<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-52197
PROSPECTUS SUPPLEMENT
JULY 14, 1998
(TO PROSPECTUS DATED JUNE 17, 1998)
$600,000,000
USA WASTE SERVICES, INC.
6 1/8% MANDATORILY TENDERED SENIOR NOTES DUE 2011
The $600,000,000 6 1/8% Mandatorily Tendered Senior Notes due 2011 (the
"Notes") of USA Waste Services, Inc. (the "Company") will bear interest at a
rate of 6 1/8% per annum from July 17, 1998 to but not including July 15, 2001
(the "Remarketing Date"). Interest on the Notes is payable semi-annually on
January 15 and July 15 of each year, commencing January 15, 1999. The Notes
constitute senior and unsecured obligations of the Company, ranking PARI PASSU
in right of payment with all other senior and unsecured obligations of the
Company. See "Description of Notes -- General."The Notes are subject to
mandatory tender on the Remarketing Date. If J.P. Morgan Securities Inc., as
Remarketing Dealer (the "Remarketing Dealer"), has elected to remarket the Notes
on the Remarketing Date as described herein, the Notes will be subject to
mandatory tender to the Remarketing Dealer at 100% of the principal amount
thereof for remarketing on the Remarketing Date. See "Description of the Notes
- -- Mandatory Tender of Notes; Remarketing." If the Remarketing Dealer elects not
to remarket the Notes on the Remarketing Date, or for any reason does not
purchase all of the Notes on the Remarketing Date, the Company will be required
to purchase on the Remarketing Date any Notes that have not been purchased by
the Remarketing Dealer at 100% of the principal amount thereof plus accrued
interest, if any. See "Description of the Notes -- Repurchase."
The Notes will be redeemable by the Company on and after the Remarketing
Date pursuant to the terms set forth in "Description of the Notes --
Redemption."The Notes are not subject to any sinking fund.
The Notes will be represented by one or more global securities registered in
the name of The Depository Trust Company ("DTC") or its nominee. Interests in
the global securities will be shown on, and transfers thereof will be effected
only through, records maintained by DTC and its participants. Purchasers of the
Notes will not have the right to receive physical certificates evidencing their
ownership of the Notes. The Notes will not be listed on any securities exchange.
Settlement for the Notes will be made in immediately available funds and the
Notes will trade in DTC's Same-Day Funds Settlement System until maturity.
Secondary market trading activity in the Notes will therefore settle in
immediately available funds. All payments of principal and interest will be made
by the Company in immediately available funds.
Concurrent with this Offering, the Company is offering (the "2028 Notes
Offering") pursuant to a separate Prospectus Supplement $600,000,000 aggregate
principal amount of 7% Senior Notes due 2028 (the "2028 Notes"). Consummation of
this Offering is not a condition to consummation of the 2028 Notes Offering, and
consummation of the 2028 Notes Offering is not a condition to consummation of
this Offering.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING COMPANY
PUBLIC (1) DISCOUNT (2) (3)(4)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........................................... 99.795% 0.450% 101.795%
Total.............................................. $598,770,000 $2,700,000 6$10,770,000
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $250,000.
(4) THE PROCEEDS TO THE COMPANY INCLUDE A PREMIUM PAID BY THE REMARKETING DEALER
PURSUANT TO THE REMARKETING AGREEMENT DESCRIBED HEREIN. SEE "DESCRIPTION OF
NOTES--MANDATORY TENDER OF NOTES; REMARKETING--THE REMARKETING DEALER" AND
"UNDERWRITING."
The Notes are offered by the several underwriters when, as and if delivered
to and accepted by them, subject to certain conditions, including their rights
to withdraw, cancel or reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York, on or about July 17,
1998, in book-entry form through the facilities of The Depository Trust Company
against payment therefor in immediately available funds.
JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE J.P. MORGAN & CO.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR AND PURCHASE THE OFFERED SECURITIES IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THE USA WASTE SELECTED HISTORICAL FINANCIAL DATA, THE USA
WASTE AND WASTE MANAGEMENT SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO, INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS. THE "COMPANY" AND "USA WASTE" REFER TO USA WASTE
SERVICES, INC. AND ITS SUBSIDIARIES AND PREDECESSORS, UNLESS OTHERWISE INDICATED
OR THE CONTEXT REQUIRES OTHERWISE.
THE COMPANY
USA Waste is the third largest integrated, nonhazardous solid waste
management company in North America, as measured by revenues for the 1997 fiscal
year, and currently serves commercial, industrial, municipal and residential
customers in various locations in the United States, Canada and Puerto Rico. The
Company's solid waste management services include collection, transfer and
disposal operations and, to a lesser extent, recycling and certain other waste
management services. As of March 31, 1998, USA Waste, through its subsidiaries,
owned or operated an extensive network of landfills, transfer stations and
collection operations and served in excess of eight million customers.
The Company believes that providing fully-integrated waste management
services gives it a competitive advantage in its markets and allows for a
relatively higher level of waste internalization and profitability. For the
three months ended March 31, 1998, approximately 64% of the Company's revenues
were attributable to collection operations, approximately 21% were attributable
to landfill operations, approximately 12% were attributable to transfer
operations, and approximately 3% were attributable to recycling and other waste
management services.
The Company operates on a decentralized basis through five geographic
regions with a diversified customer base. Based on collection revenues for the
three months ended March 31, 1998, the Company's customers were approximately
40% commercial, 30% industrial and 30% municipal and residential.
The Company's strategy includes the following key elements: (i) increasing
productivity and operating efficiencies in existing and acquired operations,
(ii) increasing revenues and enhancing profitability in its existing markets
through "tuck-in" acquisitions, and (iii) expanding into new markets through
acquisitions. The Company seeks to become the low-cost operator in each of its
markets by increasing productivity and operating efficiencies through
implementation of uniform administrative systems, consolidation of collection
routes, improvement of equipment utilization and increases in employee
productivity through incentive compensation and training programs. The Company
regularly pursues opportunities to expand its services through the acquisition
of additional solid waste management businesses and operations that can be
effectively integrated with the Company's existing operations. In addition, the
Company regularly pursues merger or acquisition transactions, some of which are
significant, in new markets where the Company believes it can strengthen its
overall competitive position as a national provider of integrated solid waste
management services.
USA Waste was incorporated under the laws of the State of Delaware in April
1995 to become the successor to USA Waste Services, Inc., an Oklahoma
corporation organized in 1987. The principal executive offices of USA Waste are
located at 1001 Fannin Street, Suite 4000, Houston, Texas 77002 and its
telephone number is (713) 512-6200.
