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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1 to Form 8-K filed May 22, 1996)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 7, 1996
USA WASTE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-12154 73-1309529
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
5400 LBJ FREEWAY
SUITE 300 - TOWER ONE
DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 383-7900
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The following financial statements of Western Waste Industries
("Western") are incorporated by reference herein: the audited
consolidated balance sheets as of June 30, 1994 and 1995, and the
related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended June 30,
1995, together with the notes thereto and the report of independent
auditors dated August 25, 1995, except for Note 8 as to which the date
is September 12, 1995, all of which were included in USA Waste
Services, Inc.'s Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 9, 1996.
The following financial statements of Western are included herein: the
unaudited condensed consolidated balance sheets as of June 30, 1995 and
March 31, 1996 and the related unaudited condensed consolidated
statements of income and cash flows for the nine months ended March 31,
1995 and 1996 with the notes thereto.
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WESTERN WASTE INDUSTRIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
1995 1996
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 6,484 $ 9,718
Receivables, less allowance of $1,738 in
June 1995 and $2,094 in March 1996 29,596 28,137
Supplies 3,320 3,640
Deferred income tax benefit 4,101 4,501
Prepayments and other 3,961 5,207
------- -------
Total current assets 47,462 51,203
Property and equipment, net 196,972 210,190
Purchased routes, net 7,340 6,098
Goodwill, net 19,994 19,472
Other assets 21,605 18,501
-------- --------
$293,373 $305,464
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current instalments of long-term debt $ 1,308 $ 1,253
Accounts payable 9,159 8,730
Accrued payroll and related costs 3,885 3,102
Other current liabilities 17,822 15,240
-------- --------
Total current liabilities 32,174 28,325
Long-term debt, excluding current instalments 78,882 75,139
Other liabilities 18,400 18,920
Deferred income taxes 3,696 3,270
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
14,612,599 and 14,932,512 shares respectively 79,614 86,343
Retained earnings 80,607 93,467
-------- --------
Total shareholders' equity 160,221 179,810
-------- --------
$293,373 $305,464
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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WESTERN WASTE INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Revenue $202,456 $206,219
-------- --------
Costs and expenses:
Operating 146,584 151,605
Selling, general and
administrative 29,154 30,258
------- --------
Total costs and expenses 175,738 181,863
------- --------
Income from operations 26,718 24,356
------- --------
Nonoperating income (expense):
Interest expense (4,014) ( 3,086)
Other ( 67) 788
------- --------
(4,081) ( 2,298)
-------- --------
Income before income taxes 22,637 22,058
Income taxes 10,073 9,198
------- --------
Net Income $ 12,564 $ 12,860
======== ========
Primary earnings per
common share: $ .81 $ .79
======== ========
Fully diluted earnings per
common share: $ .81 $ .76
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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WESTERN WASTE INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------- -------
1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities 30,747 28,367
------- -------
Cash flows from investing activities:
Purchases of property and equipment (28,252) (31,669)
Proceeds from disposition of assets 825 691
------- -------
Net cash used in investing activities (27,427) (30,978)
------- -------
Cash flows from financing activities:
Proceeds from borrowings 13,933 7,567
Principal payments on borrowings (23,217) ( 6,037)
Proceeds from issuance of stock 1,866 4,315
------- -------
Net cash provided by (used) by
financing activities (7,418) 5,845
------- -------
Increase (decrease) in cash and
short-term investments (4,098) 3,234
Cash and short-term investments
at beginning of period 9,935 6,484
------- -------
Cash and short-term investments
at end of period $ 5,837 $ 9,718
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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WESTERN WASTE INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of presentation:
The accompanying unaudited condensed consolidated financial statements of
Western Waste Industries ("Western") have been prepared in accordance with
generally accepted accounting principles for interim financial information 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. The financial statements included herein should be read in
connection with Western's Consolidated Financial Statements and related
footnotes thereto included in Western's Annual Report on Form 10-K for the year
ended June 30, 1995.
