<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER: 1-12154
__________
USA WASTE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OKLAHOMA 73-1309529
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5000 QUORUM DRIVE
SUITE 300
DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214) 383-7900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NO CHANGE
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
__________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY 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
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK AS OF MAY 11, 1995:
COMMON STOCK $.01 PAR VALUE 22,974,256
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
USA WASTE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $7,620,000 $6,613,000
Accounts receivable,net 20,481,000 19,992,000
Notes and other receivables 11,794,000 8,072,000
Prepaid expenses and other 2,869,000 2,361,000
------------ ------------
Total current assets 42,764,000 37,038,000
Notes and other receivables 2,522,000 2,462,000
Property and equipment, net 181,707,000 182,415,000
Excess of cost over net assets of acquired
businesses, net 74,363,000 73,305,000
Other intangible assets, net 13,798,000 14,375,000
Other assets 23,070,000 13,572,000
------------ ------------
Total assets $338,224,000 $323,167,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,249,000 $12,023,000
Accrued liabilities 8,730,000 12,783,000
Deferred revenues 2,008,000 1,783,000
Current maturities of long-term debt 1,735,000 1,830,000
------------ ------------
Total current liabilities 23,722,000 28,419,000
Revolving credit facility 115,000,000 98,000,000
Convertible subordinated debentures 49,000,000 49,000,000
Other long-term debt 3,715,000 6,903,000
Closure, post-closure and other liabilities 17,149,000 17,067,000
Deferred income taxes 16,292,000 15,792,000
------------ ------------
Total liabilities 224,878,000 215,181,000
------------ ------------
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.01 par value; 50,000,000
shares authorized; 22,828,159
and 22,728,548 shares issued 228,000 227,000
Additional paid-in capital 96,329,000 95,758,000
Retained earnings 18,750,000 13,962,000
------------ ------------
115,307,000 109,947,000
Less treasury stock, 149,285 shares, at cost (1,961,000) (1,961,000)
------------ ------------
Total stockholders' equity 113,346,000 107,986,000
------------ ------------
Total liabilities and stockholders' equity $338,224,000 $323,167,000
============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 3
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------------
1995 1994
----------- -----------
(restated)
<S> <C> <C>
Operating revenues $46,508,000 $38,205,000
Costs and expenses:
Operating 25,496,000 21,915,000
General and administrative 6,087,000 5,321,000
Depreciation and amortization 5,408,000 4,393,000
----------- -----------
36,991,000 31,629,000
----------- -----------
Income from operations 9,517,000 6,576,000
----------- -----------
Other income (expense):
Interest expense, net of capitalized intersest (3,152,000) (2,457,000)
Other, net 1,235,000 221,000
----------- -----------
(1,917,000) (2,236,000)
----------- -----------
Income before provision for income taxes 7,600,000 4,340,000
Provision for income taxes 2,812,000 1,636,000
----------- -----------
Net income 4,788,000 2,704,000
Preferred dividends - 380,000
----------- -----------
Income available to common shareholders $4,788,000 $2,324,000
=========== ===========
Earnings per share $0.21 $0.12
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 23,259,000 19,408,000
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $227,000 $95,758,000 $13,962,000 ($1,961,000)
Exercise of stock warrants 1,000 516,000
Issuance of common stock to directors - 25,000
Exercise of stock options - 30,000
Net income 4,788,000
-------- ----------- ----------- -----------
Balance, March 31, 1995 $228,000 $96,329,000 $18,750,000 ($1,961,000)
======== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
USA WASTE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------------
1995 1994
----------- -----------