RECENT DEVELOPMENTS
On March 10, 1998, the Company entered into a definitive agreement and plan
of merger pursuant to which a subsidiary of the Company will be merged with and
into Waste Management, Inc. ("Waste Management") and Waste Management will
become a wholly-owned subsidiary of the Company (the "Merger"). Waste Management
is a leading international provider of waste management and related services to
governmental, residential, commercial and industrial customers in the United
States and select international markets, and had revenues in 1997 of
approximately $9.2 billion. As of the effective time of
S-3
<PAGE>
the Merger, each outstanding share of Waste Management common stock ("Waste
Management Common Stock"), other than shares held in Waste Management's treasury
or owned by Waste Management, the Company or any wholly-owned subsidiaries of
either of them, will be converted into the right to receive 0.725 of a share of
the Company's common stock ("USA Waste Common Stock"). It is anticipated that
the Company will issue approximately 353 million shares of its common stock (not
including shares reserved for option and warrant exercises and convertible debt)
in connection with the Merger and that the Merger will be accounted for as a
pooling of interests. Following the Merger, the Company will be renamed "Waste
Management, Inc." ("New Waste Management"). The consummation of the Merger is
subject to a number of conditions, including obtaining all consents, approvals
and authorizations legally required to be obtained to consummate the Merger
(including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended) and approval by the stockholders of the Company and Waste Management.
It is expected that the Merger will be consummated shortly after the later of
(a) authorization from the Department of Justice and (b) approval by the
stockholders of the Company and Waste Management. The Company and Waste
Management each received a second request for information from the Department of
Justice, and they have each set July 15, 1998 as the date of their stockholders'
meeting to vote on the Merger. There can be no assurance that the conditions to
the Merger will be satisfied or waived, and therefore, there can be no assurance
that the Merger will be consummated.
Following the consummation of the Merger, John E. Drury, the current Chief
Executive Officer of the Company will remain in such position with New Waste
Management, and the current President and Chief Operating Officer, and Executive
Vice President and Chief Financial Officer of the Company are expected to remain
in such positions with New Waste Management. The current Chairman of the Board
and Chief Executive Officer of Waste Management will become non-executive
Chairman of the New Waste Management Board of Directors for a 12-month term,
after which Mr. Drury will become Chairman of the Board and will continue as
Chief Executive Officer of New Waste Management. The Board of Directors of New
Waste Management immediately following the effective time of the Merger will
consist of 14 members, seven of whom will be designated by the Company and seven
of whom will be designated by Waste Mangement.
Pursuant to the Merger, as a condition to receiving pooling of interests
accounting treatment, Waste Management was required to issue approximately 20
million shares of Waste Management Common Stock. This offering was completed on
June 15, 1998, resulting in net proceeds to Waste Management of approximately
$607.5 million. In addition, on May 15, 1998 Waste Management announced that its
Board of Directors has adopted a new dividend policy, reducing regular quarterly
dividends from $0.17 per share to $0.01 per share.
On June 29, 1998, Waste Management announced that it had reached an
agreement to acquire the publicly owned shares of its subsidiary, Waste
Management International plc. Waste Management has indicated that the
transaction is not expected to have a material impact on its future earnings.
Upon the consummation of the Merger, it is expected that New Waste
Management will enter into a revolving credit facility in the amount of $3.0
billion (the "New Credit Facility"), which will be in addition to the Company's
existing $2.0 billion revolving credit facility (the "Credit Facility"). It is
further expected that the New Credit Facility and the Credit Facility will each
be guaranteed by Waste Management, Inc., as a subsidiary of New Waste
Management. Further, upon the consummation of the Merger, New Waste Management
will unconditionally guarantee the outstanding senior indebtedness of Waste
Management, and Waste Management will unconditionally guarantee the outstanding
senior indebtedness of New Waste Management, including the 2028 Notes and the
Notes. As a consequence of such guarantees, the New Credit Facility, the Credit
Facility, the senior indebtedness of New Waste Management and the senior
indebtedness of Waste Management will be ranked on a PARI PASSU basis. Upon any
release by the lenders under the New Credit Facility and the Credit Facility (or
any replacement or new principal credit facility of New Waste Management) of the
Waste Management guarantee, Waste Management and New Waste Management shall each
be deemed automatically and unconditionally released and discharged from their
respective obligations under the guarantees of such senior indebtedness of the
other so guaranteed. See "Description of Notes--General."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes in this Offering
are $595.8 million (excluding the premium payment of $14.7 million to the
Company by J.P. Morgan Securities Inc. pursuant to the Remarketing Agreement
discussed herein), after deducting underwriting discounts and commissions and
estimated offering expenses.
The net proceeds of this Offering and the concurrent 2028 Notes Offering are
expected to be used to repay outstanding indebtedness under the Credit Facility.
At March 31, 1998, the aggregate outstanding balance of loans and letters of
credit under the Credit Facility was $1.8 billion ($483.3 million of which were
letters of credit). Borrowings under the Credit Facility bear interest at a rate
(currently 5.925%) equal to the Eurodollar rate plus an amount not in excess of
0.575% per annum and mature on August 7, 2002. Bank of America, an affiliate of
BancAmerica Robertson Stephens, expects to receive up to $29.8 million of
repayment under the Credit Facility from the proceeds of this Offering. Morgan
Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities Inc.,
expects to receive up to $29.8 million of repayment under the Credit Facility
from the proceeds of this Offering. Chase Bank of Texas, National Association,
an affiliate of Chase Securities Inc., expects to receive up to $25.3 million of
repayment under the Credit Facility from the proceeds of this Offering. Deutsche
Bank, an affiliate of Deutsche Bank Securities, expects to receive up to $25.3
million of repayment under the Credit Facility from the proceeds of this
Offering. Amounts currently outstanding under the Credit Facility were incurred
to refinance existing indebtedness and for capital expenditures and other
general corporate purposes, including acquisitions. Amounts repaid on the Credit
Facility may be reborrowed from time to time for capital expenditures and other
general corporate purposes, including possible future acquisitions.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Actual..................................... 1.9x 1.1x 2.4x 2.3x 4.1x 5.0x
</TABLE>
The Company's consolidated ratios of earnings to fixed charges were computed
by dividing earnings available for fixed charges by fixed charges. For this
purpose, earnings available for fixed charges are the sum of income before
income taxes, undistributed earnings from affiliated companies minority
interest, cumulative effect of accounting changes and fixed charges, excluding
capitalized interest. Fixed charges are interest, whether expensed or
capitalized, amortization of debt expense and discount on premium relating to
indebtedness, and such portion of rental expense that can be demonstrated to be
representative of the interest factor in the particular case.
