UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1994
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11264
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WESTERN WASTE INDUSTRIES
(Exact name of registrant as specified in its charter)
California 95-1946054
- - ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21061 S. WESTERN AVENUE TORRANCE, CALIFORNIA 90501
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (310) 328-0900
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
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of October 31, 1994
Common Stock - No par value 14,430,776
Exhibit Index on Page 12
Page 1 of 12 <PAGE>
WESTERN WASTE INDUSTRIES
INDEX
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets
June 30, 1994 - Audited
September 30, 1994 - Unaudited..................... 3
Consolidated Statements of Income - Unaudited........ 4
Consolidated Statements of Cash Flows - Unaudited.... 5
Notes to Consolidated Financial Statements -
Unaudited.......................................... 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 8
PART II. OTHER INFORMATION.................................... 10
SIGNATURES........................................... 11
EXHIBIT INDEX.................................................. 12
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PART I. FINANCIAL INFORMATION
WESTERN WASTE INDUSTRIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1994 1994
-------- --------
(Unaudited)
ASSETS (dollars in thousands)
Current assets:
Cash and short-term investments $ 9,935 $ 3,447
Receivables, less allowance of $1,611 in
June 1994 and $1,662 in September 1994 31,367 33,591
Supplies 3,349 3,291
Prepaid expenses 2,842 3,504
Other current assets 1,323 1,436
Deferred income tax benefit 5,319 4,306
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Total current assets 54,135 49,575
Property and equipment, net 185,598 186,919
Purchased routes, net 9,410 8,861
Goodwill, net 21,818 21,633
Other assets 13,720 14,234
-------- --------
$284,681 $281,222
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current instalments of long-term debt $ 1,526 $ 1,320
Accounts payable 8,764 8,783
Accrued payroll and related costs 3,325 3,132
Other current liabilities 19,860 17,888
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Total current liabilities 33,475 31,123
Long-term debt, excluding current instalments 91,864 85,689
Other liabilities 17,218 16,909
Deferred income taxes 2,947 3,194
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
14,333,612 and 14,405,746 shares respectively 75,659 76,711
Retained earnings 63,518 67,596
-------- --------
Total shareholders' equity 139,177 144,307
-------- --------
$284,681 $281,222
======== ========
The accompanying notes are an integral part of these statements.
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WESTERN WASTE INDUSTRIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended
September 30,
----------------------
1993 1994
-------- -------
(dollars in thousands
except share data)
Revenue $62,911 $67,147
Costs and expenses:
Operating 48,067 49,144
Selling, general and administrative 9,643 9,554
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Total costs and expenses 57,710 58,698
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Income from operations 5,201 8,449
Nonoperating income (expense):
Interest expense ( 890) (1,138)
Other 189 37
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( 701) (1,101)
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Income before income taxes and
cumulative effect of accounting change 4,500 7,348
Income taxes 1,939 3,270
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Income before cumulative effect
of accounting change 2,561 4,078
Cumulative effect of accounting change 414 -
------- -------
Net Income $ 2,975 $ 4,078
======= =======
Primary earnings per common share:
Income before cumulative effect of
accounting change $ .18 $ .26
Cumulative effect of accounting change .03 -
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Net Income $ .21 $ .26
======= =======
Fully diluted earnings per common share:
Income before cumulative effect of
accounting change $ .17 $ .26
Cumulative effect of accounting change .03 -
------- -------
Net Income $ .20 $ .26
======= =======
The accompanying notes are an integral part of these statements.
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WESTERN WASTE INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Three Months Ended
September 30,
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1993 1994
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(dollars in thousands)
Operating Activities:
Net income $ 2,975 $ 4,078
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,989 6,353
Provision for doubtful accounts 460 357
Uninsured claims 336 14
Employer portion - 401(k) contribution 130 188
Cumulative effect of accounting change (414) -
Deferred income taxes 1,114 1,260
(Gain) loss on disposition of assets ( 3) 196
Changes in operating assets and
liabilities, net of effects of
purchased businesses:
Increase in receivables (4,888) (2,581)
Decrease (increase) in other assets 1,939 (1,204)
Increase in accounts payable 54 19
Decrease in other liabilities (4,139) (2,488)
------ ------
Net cash provided by operating activities 2,553 6,192
Investing activities:
Purchases of property and equipment (16,907) (7,356)
Purchased businesses, net of cash received ( 180) -
Proceeds from sale of fixed assets 20 193
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Net cash used in investing activities (17,067) (7,163)
Financing activities:
Proceeds from revolving lines of credit and
long-term borrowings 13,000 -
Principal payments on borrowings ( 493) (6,381)
Proceeds from issuance of stock 896 864
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Net cash provided (used) by
financing activities 13,403 (5,517)
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Decrease in cash and short-term investments (1,111) (6,488)
Cash and short-term investments
at beginning of period 2,259 9,935
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Cash and short-term investments
at end of period $ 1,148 $ 3,447
======= =======
The accompanying notes are an integral part of these statements.
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WESTERN WASTE INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of presentation:
- - ------------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included. All adjustments made to the interim financial
statements were of a normal recurring nature. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1994.
NOTE 2 - Earnings per share:
- - ---------------------------
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 using the
treasury stock method.