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $4,788,000 $2,704,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,408,000 4,450,000
Deferred income taxes 500,000 341,000
Net gain on disposal of assets (514,000) (20,000)
Other non-cash adjustments - 40,000
Change in assets and liabilities,
net of effects of business acquisitions:
(Increase) in accounts receivables (490,000) (2,153,000)
(Increase) in prepaid expenses and other (508,000) (520,000)
(Increase) in notes and other receivables (868,000) -
(Increase) in other assets (2,778,000) (41,000)
Increase (decrease) in accounts payable and
accrued liabilities (5,489,000) 3,533,000
Increase (decrease) in deferred revenues
and other liabilities 308,000 (1,395,000)
----------- -----------
Net cash provided by operating activities 357,000 6,939,000
----------- -----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired - (16,204,000)
Capital expenditures (7,948,000) (8,972,000)
Loans and advances to others (9,726,000) -
Collection of loans to others 91,000 -
Proceeds from sale of assets 3,969,000 101,000
----------- -----------
Net cash used in investing activities (13,614,000) (25,075,000)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 17,000,000 21,121,000
Principal payments on long-term debt (3,283,000) (1,172,000)
Proceeds from exercise of stock options 30,000 300,000
Proceeds from exercise of warrants 517,000 -
----------- -----------
Net cash provided by financing activities 14,264,000 20,249,000
----------- -----------
Increase in cash and cash equivalents 1,007,000 2,113,000
Cash and cash equivalents at beginning of period 6,613,000 3,235,000
----------- -----------
Cash and cash equivalents at end of period $7,620,000 $5,348,000
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $2,513,000 $919,000
Income taxes $4,200,000 $1,191,000
</TABLE>
See accompanying notes.
5
<PAGE> 6
USA WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
The consolidated balance sheets as of March 31, 1995 and December 31, 1994,
and the related consolidated statements of income for the three months ended
March 31, 1995 and 1994, stockholders' equity for the three months ended March
31, 1995, and cash flows for the three months ended March 31, 1995 and 1994 are
unaudited; in the opinion of management, such financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary to a
fair statement of the results of the interim periods presented. The Company
has restated the previously issued financial statements for the three months
ended March 31, 1994 to reflect the acquisition of Envirofil, Inc.
("Envirofil") consummated May 27, 1994, and accounted for using the pooling of
interests method of accounting.
The financial statements included herein should be read in connection with
the Company's Annual Report on Form 10-K for the year ended December 31, 1994,
as amended on Form 10-K/A (Amendment No. 1).
1. CHAMBERS ACQUISITION:
In December 1994, the Company entered into a Plan and Agreement of
Reorganization to acquire Chambers through a merger transaction. The merger is
subject to, among other conditions, approval of both companies' boards of
directors and shareholders. It is anticipated that the merger will be completed
in June 1995 and that it will be accounted for as a pooling of interests. The
Agreement provides that on the effective date of the merger the Company will
issue one share of its Common Stock for every 2.4 shares of Chambers common
stock outstanding. The Company currently has approximately 22,575,000 common
shares outstanding and, after the merger, expects to have approximately
47,900,000 common shares outstanding. Following the merger, the Board of
Directors will include nominees of both the Company and Chambers. John E.
Drury will serve as Chairman and Chief Executive Officer. Donald F. Moorehead,
Jr. will serve as Vice Chairman of the Board of Directors and Chief Development
Officer. John G. Rangos, Sr. will serve as non-executive Vice-Chairman of the
Board of Directors. David Sutherland-Yoest will continue to serve as
President and Chief Operating Officer and Earl E. DeFrates will continue as
Chief Financial Officer.