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown on a supplemental basis excluding
nonrecurring items:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Supplemental............................... 2.0x 2.4x 3.2x 4.5x 5.1x 5.0x
</TABLE>
Nonrecurring items in 1997 represent merger costs, primarily related to the
Company's merger with United Waste Systems, Inc. ("United") in August 1997, and
unusual items, primarily related to the closure of two transfer stations in
Minnesota, estimated losses related to the closure and abandonment of two
landfills in Massachusetts, and various other terminated projects. Nonrecurring
items in 1996 represent
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<PAGE>
merger costs, primarily related to mergers with Sanifill, Inc. ("Sanifill") in
August 1996 and Western Waste Industries ("Western") in May 1996, and unusual
items, primarily related to retirement benefits associated with Western's
pre-merger retirement plan, estimated future losses related to municipal solid
waste contracts in California as a result of the continuing decline in prices of
recyclable materials, estimated losses related to the disposition of certain
non-core business assets, project reserves related to Mexican operations, and
various other terminated projects. Nonrecurring items in 1995 primarily
represent merger costs related to the merger with Chambers Development Company,
Inc. ("Chambers") in June 1995 and nonrecurring interest related to extension
fees and other charges associated with the refinancing of Chambers' pre-merger
debt. Nonrecurring items in 1994 primarily represent shareholder litigation
costs incurred in connection with a settled class action of consolidated suits
on similar claims alleging federal securities law violations against Chambers,
certain of its officers and directors, its former auditors, and the underwriters
of its securities. Nonrecurring items in 1993 were not material.
The following table sets forth for the periods presented the ratios of
earnings to fixed charges on a pro forma combined basis giving effect to the
Merger and excluding nonrecurring items:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Pro Forma Combined......................... 3.5x 3.1x 3.3x 3.1x 2.7x 3.0x
</TABLE>
In addition to the nonrecurring items discussed above, the pro forma
combined ratios of earnings to fixed charges exclude asset impairment losses of
$1,480,262,000 and special charges of $145,990,000 for the year ended December
31, 1997, asset impairment losses of $64,729,000 and special charges of
$370,735,000 for the year ended December 31, 1996, asset impairment losses of
$53,772,000 and special charges of $335,587,000 for the year ended December 31,
1995, asset impairment losses of $33,970,000 for the year ended December 31,
1994, and asset impairment losses of $29,009,000 and special charges of
$524,767,000 for the year ended December 31, 1993.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth the (i) actual consolidated cash and cash
equivalents and capitalization of the Company as of March 31, 1998; (ii) the
consolidated cash and cash equivalents and capitalization, as adjusted to give
effect to this Offering and the 2028 Notes Offering and the anticipated
application of the aggregate net proceeds of $1,183.6 million (excluding the
premium payment of $14.7 million to the Company by J.P. Morgan Securities Inc.
pursuant to the Remarketing Agreement discussed herein); and (iii) the pro forma
combined cash and cash equivalents and capitalization of the Company and Waste
Management as of March 31, 1998, giving effect to the Merger and as adjusted in
(ii) above for this Offering and the 2028 Notes Offering. See "Use of Proceeds."
The pro forma combined as adjusted cash and cash equivalents and
capitalization reflects the sale of 20 million shares of Waste Management Common
Stock that occurred June 15, 1998. For the purposes of this table, net proceeds
from the Waste Management Common Stock offering were assumed to have been $614.4
million, as discussed in the pro forma financial information provided herein.
The actual proceeds from the Waste Management Common Stock offering did not
differ materially from the amounts assumed. A portion of the proceeds from the
Waste Management Common Stock offering were used to reduce Waste Management's
obligations to former stockholders of Wheelabrator Technologies, Inc. ("WTI").
This table should be read in conjunction with and is qualified by reference
to the Company's Consolidated Financial Statements and Notes thereto and the USA
Waste and Waste Management Combined Unaudited Pro Forma Condensed Financial
Statements included or incorporated by reference in this Prospectus Supplement
and the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
--------------------------------------
COMPANY AND
WASTE MANAGEMENT
COMPANY PRO FORMA
COMPANY AS COMBINED
ACTUAL ADJUSTED AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.......................... $ 46,260 $ 46,260 $ 358,121
--------- --------- ----------------
--------- --------- ----------------
Long-term debt (including current maturities):
Credit facility.................................. $1,333,000 $ 149,400 $ 329,400
Commercial paper................................. -- -- 427,595
Obligation to former WTI stockholders............ -- -- 261,832
Existing Notes and debentures.................... 1,091,240 1,091,240 4,774,495
7% Senior Notes due 2028......................... -- 600,000 600,000
6 1/8% Mandatorily Tendered Senior Notes due
2011........................................... -- 600,000 600,000
Convertible subordinated notes and
other subordinated notes....................... 799,775 799,775 1,249,312
WTI project debt................................. -- -- 784,146
Other............................................ 407,399 407,399 1,306,683
--------- --------- ----------------
Total long-term debt, including current
maturities................................... 3,631,414 3,647,814 10,333,463
--------- --------- ----------------
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized,
none issued.................................... -- -- --
Common stock, 500,000,000 shares authorized,
219,834,550 shares (572,269,938 pro forma
shares) issued................................. 2,198 2,198 5,723
Additional paid-in capital....................... 2,436,447 2,436,447 3,267,468
Retained earnings................................ 374,459 374,459 2,033,929
Accumulated other comprehensive income........... (37,498) (37,498) (316,298)
Treasury stock................................... (484) (484) (484)
Restricted stock unearned compensation........... -- -- (10,252)
Employee stock benefit trust..................... -- -- (335,436)
--------- --------- ----------------
Total stockholders' equity..................... 2,775,122 2,775,122 4,644,650
--------- --------- ----------------
Total capitalization........................... $6,406,536 $6,422,936 $ 14,978,113
--------- --------- ----------------
--------- --------- ----------------
</TABLE>
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<PAGE>
SELECTED HISTORICAL AND SUMMARY COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
The following selected historical financial information of USA Waste for
each of the five years in the period ended December 31, 1997 has been derived
from its audited historical financial statements. The following selected
historical financial information of USA Waste as of and for the three months
ended March 31, 1997 and 1998 has been derived from its unaudited historical
financial statements and reflects all adjustments management considers necessary
for a fair presentation of the financial position and results of operations for
these periods. The selected historical financial information should be read in
conjunction with the historical financial statements and notes thereto
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.
The summary combined unaudited pro forma condensed financial information is
derived from the combined unaudited pro forma condensed financial statements,
appearing elsewhere herein, which give effect to the Merger by combining the
results of operations of USA Waste and Waste Management using the pooling of
interests method of accounting as if the Merger had been consummated as of the
beginning of the periods presented and as if Waste Management had issued 20
million shares of Waste Management Common Stock as of March 31, 1998, and should
be read in conjunction with such pro forma financial statements and notes
thereto included in this Prospectus Supplement. The combined unaudited pro forma
condensed financial statements as of March 31, 1998 and for the years ended
December 31, 1995, 1996 and 1997 and the three months ended March 31, 1998 were
prepared based on the respective historical financial statements of USA Waste
and Waste Management.