Certain reclassifications have been made in prior year financial
statements to conform to the current year presentation.
NOTE 2 - Merger with USA Waste Services, Inc.:
On May 7, 1996, USA Waste Services, Inc. ("USA Waste") consumated an
Agreement and Plan of Merger (the "Merger Agreement") to acquire Western through
a merger transaction accounted for as a pooling of interests. Under the terms
of the Merger Agreement, USA Waste issued 1.5 shares of its Common Stock for
each share of Western's outstanding common stock. The merger resulted in
Western becoming a wholly owned subsidiary of USA Waste.
NOTE 3 - 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:
<TABLE>
<CAPTION>
Primary Fully Diluted
--------------- ------------------
Nine months ended March 31,
<S> <C> <C>
1995 15,520 16,258
1996 15,520 16,949
</TABLE>
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NOTE 4 - Long-term debt:
Long-term debt, which approximates market value, consists of the
following:
<TABLE>
<CAPTION>
June 30, March 31,
1995 1996
----------- ------------
(dollars in thousands)
<S> <C> <C>
Notes payable to banks, unsecured $44,000 $41,000
Solid Waste Disposal Revenue Bonds, Series 1994A 24,000 24,000
Solid Waste Disposal Revenue Bonds 8,200 8,200
Pollution Control Revenue Bonds 1,133 891
Other notes payable, secured and unsecured 2,857 2,301
----------- -----------
Total long-term debt 80,190 76,392
Less current instalments 1,308 1,253
----------- -----------
Long-term debt, excluding current instalments $78,882 $75,139
=========== ===========
</TABLE>
Western's revolving line of credit (the "Agreement"), which currently
matures on June 1, 1997, permits borrowings up to $100,000,000. At Western'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,
depending upon certain ratios. The Agreement has a $16.5 million quarterly
commitment reduction which commenced March 1, 1996. Under the terms of the
Agreement, Western is subject to various debt covenants including maintenance of
certain financial ratios, and in addition, it limits the amount of cash
dividends.
On May 8, 1996, in connection with the merger with USA Waste Services,
Inc., Western's revolving line of credit was paid in full by USA Waste;
therefore, all outstanding balances as of that date were classified as
long-term.
Note 5 - Commitments and Contingencies:
Environmental matters -- Western strives to conduct its operations in
compliance with applicable laws and regulations, including environmental rules
and regulations, and has as its goal 100% compliance. However, in the normal
course of doing business, companies in the waste disposal industry, including
Western, may be faced with governmental enforcement proceedings and resulting
fines or other sanctions as a result of which such companies, including Western,
may be required to pay civil penalties or to expend funds for remedial work on
waste disposal sites. Western is not aware of any instances of non-compliance
with applicable laws and regulations that would have a materially adverse effect
upon the consolidated financial position or results of operations of Western.
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Legal matters -- Western was served on October 13, 1993 with a
class action lawsuit. The complaint alleged that Western violated federal
securities laws with regard to certain disclosures and representations made by
Western and certain alleged omissions on the part of Western in
connection with merger negotiations between Western and Browning-Ferris
Industries ("BFI"). The plaintiffs allege that they and all other persons or
entities that bought the stock of Western during the period of September 2,
1993 through October 7, 1993 suffered damages as a result of changes in the
market price of Western's common stock. Western has recently settled
this matter for an amount equal to plaintiffs' costs incurred to date in the
lawsuit and within amounts previously accrued by Western.
Western was served on August 9, 1994 with a complaint filed by
certain refuse haulers in San Bernardino County alleging that Western
violated certain California Business and Professions Code Sections and also
intentionally interfered with existing and prospective economic relations. The
complaint alleges that Western does not hold a validly issued permit to
operate within a certain geographic area in the County of San Bernardino and
that Western has engaged in a course of conduct of predatory pricing. The
complaint also alleges that Western 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. Western believes it has valid defenses to the allegations
and intends to vigorously defend the suit. Western has filed a
cross-complaint against the plaintiffs for engaging in improper pricing
activities.