6
<PAGE> 7
2. LONG-TERM DEBT:
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Revolving credit facility $115,000,000 $ 98,000,000
8 1/2% Convertible Subordinated
Debentures 49,000,000 49,000,000
Other 5,450,000 8,733,000
------------ ------------
169,450,000 155,733,000
Less current maturities 1,735,000 1,830,000
------------ ------------
$167,715,000 $153,903,000
============ ============
</TABLE>
On November 28, 1994, the Company entered into a new revolving credit
facility providing for borrowings of up to $150,000,000. At the Company's
option, the interest rate on any loan under the revolving credit facility will
be based on an adjusted prime rate or Eurodollar rate, as defined in the
agreement. The facility matures on November 30, 1997. The revolving credit
facility, among other conditions, requires the payment of a 3/8 of 1%
commitment fee on the unused balance, payable in arrears, and provides for
certain restrictions on the ability of the Company, subject to certain
limitations, to incur borrowings, sell assets, or pay cash dividends. The
facility also requires the maintenance of certain financial ratios, minimum net
worth requirements and profitable operations. The facility is collateralized
by all the stock of the Company's subsidiaries, whether now owned or hereafter
acquired.
3. CHANGE IN ACCOUNTING ESTIMATE:
As of January 1, 1995, the Company changed the useful life of the excess
of cost over net assets of acquired businesses from 25 years to 40 years to
more appropriately reflect the estimated periods during which the benefit of
the assets will be realized. This change in accounting estimate had the effect
of reducing amortization expense by approximately $360,000 for the three months
ended March 31, 1995.
7
<PAGE> 8
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion reviews the Company's operations for the three
months ended March 31, 1995 and 1994, and should be read in conjunction with
the Company's Consolidated Financial Statements and related notes thereto
included herein, and the Company's Consolidated Financial Statements and
related notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, as amended by Form 10-K/A (Amendment No. 1).
The Company has restated the previously issued financial statements for the
three months ended March 31, 1994 to reflect the acquisition of Envirofil
consummated May 27, 1994, and accounted for using the pooling of interests
method of accounting.
GENERAL
The Company's revenues consist primarily of fees charged for its collection
and disposal services. Revenues for collection services include fees from
residential, commercial, industrial, and municipal collection customers. A
portion of these fees are billed in advance; a liability for future service is
recorded upon receipt of payment and revenues are recognized as services are
actually provided. Fees for residential services are normally based on the type
and frequency of service, however, in a few instances, the fees are based on
the volume of waste collected. Fees for commercial and industrial services are
normally based on the type and frequency of service and the volume of solid
waste collected.
The Company's revenues from its landfill operations consist of disposal
fees (known as tipping fees) charged to third parties and are normally billed
monthly. Tipping fees are based on the volume or weight of solid waste being
disposed of at the Company's landfill sites. The Company also operates transfer
stations where solid waste is deposited by collection vehicles and then loaded
into larger trucks and transported to landfills for disposal. Fees are charged
at the transfer stations based on the volume of solid waste deposited, taking
into account the Company's cost of loading, trucking, and disposing of the
solid waste at its landfills. Intercompany revenues between the Company's
landfill and collection operations have been eliminated in the financial
statements presented herein.
Operating expenses include direct and indirect labor and the related taxes
and benefits, fuel, maintenance and repairs of equipment and facilities,
tipping fees paid to third party landfills, certain landfill fees and taxes,
and accruals for future landfill closure costs. Certain direct landfill
development expenses are capitalized and depreciated over the estimated useful
life of the site as capacity is consumed, and include acquisition, engineering,
upgrading, construction, capitalized interest, and permitting costs. All
indirect development expenses, such as administrative salaries and general
corporate overhead, are expensed in the period when incurred.
General and administrative costs include management salaries, clerical, and
administrative costs, professional services, facility rentals, and related
insurance costs, as well as costs related to the Company's marketing and sales
force.
8
<PAGE> 9
The following table presents, for the periods indicated, the period to
period change in dollars (in thousands) and percent for the various
Consolidated Statements of Income items.