The combined unaudited pro forma condensed financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have been achieved had
the Merger been consummated as of the beginning of the periods presented, nor is
it necessarily indicative of the future operating results or financial position
of New Waste Management. The combined unaudited pro forma condensed financial
information does not give effect to any possible divestitures of business units
(including those which may be required by the antitrust regulatory authorities)
or to any cost savings which may result from the integration of USA Waste's and
Waste Management's operations nor does such information include the nonrecurring
costs directly related to the Merger which are expected to be included in
operations of New Waste Management within the 12 months following the Merger.
Such nonrecurring costs have yet to be determined; however, such costs are
expected to be significant.
S-8
<PAGE>
USA WASTE SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues....................... $ 887,972 $1,043,687 $1,216,082 $1,649,131 $2,613,768 $ 460,484 $ 769,440
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below)........ 514,483 596,868 672,117 881,401 1,345,769 241,318 397,492
General and administrative............. 144,623 159,097 169,686 200,101 284,946 53,677 81,916
Depreciation and amortization.......... 108,024 127,108 143,878 191,044 303,241 56,178 86,110
Merger costs........................... -- 3,782 26,539 126,626 109,411 1,996 --
Unusual items.......................... 2,672 8,863 4,733 63,800 24,720 -- --
--------- --------- --------- --------- --------- --------- ---------
769,802 895,718 1,016,953 1,462,972 2,068,087 353,169 565,518
--------- --------- --------- --------- --------- --------- ---------
Income from operations................... 118,170 147,969 199,129 186,159 545,681 107,315 203,922
--------- --------- --------- --------- --------- --------- ---------
Other income (expenses):
Shareholder litigation settlement and
other litigation related costs....... (5,500) (79,400) -- -- -- -- --
Interest expense:
Nonrecurring......................... -- (1,254) (10,994) -- -- -- --
Other................................ (50,737) (54,102) (58,619) (60,497) (104,261) (16,098) (38,368)
Interest income........................ 5,072 5,085 6,682 6,699 7,634 2,053 1,799
Other income, net...................... 1,749 2,629 4,891 6,376 14,213 3,646 34,251
--------- --------- --------- --------- --------- --------- ---------
(49,416) (127,042) (58,040) (47,422) (82,414) (10,399) (2,318)
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item..................... 68,754 20,927 141,089 138,737 463,267 96,916 201,604
Provision for income taxes............... 29,170 8,959 60,313 70,398 189,944 38,954 80,642
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item......... 39,584 11,968 80,776 68,339 273,323 57,962 120,962
Extraordinary item related to early
retirement of debt, net of taxes....... -- -- -- -- (6,293) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................... $ 39,584 $ 11,968 $ 80,776 $ 68,339 $ 267,030 $ 57,962 $ 120,962
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per common share:
Income before extraordinary item....... $ 0.32 $ 0.08 $ 0.56 $ 0.39 $ 1.31 $ 0.30 $ 0.55
Extraordinary item..................... -- -- -- -- (0.03) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 0.32 $ 0.08 $ 0.56 $ 0.39 $ 1.28 $ 0.30 $ 0.55
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per common share:
Income before extraordinary item....... $ 0.32 $ 0.08 $ 0.54 $ 0.37 $ 1.26 $ 0.29 $ 0.52
Extraordinary item..................... -- -- -- -- (0.03) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 0.32 $ 0.08 $ 0.54 $ 0.37 $ 1.23 $ 0.29 $ 0.52
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Dividends per common share............... $ -- $ -- $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.......................... $ 37,565 $ 1,901 $ 26,134 $ 31,842 $ 86,736 $ 148,997 $ 177,910
Intangible assets, net................... 196,353 250,551 433,944 804,251 1,645,985 1,110,900 2,031,811
Total assets............................. 1,617,422 1,833,099 2,455,102 3,631,547 6,622,845 4,591,544 7,589,405
Long-term debt, including current
maturities............................. 711,014 759,123 909,050 1,504,888 2,763,729 1,732,825 3,631,414
Stockholders' equity..................... 623,510 688,603 1,149,885 1,473,990 2,628,976 2,118,698 2,775,122
</TABLE>
S-9
<PAGE>
- ------------------------
(1) The results of operations in 1997 include charges for merger costs that
primarily related to a pooling of interests with United and unusual items
for the closure and abandonment of certain landfills and transfer stations
and reserves for various other terminated projects.
(2) In 1996, USA Waste recorded merger costs primarily related to its poolings
of interests with Western and Sanifill, and unusual items primarily related
to retirement benefits associated with Western's pre-merger retirement plan,
estimated future losses related to municipal solid waste contracts in
California as a result of the continuing decline in prices of recyclable
materials, estimated losses related to the disposition of certain non-core
business assets, project reserves related to certain operations in Mexico,
and various other terminated projects.
(3) USA Waste's results of operations in 1995 include merger costs primarily
related to its merger with Chambers and nonrecurring interest related to
extension fees and other charges associated with the refinancing of
Chambers' pre-merger debt.
(4) The 1994 results of operations include nonrecurring charges primarily
related to shareholder litigation costs incurred in connection with a
settled class action of consolidated suits on similar claims alleging
federal securities law violations against Chambers, certain of its officers
and directors, its former auditors, and the underwriters of its securities.