The average number of shares (in thousands) used for primary and fully
diluted calculations were as follows:
Quarter ended September 30, Primary Fully Diluted
--------- -------------
1993 14,406 14,843
1994 15,664 15,664
NOTE 3 - Long-term borrowings:
- - -----------------------------
The Company's 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 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 September 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
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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. Outstanding borrowings under the Company's agreement were
$76 million at September 30, 1994. Interest on this debt averaged 5.7% for
the three months ended September 30, 1994.
-7- <PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATION
- - --------------------
Revenue
- - -------
Revenue for the first quarter of fiscal 1995 increased $4,236,000 or
7% as compared with the same quarter in fiscal 1994. The increase resulted
primarily from price and volume changes.
Operating Expenses
- - ------------------
Operating expenses, consisting primarily of wages and benefits for
operating personnel, insurance costs, fuel costs, disposal site fees and
equipment operating costs, increased $1,077,000 or 2% for the current
quarter over the comparable period in the prior fiscal year. As a
percentage of revenue, these expenses decreased from 76.4% to 73.2% for the
quarter, as compared to the same quarter in fiscal 1994. The decrease in
operating expenses as a percentage of revenue was due primarily to revenue
growth resulting from rate increases in combination with the Company's cost
control efforts.
Selling, General and Administrative Expenses
- - --------------------------------------------
As a percentage of revenue, selling, general and administrative
expenses decreased from 15.3% to 14.2% for the quarter, as compared to the
same quarter in the prior fiscal year. The decrease in selling, general
and administrative expenses as a percentage of revenue occurred primarily
as a result of revenue growth resulting from rate increases in combination
with the Company's cost control efforts. The Company intends to continue
to assess the efficiency of selling, general and administrative expenses
with the goal of reducing them further as a percent of revenue.
Interest Expense
- - ----------------
Interest expense increased $248,000 for the first quarter of fiscal
1995, as compared to the same period in the prior fiscal year. The
increase was due primarily to higher borrowing rates.
Income Taxes
- - ------------
The effective tax rate was 44.5% for the first quarter of fiscal 1995,
as compared to 43.1% for the same period in the prior fiscal year. The
increase in the rate was due primarily to a change in federal income tax
rates.
-8- <PAGE>
Liquidity and Capital Resources
- - -------------------------------
Working capital -
- - ---------------
At September 30, 1994, working capital amounted to $18,452,000
compared to $20,660,000 at June 30, 1994. The current ratio was 1.6 at
June 30, 1994 and September 30, 1994. The decrease in working capital
resulted primarily from reducing borrowings under the Company's unsecured
revolving credit agreement by $6,000,000 during the current quarter.
The Company has an unsecured revolving credit agreement, which
provides for borrowings up to $100 million. 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%,
(1.25% at September 30, 1994), depending upon certain ratios. Outstanding
borrowings under the Company's revolving credit agreement were $76 million
at September 30, 1994.
The Company's debt to equity ratio was .60 to 1.0 at September 30,
1994 and .67 to 1.0 at June 30, 1994.
Capital resources -
- - -----------------
During the quarter ended September 30, 1994, the Company made capital
expenditures of approximately $7.4 million for property and equipment other
than that purchased through the acquisition of other companies. The
Company estimates that total capital expenditures for fiscal 1995 will be
approximately $30 million. The Company believes that cash provided by
operations, cash available under its revolving credit agreement and cash
from other external sources will be sufficient for its financing needs.
Inflation -
- - ---------
Generally, inflation has had a minor 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 costs such as fuel and disposal costs, rate increases may lag
behind cost increases.
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PART II. OTHER INFORMATION
Items 1 through 5
- - -----------------
Items 1, 2, 4 and 5 are not applicable.
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. In an order dated October 4, 1994, the Court
granted the Company's request for a limitation in the class period, and
certified a class of persons who purchased the Company's common stock
during the period from October 1, 1993 through October 7, 1993, inclusive.
The Court further ordered that plaintiff Neil Haltrecht would be the class
representative, and denied class representative status to plaintiffs Isaac
Mayer and Croyden Associates. 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.
Item 6 - Exhibits and Report on Form 8-K
- - ----------------------------------------
a. Exhibits - Exhibit 27, Financial Data Schedule.
b. Report on Form 8-K - There was no report on Form 8-K filed during
the quarter ended September 30, 1994.
-10- <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned as both a duly authorized officer and as the Chief
Financial Officer of the registrant.
WESTERN WASTE INDUSTRIES
By: LAWRENCE F. MCQUAIDE
----------------------------
LAWRENCE F. MCQUAIDE
EXECUTIVE VICE PRESIDENT,
FINANCE
Date: NOVEMBER 14, 1994
----------------------------
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Exhibit Page
No. Description No.
- - -------------------------------------------------------------------------
27 Financial Data Schedule 13
-12- <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
<CASH> 3,447
<SECURITIES> 0
<RECEIVABLES> 32,182
<ALLOWANCES> 1,662
<INVENTORY> 0
<CURRENT-ASSETS> 49,575
<PP&E> 276,884
<DEPRECIATION> 89,965
<TOTAL-ASSETS> 281,222
<CURRENT-LIABILITIES> 31,123
<BONDS> 85,689
<COMMON> 76,711
0
0
<OTHER-SE> 67,596
<TOTAL-LIABILITY-AND-EQUITY> 281,222
<SALES> 0
<TOTAL-REVENUES> 67,147
<CGS> 0
<TOTAL-COSTS> 49,144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 357
<INTEREST-EXPENSE> 1,138
<INCOME-PRETAX> 7,348
<INCOME-TAX> 3,270
<INCOME-CONTINUING> 7,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,078
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