In or about August 1994, a case was filed in the United States
District Court for the Western District of Arkansas. This is an action
originally filed by seven landowners who live near a landfill operated by
Western in Miller County, Arkansas. The landowners allege that Western
unlawfully received hazardous waste and that the pollutants from the waste
received by Western had contaminated their property or threatened to
contaminate their property in the future. The landowners seek an unspecified
amount of damages based on the contamination or threat of contamination. In
addition, the landowners seek to recover damages based on the devaluation of
their property due to the "stigma" of being located near a disposal site for
hazardous waste. In addition, the landowners also seek to recover damages
based upon their fear of developing adverse health effects. In July 1995, 135
additional plaintiffs intervened and asserted claims similar to those raised by
the original plaintiffs. Western and the other defendants have denied that
any unlawful disposal of waste took place at the landfill. In or about June
1995, a case was filed by eight land owners who own property along a creek
downstream from Western's Miller County landfill. Plaintiffs allege that
their property has been contaminated by releases of hazardous substances from
the landfill and other hazardous substance disposal sites operated by the other
defendants. Western believes it has valid defenses to the allegations and
is vigorously defending the action.
In late December 1994, a lawsuit was filed in Los Angeles County
Superior Court by 24 plaintiffs. Western is among 19 named defendants.
The complaint asserts causes of action for nuisance and trespass seeking
damages for personal injuries and property damage. The complaint alleges that
Western owns a parcel of property, acquired from Cadillac Fairview/California
located in Torrance, California. The complaint alleges that Montrose Chemical
Corporation and others manufactured DDT on property at
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or adjacent to the property owned by Western. The plaintiffs further allege
that contaminants from this property escaped to plaintiff's property, injured
plaintiff and damaged the value of plaintiff's property. On June 29, 1995, this
case was removed to the United States District Court. Western has filed an
answer denying any liability. Western believes it has valid defenses to
the allegations and intends to vigorously contest the case and is contemplating
filing a cross-complaint once its investigation of the facts is completed.
On or about February 2, 1995, a complaint was filed in a taxpayer
lawsuit. The complaint did not name Western as a defendant. The
plaintiffs allege that the County and the other defendants, in connection with
a contract with Western, regarding the operation and management of the El
Sobrante Landfill (the "Landfill") located within the County (the "Agreement"),
engaged in various improper actions, including the unlawful sale of public
property, wasting public funds, and making an unconstitutional gift of public
property and funds. The complaint seeks an order voiding the Agreement and an
injunction ordering the defendants to pay to the County allegedly unlawful
revenues earned from the Landfill, to cease further dumping at the Landfill of
out-of-County waste, return of alleged windfall profits and limiting dumping
fees charged to County residents. The complaint also seeks general damages
of $10,000,000 and special and punitive damages, attorneys' fees and costs.
Western believes the taxpayer suit is based upon erroneous assumptions and
that there are valid defenses available to the County to each of the claims
asserted in the complaint. Western has now filed a motion to intervene in
the litigation and will thereafter become a party to the lawsuit.
Based in part on various newspaper articles, Western has reason to
believe that it, either alone or with others engaged in the solid waste
industry, may be a subject of an investigation by the United States government
relating to political corruption. Western has not, however, been charged with
any wrongdoing and does not know whether such an investigation is, in fact,
ongoing. Western has not been advised by the government that it is a target of
any such investigation. In fact, upon written inquiry under the Freedom of
Information Act, Western was advised that there were no records of any such
investigations.
In addition to the above, there are a number of claims and suits
pending against Western 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 or results of operations of Western.
Insurance -- Western 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. Western
carries insurance coverage which management considers sufficient to protect the
assets and operations of Western, including excess umbrella and special
hazardous waste transportation coverage.
Management believes the self insured loss reserves of Western are
adequate. Western 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.