S-10
<PAGE>
USA WASTE AND WASTE MANAGEMENT
SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------- -------------
1995 1996 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues................................... $ 10,316,307 $ 10,874,767 $ 11,802,350 $ 2,901,061
------------- ------------- ------------- -------------
Costs and expenses:
Operating (exclusive of depreciation and
amortization shown below)...................... 6,176,196 6,498,708 7,479,745 1,757,707
General and administrative....................... 1,260,192 1,294,471 1,413,244 345,581
Depreciation and amortization.................... 1,178,896 1,256,727 1,382,356 351,458
Merger costs..................................... 26,539 126,626 109,411 --
Unusual items.................................... 394,092 499,264 1,650,972 --
(Income) loss from continuing operations held for
sale, net of minority interest..................... (25,110) (315) 9,930 2,416
------------- ------------- ------------- -------------
9,010,805 9,675,481 12,045,658 2,457,162
------------- ------------- ------------- -------------
Income (loss) from operations........................ 1,305,502 1,199,286 (243,308) 443,899
------------- ------------- ------------- -------------
Other income (expense):
Interest expense:
Nonrecurring................................. (10,994) -- -- --
Other........................................ (522,480) (522,921) (551,149) (153,942)
Interest income.................................. 41,565 34,603 45,214 6,109
Minority interest................................ (81,367) (41,289) (45,442) (25,302)
Other income, net................................ 257,586 108,390 126,172 70,323
------------- ------------- ------------- -------------
(315,690) (421,217) (425,205) (102,812)
------------- ------------- ------------- -------------
Income (loss) from continuing operations before
income taxes....................................... 989,812 778,069 (668,513) 341,087
Provision for income taxes........................... 492,885 486,616 361,464 161,815
------------- ------------- ------------- -------------
Income (loss) from continuing operations............. $ 496,927 $ 291,453 $ (1,029,977) $ 179,272
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic earnings (loss) per common share from
continuing operations.............................. $ 1.00 $ 0.55 $ (1.88) $ 0.33
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted earnings (loss) per common share from
continuing operations.............................. $ 0.99 $ 0.54 $ (1.88) $ 0.32
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)............................ $(1,537,137)
Intangible assets, net............................... 5,651,426
Total assets......................................... 21,248,259
Long-term debt, including current maturities......... 10,317,063
Stockholders' equity................................. 4,644,650
</TABLE>
S-11
<PAGE>
DESCRIPTION OF THE NOTES
The Notes constitute a series of Senior Debt Securities described in the
accompanying Prospectus that will be issued under an indenture, dated as of
September 10, 1997 (the "Senior Indenture"), between the Company and Chase Bank
of Texas, National Association, as trustee (the "Trustee"). The following
description of the particular terms of the Notes offered hereby supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Senior Debt Securities set forth in the accompanying
Prospectus, to which reference is hereby made. Capitalized terms used but not
defined herein or in the accompanying Prospectus have the meanings given to them
in the Senior Indenture. As used in this section, the "Company" means USA Waste
Services, Inc., but not any of its subsidiaries, unless the context otherwise
requires. The following summary of the Senior Indenture and the Notes does not
purport to be complete and such summary is subject to the detailed provisions of
the Senior Indenture and the Notes to which reference is hereby made for a full
description of such provisions.
GENERAL
The Notes offered by this Prospectus Supplement will be limited in aggregate
principal amount to $600,000,000. The Notes constitute senior and unsecured
obligations of the Company, ranking PARI PASSU in right of payment with all
other senior and unsecured obligations of the Company.
The Notes will mature on July 15, 2011 (the "Stated Maturity Date") and will
bear interest at an annual rate of 6 1/8% to but not including July 15, 2001
(the "Remarketing Date"). Interest on the Notes will be payable semi-annually on
January 15 and July 15 of each year, commencing January 15, 1999 to the persons
in whose name the Notes are registered at the close of business on the December
31 and June 30 immediately preceding the related Interest Payment Date. Interest
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. The Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and integral multiples thereof. There is no sinking
fund applicable to the Notes.
If the Remarketing Dealer elects to remarket the Notes on the Remarketing
Date, then the Notes will be subject to mandatory tender to the Remarketing
Dealer, for purchase at 100% of the principal amount thereof on the Remarketing
Date on the terms and subject to the conditions described herein (interest
accrued to but not including the Remarketing Date will be paid by the Company on
such date to holders on the immediately preceding Record Date). See "--
Mandatory Tender of Notes; Remarketing." If the Remarketing Dealer does not
elect to exercise its right to a mandatory tender of the Notes on the
Remarketing Date, if the Remarketing Dealer does not receive by the
Determination Date (as defined below) any firm committed bids to purchase all
the Notes from a Reference Corporate Dealer, as provided below, or if for any
reason the Remarketing Dealer does not purchase all of the Notes on the
Remarketing Date, then the Company is required to repurchase any Notes that have
not been purchased by the Remarketing Dealer from the holders thereof at 100% of
the principal amount thereof plus accrued interest, if any. See "-- Repurchase."
The Notes will be redeemable by the Company on and after the Remarketing Date
pursuant to the terms set forth in "-- Redemption."
If the Remarketing Dealer remarkets the Notes on the Remarketing Date, then,
as of the Remarketing Date, the interest rate on the Notes will be reset at a
fixed rate until the Stated Maturity Date, as determined by the Remarketing
Dealer based on bids requested from certain dealers in the Company's
publicly-traded debt securities. See "-- Mandatory Tender of Notes;
Remarketing."
The Notes will be issued in the form of one or more registered global
securities and will be deposited with, or on behalf of, DTC and registered in
the name of DTC or its nominee. See "-- Book-Entry, Delivery and Form."
Settlement for the Notes will be made in immediately available funds and the
Notes will trade on the DTC's Same-Day Funds Settlement System until maturity.
Secondary market trading activity in the Notes will therefore settle in
immediately available funds. All payments of principal and interest will be made
by the Company in immediately available funds.
Although the United States federal income tax treatment of the Notes is not
certain, the terms of the Notes provide that the Company and all holders of the
Notes agree to treat the Notes as fixed rate debt
S-12
<PAGE>
instruments that mature on the Remarketing Date for United States federal income
tax purposes. See "Certain United States Federal Income Tax Considerations."
The Company's obligations under the Credit Facility are currently guaranteed
by United and Sanifill, both wholly-owned subsidiaries of the Company. Upon
consummation of the Merger, it is expected that New Waste Management will enter
into the New Credit Facility, and that each of the Credit Facility and the New
Credit Facility will be guaranteed by Waste Management, Inc., as a subsidiary of
New Waste Management. Further, upon consummation of the Merger, it is expected
that New Waste Management will unconditionally guarantee the outstanding senior
indebtedness of Waste Management, and Waste Management will unconditionally
guarantee the outstanding senior indebtedness of New Waste Management, including
the Notes and the 2028 Notes. It is expected that as a consequence of such
guarantees, the New Credit Facility, the Credit Facility, the senior
indebtedness of New Waste Management and the senior indebtedness of Waste
Management will be ranked on a PARI PASSU basis. Upon any release by the lenders
under the New Credit Facility and the Credit Facility (or any replacement or new
principal credit facility of New Waste Management) of the Waste Management
guarantee, Waste Management and New Waste Management shall each be deemed
automatically and unconditionally released and discharged from their respective
obligations under the guarantees of such senior indebtedness of the other so
guaranteed. The Company is seeking, among other proposed amendments, to amend
the Credit Facility to have the guarantees provided by United and Sanifill
removed, although there can be no assurance such guarantees will be removed. If
such guarantees by United and Sanifill are removed, Waste Management, Inc. will
be the only subsidiary of New Waste Management guaranteeing the Credit Facility
and the New Credit Facility. In such event, the claims of creditors of United,
Sanifill and (with the exception of Waste Management assuming the Merger is
consummated and the Waste Management guarantee is entered into as described
hereinabove) the Company's other subsidiaries (including holders of the $150.0
million aggregate principal amount of outstanding 4% Convertible Subordinated
Debentures due June 1, 2001 of United, and $115.0 million aggregate amount of
outstanding 5% Convertible Subordinated Debentures due March 1, 2006 of
Sanifill) will effectively have priority with respect to the assets and earnings
of such subsidiaries, over the claims of creditors of the Company, including the
holders of the Notes. However, upon consummation of the Merger, the claims of
creditors of Waste Management will not have such priority as a consequence of
Waste Management's guarantee of the Company's senior indebtedness described
above during the period such guarantee is in effect.