<TABLE>
<CAPTION>
PERIOD TO PERIOD CHANGE
FOR THE THREE
MONTHS ENDED
MARCH 31, 1995
AND 1994
-------------------------
(Dollars in thousands)
<S> <C> <C>
Operating revenues . . . . . . . . . . . . . . . . . . . . . $8,303 21.7%
------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . . . . . . . . 3,581 16.3
General and administrative . . . . . . . . . . . . . . . . 766 14.4
Depreciation and amortization . . . . . . . . . . . . . . . 1,015 23.1
------
5,362 17.0
------
Income from operations . . . . . . . . . . . . . . . . . . . 2,941 44.7
------
Other income (expense):
Interest expense, net of capitalized interest . . . . . . . (695) 28.3
Other, net . . . . . . . . . . . . . . . . . . . . . . . . 1,014 458.8
------
319 (14.3)
------
Income before provision for income taxes . . . . . . . . . . 3,260 75.1
Provision for income taxes . . . . . . . . . . . . . . . . . 1,176 71.9
------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $2,084 77.1
======
</TABLE>
The following table presents for the periods indicated, the percentage
relationship that the various Consolidated Statements of Income items bear to
operating revenues.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
---- ----
<S> <C> <C>
Operating revenues:
Disposal . . . . . . . . . . . . . . . . . . . . . . . 22.9% 21.6%
Waste collection . . . . . . . . . . . . . . . . . . . 68.6 69.9
Other . . . . . . . . . . . . . . . . . . . . . . . . 8.5 8.5
----- -----
100.0% 100.0%
----- -----
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . . . . . . 54.8 57.4
General and administrative . . . . . . . . . . . . . . 13.1 13.9
Depreciation and amortization . . . . . . . . . . . . . 11.6 11.5
----- -----
79.5 82.8
----- -----
Income from operations 20.5 17.2
----- -----
Other income (expense):
Interest expense, net of capitalized interest . . . . . (6.8) (6.4)
Other, net . . . . . . . . . . . . . . . . . . . . . . 2.7 0.6
----- -----
(4.1) (5.8)
----- -----
Income before provision for income taxes . . . . . . . . 16.4 11.4
Provision for income taxes . . . . . . . . . . . . . . . 6.1 4.3
----- -----
Net income . . . . . . . . . . . . . . . . . . . . . . . 10.3% 7.1%
===== =====
</TABLE>
9
<PAGE> 10
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Operating Revenues
Operating revenues for the three months ended March 31, 1995, were
$46,508,000, representing an increase of $8,303,000, or 21.7% from 1994. The
net effect of business acquisitions and dispositions accounted for an increase
of 8.1% over 1994. Operating revenues for comparable operations increased
approximately 13.6% during 1995 compared to 1994, as a result of increases of
2.9% and 10.7% in prices and volumes, respectively. The increase in operating
revenues due to volume is the result of intensive marketing efforts and the
improved weather conditions at certain market areas in 1995 as compared to
1994.
Operating Costs and Expenses
The Company's operating costs and expenses for the three months ended March
31, 1995, of $25,496,000 represented an increase of $3,581,000, or 16.3%,
compared to the corresponding period of 1994. The net effect of business
acquisitions and dispositions accounted for an increase of 9.2% over 1994.
Operating costs and expenses for comparable operations accounted for an 7.1%
increase. Operating costs and expenses as a percentage of revenues decreased
from 57.4% during the first quarter of 1994 to 54.8% for the same period of
1995, primarily as a result of two factors. The decrease in the operating costs
and expenses as a percentage of revenues is due in part to the increase in
operating revenues, including the volume increases in market areas which were
negatively affected by the severe weather conditions in the first quarter of
1994. In addition, the decrease in operating costs and expenses is due in part
to the effect of the Company's strategic business decision to exit the Phoenix
market, which experienced low operating margins in 1994. In addition, several
of the Company's businesses were acquired in 1994 and operating efficiencies
and cost improvements have been implemented to improve margins as these
companies are integrated into the Company's operations.
General and Administrative
General and administrative expenses for the three months ended March 31,
1995, increased $766,000, or 14.4%, over the same period of 1994. However,
general and administrative expenses as a percentage of operating revenues
decreased from approximately 13.9% in the first quarter of 1994 to 13.1% in the
comparable period of 1995, due to the Company's ability to integrate new
acquisition revenues without a corresponding increase in general and
administrative expenses and the cost savings resulting from the merger with
Envirofil.
