corporation does not agree to exchange its options
for Options granted under the plan, all Options granted under the
plan shall terminate and thereupon become null and void; but the
optionee shall have the right, immediately prior to such
dissolution, merger or consolidation, to exercise any such Option
without regard to any otherwise applicable restriction as to time
of exercise, other than expiration of the Option Period.
7. Option Period and Limitation on Exercise.
Options shall be exercisable at such times and for such
period (the "Option Period") as may be fixed by the Board or the
Committee at the Date of Grant.
8. Effect of Termination of Director or Officer or Employee.
a. If an optionee ceases to be a director, officer or
employee of the Company, for any reason other than death, such
optionee may exercise his Options in accordance with their terms
only for a period of thirty (30) days after such cessation (but
not beyond the Option Period). Any exercise of Options after such
cessation may be only to the extent of the full number of shares
the optionee was entitled to purchase under the Option on the
date of such cessation. The Board, in its sole discretion, may
determine to accelerate the exercisability of all or any portion
of any such individual's Option upon any such cessation.
b. If an optionee dies while a director, officer or
employee of the Company, any Options held by the deceased
optionee will continue in effect and may be exercised in
accordance with their terms for a period of twelve (12) months
from the date of the optionee's death (but not beyond the Option
Period) by the executor or administrator of such optionee's
estate, or in the event there is no such executor or
administrator (or the person holding such position has been
discharged), then by the person or persons to whom the optionee's
rights under the Option shall pass by will or the laws of descent
and distribution.
<PAGE>
c. Options shall not be affected by authorized leaves of
absence so long as the optionee continues to be director, officer
or employee of the Company.
9. Nontransferability of Options.
Options granted hereunder shall not be transferable except
to the executor or administrator of the optionee's duly appointed
and acting guardian or conservator, and shall be exercisable
during the optionee's lifetime only by the optionee or by such
guardian or conservator for the benefit of the optionee. Options
may, however, be surrendered to the Company for cancellation for
such consideration and upon such terms as may be mutually agreed
upon by the Company and the holder of such Options.
10. Effective Date and Expiration of the Plan.
The Plan becomes effective upon its adoption by the Board of
Directors and approval by an affirmative vote of the holders of a
majority of the outstanding shares of the Common Stock of the
Company present and entitled to vote thereon at the annual
meeting of shareholders. Unless sooner terminated, the Plan's
authority to grant Options shall expire on November 5, 2002
("Expiration Date"), but the Plan shall remain in full force and
effect beyond the Expiration Date for all Options granted prior
to the Expiration Date.
11. Amendment and Termination of the Plan Prior to Expiration
Date.
At any time prior to the expiration of the Plan, the Board
may terminate, suspend, modify or amend the Plan, provided that:
a. No such modification or amendment shall, without
the approval of the holders of a majority of the
outstanding voting shares of the Company (i) increase,
beyond the amount set forth in Section 2, the total
number of shares which may be issued upon exercise of
options granted under the Plan (except as provided in
Section 6), (ii) provide for the grant of options
having an option exercise price per share of Common
Stock less than the amount set forth in Section 5, or
(iii) postpone the date of the expiration of the Plan
beyond that set forth in Section 10 above; and
b. In no event shall any termination, suspension,
modification or amendment of the Plan alter or impair,
without the consent of the respective optionee, any
rights or obligations under Options theretofore granted
under the Plan, subject only to adjustment or
cancellation as provided in Section 6, 8, 12 and 13.
12. Compliance with Applicable Law.
This Plan, Options granted hereunder, and the issuance of
<PAGE>
Common Stock upon exercise of such Options are or may be subject
to compliance with various laws and rules, regulations and
policies of various regulatory bodies and agencies, including the
Securities and Exchange Commission, as now in effect or as may
hereafter be adopted or amended. The grant of Options under the
Plan and the issuance of Common stock upon the exercise thereof
are each expressly conditioned upon compliance with all such
laws, rules, regulations and policies, In the event that the
Company, after making reasonable efforts to do so, shall be
unable to obtain any necessary authorization or permit required
in order to implement this Plan or to issue Common Stock upon
exercise of Options granted hereunder, or is otherwise unable to
comply with any such applicable law, rule, regulation or policy,
the Company may decline to allow the exercise of any Option until
all such permits or authorizations are issued or until it can
effect such compliance. If it is ultimately determined, in the
sole judgment of the Board, that the Company cannot reasonably
obtain any such permit or authorization or effect such
compliance, unexercised Options affected thereby shall thereupon
be canceled upon notice to the holders of such Options, all
without any liability whatsoever of the Company to any optionee.