MANDATORY TENDER OF NOTES; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the Notes on the Remarketing Date, if the Remarketing Dealer
elects to purchase the Notes on the Remarketing Date for remarketing.
MANDATORY TENDER
If the Remarketing Dealer gives notice to the Company and the Trustee on a
Business Day not later than fifteen Business Days prior to the Remarketing Date
(the "Notification Date") of its intention to purchase the Notes for remarketing
on the Remarketing Date, all outstanding Notes will be automatically tendered to
the Remarketing Dealer for purchase on the Remarketing Date. The purchase price
of the Notes will be equal in each case to 100% of the principal amount thereof.
When the Notes are tendered for remarketing, the Remarketing Dealer may remarket
the Notes for its own account at a price or prices to be determined by the
Remarketing Dealer at the time of each sale or may sell such Notes to the
Reference Corporate Dealer (defined below) submitting the lowest firm, committed
bid on the Determination Date (defined below), as described below.
If the Remarketing Dealer elects to remarket the Notes on the Remarketing
Date, then from and including the Remarketing Date to but excluding the Stated
Maturity Date, the Notes will bear interest at the Interest Rate to Maturity
(determined as provided below). If the Remarketing Dealer elects to remarket the
Notes on the Remarketing Date, the obligation of the Remarketing Dealer to
purchase the Notes on the Remarketing Date is subject to several conditions set
forth in a Remarketing Agreement
S-13
<PAGE>
between the Company and the Remarketing Dealer (the "Remarketing Agreement"). In
addition, the Remarketing Dealer may terminate the Remarketing Agreement upon
the occurrence of certain events set forth therein. See "-- The Remarketing
Dealer." If for any reason the Remarketing Dealer does not purchase all
outstanding Notes on the Remarketing Date, the Company will be required on the
Remarketing Date to repurchase any Notes that have not been purchased by the
Remarketing Dealer from the holders thereof at a price equal to 100% of the
principal amount thereof plus all accrued interest, if any. See "-- Repurchase."
The Remarketing Dealer shall determine the interest rate the Notes will bear
from and including the Remarketing Date to but excluding the Stated Maturity
Date (the "Interest Rate to Maturity") on the third Business Day immediately
preceding the Remarketing Date (the "Determination Date") by soliciting by 3:30
p.m., New York City time, on the Determination Date the Reference Corporate
Dealers (defined below) for firm, committed bids to purchase all outstanding
Notes at the Dollar Price (defined below), and by selecting the lowest such
firm, committed bid (regardless of whether each of the Referenced Corporate
Dealers actually submits a bid). Each bid shall be expressed in terms of the
Interest Rate to Maturity that the Notes would bear (quoted as a spread over
5.585% per annum (the "Base Rate")) based on the following assumptions:
(i) the Notes would be sold to such Reference Corporate Dealer on the
Remarketing Date for settlement on the same day;
(ii) the Notes would mature on the Stated Maturity Date; and
(iii) the Notes would bear interest from and including the Remarketing
Date to but excluding the Stated Maturity Date at a stated rate equal to the
Interest Rate to Maturity bid by such Reference Corporate Dealer, payable
semi-annually on the Interest Payment Dates for the Notes.
The Interest Rate to Maturity announced by the Remarketing Dealer as a result of
such process will be quoted to the nearest one hundred-thousandth (0.00001) of
one percent per annum and, absent manifest error, will be binding and conclusive
upon the holders of the Notes, the Company and the Trustee. The Remarketing
Dealer shall have the discretion to select the time at which the Interest Rate
to Maturity is determined on the Determination Date.
"Dollar Price" means the discounted present value to the Remarketing Date of
the cash flows on a bond
(x) with a principal amount equal to the aggregate principal amount of
the Notes,
(y) maturing on the Stated Maturity Date, and
(z) bearing interest at a rate equal to the Base Rate,
using a discount rate equal to the Treasury Rate (defined below), payable
semi-annually (assuming a 360-day year consisting of twelve 30-day months) on
the Interest Payment Dates of the Notes from and including the Remarketing Date
to but excluding the Stated Maturity Date.
"Reference Corporate Dealer" means J.P. Morgan Securities Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, BancAmerica Robertson Stephens, Chase
Securities Inc., and Deutsche Bank Securities. If any of such persons shall
cease to be a leading dealer of publicly-traded debt securities of the Company,
then the Remarketing Dealer may replace, with the approval of the Company (not
to be unreasonably withheld), such person with any other leading dealer of
publicly-traded debt securities of the Company.
"Treasury Rate" means the annual rate equal to the semi-annual equivalent
yield to maturity or interpolated (on a 30/360 day count basis) yield to
maturity on the Determination Date of the Comparable Treasury Issue (defined
below) for value on the Remarketing Date, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price (as defined below).
S-14
<PAGE>
"Comparable Treasury Issue" means the United States Treasury security
selected by the Remarketing Dealer as having an actual maturity on the
Determination Date (or the United States Treasury securities selected by the
Remarketing Dealer to derive an interpolated maturity on the Determination Date)
comparable to the remaining term of the Notes.
"Comparable Treasury Price" means (a) the offer price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) on the
Determination Date, as set forth on Telerate Page 500 (as defined below),
adjusted to reflect settlement on the Remarketing Date if prices quoted on
Telerate Page 500 are for settlement on any date other than the Remarketing
Date, or (b) if such page (or any successor page) is not displayed or does not
contain such offer prices on such Business Day, (i) the average of five
Reference Treasury Dealer Quotations (as defined below) for the Remarketing
Date, excluding the highest and lowest of such Reference Treasury Dealer
Quotations (unless there is more than one highest or lowest quotation, in which
case only one such highest and/or lowest quotations shall be excluded) or (ii)
if the Remarketing Dealer obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated on "Telerate Page 500" on
Dow Jones Markets Limited (or such other page as may replace Telerate page 500
on such service) or such other service displaying the offer prices specified in
clause (a) of the definition of Comparable Treasury Price as may replace Dow
Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer, the offer price(s) for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) for settlement on the Remarketing Date
quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by
3:30 p.m., New York City time, on the Determination Date.