Depreciation and Amortization
Depreciation and amortization expense increased from $4,393,000 for the three
months ended March 31, 1994, to $5,408,000 for the same period of 1995,
reflecting an increase of $1,015,000, or 23.1%. The net effect of business
acquisitions and dispositions accounted for an increase of $457,000, while
existing operations reflected an increase of $558,000, primarily resulting from
additional equipment necessary to service the Company's contracts. The
increase discussed above is net of a change in estimate made to more
appropriately reflect the estimated periods during which the benefit of the
excess of cost over net assets of acquired businesses will be realized. The
Company has adopted a useful life of 40 years as of January 1, 1995 to amortize
the excess of cost over net assets of acquired businesses. This change had the
effect of reducing amortization expense approximately $360,000 for the three
months ended March 31, 1995. Depreciation and amortization expense as a
percentage of revenues increased slightly from 11.5% in the first quarter of
1994 to 11.6% for the same period in 1995.
10
<PAGE> 11
Income from Operations
For the reasons discussed above, income from operations, increased
$2,941,000, or 44.7% during the first quarter of 1995 as compared to the same
period in 1994.
Other Income and Expense
Other income and expense items consist primarily of interest expense,
interest income and other income items, generally from the sale of assets.
Interest expense increased to $3,152,000 for the three months ended March 31,
1995, as compared to $2,457,000 for the same period in 1994, an increase of
28.3%. In 1995, interest expense is net of interest capitalized during the
period of approximately $337,000. The increase results from the growth in the
Company's indebtedness incurred to finance the Company's accelerated growth
through business acquisitions and capital expenditures and an increase in the
Company's effective average borrowing rate to 8.7% for the three months ended
March 31, 1995 as compared to 8.1% for the same period of 1994.
Other, net increased from $221,000 in the first quarter of 1994 to $1,235,000
in the same period of 1995. The other income increase is primarily a result of
the sale of real estate in the Phoenix, Arizona market in 1995.
Provision for Income Taxes
The provision for income taxes increased $1,176,000 for the three months
ended March 31, 1995, as compared to 1994. The effective income tax rate was
37.0% for the first quarter of 1995 compared to 37.7% for the same period of
1994. The decrease in the effective tax rate is due to the fact that the
periods prior to the Envirofil merger reflect the historical provision for
income taxes of the separate companies and, therefore, those periods do not
reflect the benefit of losses incurred by Envirofil for financial reporting
purposes.
Net Income
For the reasons discussed above, net income increased $2,084,000, or 77.1%
during the first quarter of 1995 as compared to the same period of 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, the Company had working capital of $19,042,000 and a
cash balance of $7,620,000, as compared to working capital of $8,619,000 and a
cash balance of $6,613,000 as of December 31, 1994. For the three months ended
March 31, 1995, cash flows provided by operating activities were $357,000.
Cash flows used in investing activities were $13,614,000, which included the
funding of capital expenditures of $7,948,000 and investments in other
businesses and net advances to others of $9,635,000, offset by the proceeds
from asset sales of $3,969,000. Cash flows provided by financing activities
were $14,264,000, which was primarily a result of the net borrowings under the
Company's revolving credit facility.
11
<PAGE> 12
The Company's capital expenditure and working capital requirements have
increased reflecting the Company's business strategy of growth through
acquisitions and development projects. As indicated above, the Company's
capital expenditures for the first quarter of 1995 were $7,948,000. The
Company has financed its capital expenditures from its internally generated
cash flows and amounts available under its revolving credit facility. The
Company expects capital expenditures for 1995 to be approximately $40,000,000.
The Company intends to finance the remainder of its 1995 capital requirements
through internally generated cash flow and amounts available under its
revolving credit facility.