13. Cancellation or Amendment of Options.
At any time prior to the expiration of the Plan, the Board
may, with the written consent of the optionee, cancel or modify
all Options, or any portion thereof previously granted to such
optionee.
14. No Rights as Shareholder.
Optionee shall have no rights as a shareholder with respect
to any shares of Common Stock covered by the Option until the
date of the issuance of a stock certificate to him. Except as may
be provided under Section 6 of the Plan, no adjustment will made
for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.
15. Optional Form of Payment for Shares.
Payment for any number of shares of Common Stock of the
Company purchased pursuant to the exercise of Options granted
hereunder may, at the option of the optionee, be made by
delivering to the Company a number of shares of the Common Stock
of the Company having a fair market value (on the date such
Option is exercised) equal to the Option Price for such shares.
16. Limitation of Rights; Employment Relationship.
Neither the establishment of the Plan or any modifications
thereof, nor the grant of any Options hereunder, shall be
construed as giving to any optionee or other person any legal or
equitable right against the Company except as specifically
provided herein; and, in no event, shall the terms of employment
of any employee be modified or in any way be affected hereby.
Note: The foregoing 1992 Stock Option Plan was adopted by the
Board of Directors of Western Waste Industries on November 6,
<PAGE>
1992 and was approved by majority of the outstanding shares of
the Company's Common Stock present and entitled to vote thereon
at a meeting of shareholders duly held on January 31, 1994.
EXHIBIT 10.2
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease ("Second Amendment"), dated as of
February 28,1993, is entered into by and between KOSTI and MARIAN
SHIRVANIAN, husband and wife ("Lessor") and WESTERN WASTE
INDUSTRIES, a California corporation, formerly known as "Western
Refuse Hauling, Inc."(Tenant").
Recitals
A. Lessor and Tenant entered into that certain Twenty-Five Year
Lease (the "Lease"), dated May 1, 1968, pursuant to which Lessor
leased to Tenant those premises in the County of Los Angeles, State
of California, described as: "Approximately two and one-half acres
known as 401 W. Francisco, together with approximately one acre
immediately adjacent to said property abutting on Main Street."
The capitalized terms used and not otherwise defined herein shall
have the meanings set forth for such terms in the Lease,
B. The Lease was amended on March 24, 1983 (the "First
Amendment") to, among other things, increase the rental and to
provide for future rent adjustments.
C. Lessor and Tenant now desire to amend the Lease as
hereinafter provided.
Amendment
NOW, THEREFORE, Lessor and Tenant agree as follows:
1. Expiration Date. The first full paragraph on page 2 of the
Lease is hereby deleted in its entirety and the following is
substituted in place thereof:
"TO HAVE AND TO HOLD said premises, together with the
tenements, hereditaments, appurtenances and easements
thereunto belonging, at the rental and upon the terms,
conditions, covenants and agreements herein stated, for
a term commencing on the 1st day of June 1968, and ending
on the 28th day of February 1995, hereinafter called
'said term'."
2. Monthly Base Rent. Lessor and Tenant agree that the monthly
basic guaranteed rent, as that term is defined in the First
Amendment, is as of the date of this Amendment, the sum of $14,457.
3. No Other Modification . Except as modified by this Second
Amendment, the Lease, as amended, remains in full force and effect.
4. Miscellaneous. This Second Amendment shall bind, and shall
<PAGE>
inure to the benefit of, the successors and assigns of the parties.
This document may be executed in counterparts with the same force
and effect as if the parties had executed one instrument, and each
such counterpart shall constitute an original hereof. No provision
of this Second Amendment that is held to be inoperative,
unenforceable or invalid shall affect the remaining provisions, and
to this end all provisions hereof are hereby declared to be
severable. Time is of the essence of this Second Amendment. This
Second Amendment shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date first written above.
"LESSOR"
KOSTI SHIRVANIAN
Kosti Shirvanian
MARIAN SHIRVANIAN
Marian Shirvanian
"TENANT"
WESTERN WASTE INDUSTRIES
By: SAVEY TUFENKIAN
EXECUTIVE VICE PRESIDENT
Title
EXHIBIT 10.12
AMENDMENT TO 1983 INCENTIVE STOCK OPTION, 1983 NON-QUALIFIED
STOCK OPTION AND 1992 STOCK OPTION PLANS
Approved by Board of Directors on December 18, 1992
Any employee who retires from the Company after at least ten
years of service will be allowed to exercise any and all options
granted under the qualified and non-qualified stock option plans
within one year from the time of retirement and any options which
are not vested at the time of retirement automatically vest upon
said retirement.