"Reference Treasury Dealer" means a primary U.S. Government securities
dealer in The City of New York (which may include the Remarketing Dealer)
selected by the Remarketing Dealer.
NOTIFICATION OF RESULTS; SETTLEMENT
If the Remarketing Dealer has elected to remarket the Notes on the
Remarketing Date as provided herein, then the Remarketing Dealer will notify the
Company, the Trustee and DTC by telephone, confirmed in writing by 5:00 p.m.,
New York City time on the Determination Date, of the Interest Rate to Maturity
applicable to the Notes effective from and including the Remarketing Date.
All outstanding Notes will be automatically delivered to the account of the
Trustee by book-entry through DTC, pending payment of the purchase price
therefor, on the Remarketing Date.
The Remarketing Dealer will make, or cause the Trustee to make, payment to
DTC by the close of business on the Remarketing Date, against delivery through
DTC of the tendered Notes, of the purchase price for all of the tendered Notes.
The purchase price of the tendered Notes will be equal to 100% of the principal
amount thereof and will be paid in immediately available funds. If the
Remarketing Dealer does not purchase all of the Notes on the Remarketing Date,
then the Company is obligated to make or cause to be made such payment for all
of the Notes not purchased by the Remarketing Dealer, as described below under
"-- Repurchase." In any case, the Company will make, or cause the Trustee to
make, payment of interest due on the Remarketing Date to holders of Notes as of
the Record Date by book entry through DTC by the close of business on the
Remarketing Date.
The tender and settlement procedures described above may be modified without
the consent of the holders of the Notes to the extent required by DTC or, if the
book-entry system is no longer available for the Notes at the time of the
remarketing, to the extent required to facilitate the tendering and remarketing
of Notes in certificated form. In addition, the Remarketing Dealer may modify
without any such consent the settlement procedures set forth above in order to
facilitate the settlement process.
S-15
<PAGE>
As long as DTC's nominee holds the certificates representing any Notes in
the book entry system of DTC, no certificates for such Notes will be delivered
by or to any selling beneficial owner to reflect any transfer of such Notes
effected in the remarketing. In addition, under and subject to the terms of the
Notes and the Remarketing Agreement, the Company (i) has agreed that it will use
its best efforts to maintain the Notes in book-entry form with DTC or any
successor thereto and to appoint a successor depositary to the extent necessary
to maintain the Notes in book-entry form and (ii) has waived any discretionary
right it otherwise has under the Senior Indenture to cause the Notes to be
issued in certificated form.
For further information with respect to transfers and settlement through
DTC, see "-- Book-Entry, Delivery and Form" below, and "Description of Debt
Securities -- Provisions Applicable to Both Senior and Subordinated Debt
Securities -- Global Debt Securities" in the accompanying Prospectus.
THE REMARKETING DEALER
On or prior to the date of issuance of the Notes, the Company and the
Remarketing Dealer will enter into the Remarketing Agreement which will provide
for the Notes to be remarketed substantially on the terms described below and in
"-- Mandatory Tender of Notes; Remarketing." The Remarketing Dealer will not
receive any fees from the Company in connection with the remarketing, but the
Company will reimburse the Remarketing Dealer's reasonable out-of-pocket
expenses under certain circumstances.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
arising out of or in connection with its duties under the Remarketing Agreement.
The Remarketing Dealer has the right under the Remarketing Agreement to
elect whether or not to remarket the Notes. If the Remarketing Dealer elects to
remarket the Notes on the Remarketing Date as described herein, the obligation
of the Remarketing Dealer to purchase Notes from holders thereof will be subject
to several conditions set forth in the Remarketing Agreement. In addition, the
Remarketing Agreement will provide for the termination thereof by the
Remarketing Dealer on or before the Remarketing Date upon the occurrence of
certain events, including events that customarily give underwriters the right to
terminate an underwriting agreement or would give rise to a failure to satisfy a
closing condition to an underwriting agreement in the Company's public debt
offerings.
As a result of these conditions and termination rights, holders of Notes
cannot be assured that their Notes will be purchased by the Remarketing Dealer
in connection with a mandatory tender. The Remarketing Dealer is not required to
purchase the Notes and no holder of any Notes shall have any rights or claims
under the Remarketing Agreement or against the Company or the Remarketing Dealer
as a result of the Remarketing Dealer not purchasing such Notes. If the
Remarketing Dealer does not purchase all of the Notes on the Remarketing Date,
the Company will be required to purchase on the Remarketing Date any Notes that
have not been purchased by the Remarketing Dealer on the Remarketing Date at
100% of the principal amount thereof plus accrued interest, if any. See "--
Repurchase."
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign as Remarketing Dealer (i) at any time prior to its giving notice of its
intention to remarket the Notes, such resignation to be effective ten Business
Days after the delivery to the Company and the Trustee of notice of such
resignation or (ii) immediately upon termination of the Remarketing Agreement.
The Company shall have the right, but not the obligation, to appoint a successor
Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the Notes. The Remarketing Dealer, as a holder or
beneficial owner of Notes may exercise any vote or join in any action which any
holder or beneficial owner of Notes may be entitled to exercise or take with
like effect as if it did not act in any capacity under the Remarketing
Agreement. The Remarketing Dealer, in its individual capacity, either as
principal or agent, may also engage in or have an interest in any financial or
S-16
<PAGE>
other transaction with the Company as freely as if it did not act in any
capacity under the Remarketing Agreement.
REPURCHASE
If the Remarketing Dealer for any reason does not purchase all of the Notes
on the Remarketing Date, the Company shall repurchase on the Remarketing Date,
at a price equal to 100% of the principal amount of the Notes plus all accrued
and unpaid interest, if any, on the Notes to (but excluding) the Remarketing
Date, any Notes that have not been purchased by the Remarketing Dealer on the
Remarketing Date.
REDEMPTION
ON THE REMARKETING DATE
If the Remarketing Dealer has elected to remarket the Notes on the
Remarketing Date, the Company shall have the right to redeem the Notes in whole
but not in part, from the Remarketing Dealer on the Remarketing Date by giving
written notice of such redemption to the Remarketing Dealer no later than the
later of:
(i) the Business Day immediately prior to the Determination Date or
(ii) if fewer than three Reference Corporate Dealers timely submit firm,
committed bids for all outstanding Notes to the Remarketing Dealer on the
Determination Date, immediately after the deadline set by the Remarketing Dealer
for receiving such bids has passed;
and by paying the amount equal to the greater of (x) 100% of the aggregate
principal amount of the Notes and (y) the Dollar Price with respect to such
Notes. In either such case, it shall pay such redemption price for the Notes in
same-day funds by wire transfer on the Remarketing Date to an account designated
by the Remarketing Dealer.