The Company is subject to extensive and evolving federal, state, and local
environmental laws and regulations that have been enacted in response to
technological advances and the public's increased concern over environmental
issues. As a result of changing governmental attitudes in this area,
management anticipates that the Company will continually modify or replace
facilities and alter methods of operation. The majority of the expenditures
necessary to comply with the environmental laws and regulations are made in the
normal course of business.
The Company's revolving credit facility is currently $150,000,000 with a
maturity date of November 30, 1997. The Company anticipates that if additional
acquisitions are made, the cash portion of the consideration will be funded
from its internally generated cash and its revolving credit facility. At May
11, 1995, the Company had approximately $30,000,000 available under such credit
facility.
Under the terms of the Company's revolving credit facility, lender consent is
required to consummate the Chambers merger. Chambers is subject to similar
consent requirements under its lending agreements. In connection with the
Chambers' merger, the Company anticipates refinancing certain of its and
Chambers' outstanding indebtedness, including the Company's revolving credit
facility and the revolving credit facility, senior notes, and letters of credit
of Chambers. Amounts outstanding under Chambers' debt instruments at December
31, 1994, were approximately $364,000,000. The Company is currently engaged in
discussions with financing sources regarding financial arrangements to be
entered into at or before the date the Chambers' merger is consummated.
In connection with the merger with Chambers, the Company and Chambers
developed a plan for financing certain Chambers' obligations, including a
$6,800,000 obligation that was incurred in January 1995 and $70,000,000 in
payments required to fund certain Chambers' shareholder litigation settlements.
The purpose of the financing plan was to provide Chambers with the ability to
fund these payment obligations pending consummation of the proposed merger and
in the event the merger was not consummated. The Company has paid $2,500,000
on certain promissory notes owed to Chambers and a letter of intent was
executed providing for the purchase of certain assets, including a hauling
company in Charlotte, North Carolina and a landfill and a collection facility
in Lake, Mississippi, for which $4,300,000 has been advanced to Chambers. To
provide for the funding of the initial $25,000,000 settlement payment due upon
final approval of the shareholder litigation, the Company agreed to make an
advance purchase of airspace rights at certain of Chambers' landfills in the
aggregate amount of $25,000,000. Such payment would be made within 30 days
after final approval of the Settlement Agreement and expiration of the
applicable appeal period. To provide for the payment of the $45,000,000
settlement payment on the shareholder litigation, The Company and Chambers have
agreed to negotiate an agreement for the purchase by the Company from Chambers
of an asset or group or assets or airspace rights mutually selected by the
Company and Chambers and having a fair market value of not less than
$45,000,000. payment of such amount is required not later than one year from
the date of final approval of the Settlement Agreement and expiration of the
applicable appeal period. In the event that Chambers completes a refinancing of
its current indebtedness, including amounts due with respect to the shareholder
litigation, the Company's obligation to finance the $45,000,000 payment will
lapse and the Company will have an option to require Chambers, and Chambers
will have an option to require the Company, to buy or sell, as the case may be,
any unused airspace purchased in advance by the Company.
The Company's business plan is to grow through acquisitions as well as
development projects. The Company has issued equity securities in business
acquisitions where appropriate and expects to do so in the future.
Furthermore, the Company's future growth will depend greatly upon its ability
to raise
12
<PAGE> 13
additional capital. Management believes that it can arrange the necessary
financing required to accomplish its business plan; however, to the extent the
Company is not successful in its future financing strategies, the Company's
growth could be limited.
Although the Company regularly engages in discussions relating to potential
acquisitions and mergers and has identified several possible acquisition and
merger opportunities, other than the previously announced Merger Agreement
entered into with Chambers, the Company currently does not have any significant
binding commitments or agreements to acquire or merge with any such businesses;
however, part of the Company strategy is to continue to participate in the
industry consolidation, and as a result, the Company will pursue acquisition
and merger opportunities and may announce an acquisition or merger or
transaction at any time.