Western 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 the doctrines of legal
liability and size of damage awards. Because of the variables
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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 the period in which they are determined.
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(b) Pro Forma Financial Information.
The following pro forma financial statements of USA Waste and Western
are incorporated by reference herein: (i) the combined historical
unaudited pro forma condensed balance sheet as of December 31, 1995;
and (ii) the combined historical unaudited pro forma statements of
operations for each of the three years in the period ended December
31, 1995, together with the notes thereto, all of which were filed as
part of USA Waste's Registration Statement on Form S-4 (Registration
No. 333-02181). In addition, the following pro forma financial
statements of USA Waste and Western are also incorporated by reference
herein: (iii) the unaudited supplemental condensed consolidated
balance sheet as of March 31, 1996; and (iv) the unaudited
supplemental condensed consolidated statements of operations for the
three months ended March 31, 1995 and 1996, all of which were included
in USA Waste's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996, filed with the Securities and Exchange
Commission on May 14, 1996.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of December
18, 1995, by and among USA Waste Services, Inc.,
Riviera Acquisition Corporation and Western Waste
Industries (included as Appendix A in Registration
Statement on Form S-4 (Registration No. 333-02181) and
incorporated herein by reference).
* 2.2 Amendment No. 1 to Agreement and Plan of Merger,
dated May 1, 1996, by and among USA Waste Services,
Inc., Riviera Acquisition Corporation and Western
Waste Industries.
* 10.1 Revolving Credit Agreement by and among USA Waste
Services, Inc., The First National Bank of Boston,
Bank of America Illinois, Morgan Guaranty Trust
Company of New York and other financial institutions,
dated as of May 7, 1996.
**23.1 Consent of Ernst & Young LLP.
* 99.1 Press Release, dated May 7, 1996, relating to closing
of the Merger and new revolving credit agreement.
</TABLE>
- ----------------------
* Previously filed.
** Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
USA WASTE SERVICES, INC.
Dated: May 28, 1996 By: /s/ BRUCE E. SNYDER
------------------------------------
Bruce E. Snyder
Vice President - Controller,
Chief Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of
December 18, 1995, by and among USA Waste
Services, Inc., Riviera Acquisition Corporation
and Western Waste Industries (included as
Appendix A in Registration Statement on Form S-4
(Registration No. 333-02181) and incorporated
herein by reference).
*2.2 Amendment No. 1 to Agreement and Plan of Merger,
dated May 1, 1996, by and among USA Waste
Services, Inc., Riviera Acquisition Corporation
and Western Waste Industries.
*10.1 Revolving Credit Agreement by and among USA Waste
Services, Inc., The First National Bank of
Boston, Bank of America Illinois, Morgan Guaranty
Trust Company of New York and other financial
institutions, dated as of May 7, 1996.
**23.1 Consent of Ernst & Young LLP.
*99.1 Press Release, dated May 7, 1996, relating to
closing of the Merger and new revolving credit
agreement.
</TABLE>
- -------------------------
* Previously filed.
**Filed herewith.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 33-42988, No. 33-43809, No. 33-76226, No. 33-85018, and No.
333-00097) of USA Waste Services, Inc. and the related Prospectuses, and in the
Registration Statements (Form S-4, No. 33-60103, No. 33-63981, and No.
333-02181) of USA Waste Services, Inc., and the related Prospectuses, and in
the Registration Statements (Form S-8, No. 33-43619, No. 33-72436, No.
33-84990, No. 33- 84988, No. 33-5907, and No. 33-61623) of USA Waste Services,
Inc., and the related Prospectuses of our report, dated August 25, 1995 (except
Note 8, as to which the date is September 12, 1995), with respect to the
consolidated financial statements of Western Waste Industries for the year
ended June 30, 1995, incorporated by reference in this Current Report on
Form 8-K/A, dated May 28, 1996.
ERNST & YOUNG LLP
Long Beach, California
May 28, 1996