ENVIRONMENTAL MATTERS
The Company will also have material financial commitments for the costs
associated with its future obligations for closure and post-closure costs of
landfills it operates or for which it is otherwise responsible over the
estimated useful lives of these facilities. These accruals are based on the
Company's management reviews performed periodically, not lees than annually,
based on input from its engineers and interpretations of current requirements
and proposed regulatory changes. The accrual for closure and post-closure
costs includes a final cap and cover for the site, methane gas control,
leachate management and groundwater monitoring, and other operational and
maintenance costs to be incurred after the site stops accepting waste.
The Company has estimated that the aggregate closure and post-closure costs
will be approximately $25,000,000, which, for each landfill, is fully accrued
at the time the site stops accepting waste and is closed. As of March 31,
1995, the Company has accrued $13,500,000 for closure and post-closure costs
of disposal facilities. The difference between the closure and post-closure
costs accrued as of March 31, 1995 and the total estimated closure and
post-closure costs to be incurred will be accrued and charged to expense as
airspace is consumed. The Company also expects to incur approximately
$40,000,000 related to capping activities expected to occur during the
operating lives of these disposal sites, which are also being expensed over the
useful lives of the disposal sites as airspace is consumed. In addition, the
Company has acquired certain facilities where the potential for minor
remediation may exist, which is approximately $2,000,000 as of March 31, 1995.
Management believes that the ultimate disposition of these environmental
matters will not have a material adverse effect on the financial condition of
the Company. However, the Company's operation of landfills subjects it to
certain operational, monitoring, site maintenance, closure and post-closure
obligations which could give rise to increased costs for monitoring and
corrective measures. The Company cannot predict the effect of any future
enacted regulations or legislation on the Company's operations.
SEASONALITY
Because the volumes of certain types of waste, such as yard clippings and
construction debris, tend to be higher in the spring and summer, the Company
experiences seasonal variations in its revenue. As a result, during spring and
summer, the Company's revenues tend to be higher than its revenues in fall and
winter. In addition, during the winter, harsh weather conditions often
temporarily affect the Company's ability to collect, transport, and dispose of
waste. The seasonal impact is often offset by revenues added through
acquisitions such that the Company's reported revenues have historically
reflected increases in period to period comparisons.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no changes in the status of legal proceedings since
the filing of the Form 10-K as of December 31, 1994, as amended by Form 10-K/A
(Amendment No. 1).
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Ex-27 Financial Data Schedule
(b) Reports on Form 8-K:
None
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA WASTE SERVICES, INC.
Registrant
May 12, 1995 BY: s/ Earl E. DeFrates
- ------------------- ---------------------------
Date Earl E. DeFrates,
Executive Vice President,
Chief Financial Officer
May 12, 1995 BY: s/ Bruce E. Snyder
- ------------------- ---------------------------
Date Bruce E. Snyder,
Vice President - Controller
Chief Accounting Officer
15
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF USA WASTE FOR THE QUARTER ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 7,620,000
<SECURITIES> 0
<RECEIVABLES> 22,631,000
<ALLOWANCES> (2,150,000)
<INVENTORY> 0
<CURRENT-ASSETS> 42,764,000
<PP&E> 213,726,000
<DEPRECIATION> (32,019,000)
<TOTAL-ASSETS> 338,224,000
<CURRENT-LIABILITIES> 23,722,000
<BONDS> 167,715,000
<COMMON> 228,000
0
0
<OTHER-SE> 113,118,000
<TOTAL-LIABILITY-AND-EQUITY> 338,224,000
<SALES> 0
<TOTAL-REVENUES> 46,508,000
<CGS> 0
<TOTAL-COSTS> 36,991,000
<OTHER-EXPENSES> (1,235,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,152,000
<INCOME-PRETAX> 7,600,000
<INCOME-TAX> 2,812,000
<INCOME-CONTINUING> 4,788,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,788,000
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