AFTER THE REMARKETING DATE
After the Remarketing Date, if the Remarketing Dealer has elected to
remarket the Notes on the Remarketing Date, the Notes will be redeemable (a
"Post-Remarketing Redemption"), in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon (not including
the portion of any such payments of interest accrued as of the redemption date)
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined
below) (determined on the third Business Day preceding such redemption date),
plus, in each case, accrued and unpaid interest thereon to (but excluding) the
redemption date.
Notice of any Post-Remarketing Redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to each holder of the Notes
to be redeemed. Unless the Company defaults in payment of the redemption price,
on and after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption pursuant to a Post-Remarketing
Redemption.
"ADJUSTED TREASURY RATE" means (i) the arithmetic means of the yields under
the heading "Week Ending" published in the Statistical Release most recently
published prior to the date of determination under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to the maturity, as of the redemption date,
of the principal being redeemed plus (ii) 0.10%. If no maturity set forth under
such heading exactly corresponds to the maturity of such principal, yields for
the two published maturities most closely corresponding to the maturity of such
principal shall be calculated pursuant to the immediately preceding sentence,
and the Adjusted Treasury
S-17
<PAGE>
Rate shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding in each of the relevant periods to the nearest month.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the terms of the Notes,
then such other reasonably comparable index which shall be designated by the
Company.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form of
one or more registered Notes in global form (the "Global Notes"). Each Global
Note will be deposited on the date of the closing of the sale of the Notes (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary.
The Company has been advised that the Depositary is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with it. The Depositary also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations ("Direct Participants"). The Depositary is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depository Trust Company system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Commission.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with an interest in the
Global Notes and (ii) ownership of the Notes evidenced by the Global Notes will
be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests of
Participants), the Participants and the Indirect Participants.
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Senior Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated notes (the "Certificated Notes"), and
will not be considered the owners or holders thereof under the Senior Indenture
for any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. As a result, the ability of
a person having a beneficial interest in Notes represented by a Global Note to
pledge such interest to persons or entities that do not participate in the
Depositary's system, or to otherwise take actions with respect to such interest,
may be affected by the lack of a physical certificate evidencing such interest.
The Company understands that under existing practices, if the Company requests
any action of Holders or if an owner of a beneficial interest in a Global Note
desires to give any notice or take any action a Holder is entitled to give or
take under the Senior Indenture, the Depositary would authorize the Participants
to give such notice or take such action, and Participants would authorize
beneficial owners owning through such Participants to give such notice or take
such action or would
S-18
<PAGE>
otherwise act upon the instructions of beneficial owners owning through them.
Issuance of the Notes in book-entry form may reduce the liquidity of such Notes
in the secondary trading market because investors may be unwilling to purchase
Notes for which they cannot obtain physical certificates.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to the Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Note represented by a Global Note registered in the name of the Depositary
or its nominee on the applicable record date will be payable by the Trustee to
or at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global Note representing the Notes under the Senior
Indenture. Under the terms of the Senior Indenture, the Company and the Trustee
may treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, or interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Notes as
shown on the records of the Depositary. Payments by the Participants and the
Indirect Participants to the beneficial owners will be governed by standing
instructions and customary practice and will be the sole responsibility of the
Participants or the Indirect Participants.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in definitive
form under the Senior Indenture or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes, then, upon surrender
by the Depositary of the Global Notes, Certificated Notes will be issued to each
person that the Depositary identifies as the beneficial owner of the Notes
represented by a Global Note. Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Certificated Notes may be presented for registration or exchange at the offices
of the Company required to be maintained under the Senior Indenture for such
purposes.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
The information in this and the preceding section concerning the Depositary
and the Depositary's book-entry system has been obtained from sources that the
Company believes to be reliable. The Company will have no responsibility for the
performance by the Depositary, its Participants or the Indirect Participants of
their respective obligations as described hereunder or under the rules and
procedures governing their respective operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
Payments in respect of the Notes represented by a Global Note (including
principal, premium, if any, and interest) will be made by wire transfer of
immediately available funds to the accounts specified by the Depositary. With
respect to Notes represented by Certificated Notes, all payments (including
principal, premium, if any, and interest) will be made at the office or agency
of the Company maintained for such
S-19
<PAGE>
purpose, which office or agency shall be maintained in the Borough of Manhattan,
The City of New York, except that, at the option of the Company, any payments of
interest may be made by mailing a check on or before the due date to the address
of the person entitled thereto as such address shall appear in the Security
Register. The Notes will trade in the Depositary's Same-Day Funds Settlement
System until maturity, or until the Notes are issued in certificated form, and
secondary market trading activity in the Notes will therefore be required by the
Depositary to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
S-20
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general discussion of the principal U.S. federal income
tax consequences of the purchase, ownership and disposition of the Notes to
initial holders purchasing Notes at the "issue price." The "issue price" of a
Note will equal the first price to the public (not including bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at which a substantial amount of
the Note is sold for money. This summary is based upon laws, regulations,
rulings and decisions currently in effect, all of which are subject to change,
which change may be retroactive. Moreover, it deals only with purchasers who
hold Notes as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"), and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding Notes
as a hedge against currency risk or as a position in a "straddle," "conversion"
or another integrated transaction for tax purposes, or U.S. Holders (as defined
below) whose functional currency is not the U.S. dollar. In addition, this
discussion only addresses the U.S. federal income tax consequences of the Notes
until the Remarketing Date.
As used herein, the term "U.S. Holder" means a beneficial owner of Notes
that is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a U.S.
person under any applicable Treasury regulations and certain partnerships that
have one or more partners who are not U.S. persons), (iii) an estate whose
income is subject to U.S. federal income tax regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the trust's administration and one or more U.S. fiduciaries
have the authority to control all its substantial decisions. As used herein, the
term "non-U.S. Holder" means a beneficial owner of a Note that is not a U.S.
Holder.
Because the Notes are subject to mandatory tender for purchase by the
Remarketing Dealer or purchase by the Company if not purchased by the
Remarketing Dealer on the Remarketing Date, the Company intends to treat the
Notes as maturing on the Remarketing Date for U.S. federal income tax purposes
and as being reissued on the Remarketing Date should the Remarketing Dealer
remarket the Notes. By purchasing the Notes a holder agrees to follow such
treatment for U.S. federal income tax purposes. Because no debt instrument
closely comparable to the Notes has been the subject of any Treasury regulation,
revenue ruling or judicial decision, the U.S. federal income tax treatment of
the Notes is not certain. Prospective purchasers should note that no rulings
have been or are expected to be sought from the Internal Revenue Service ("IRS")
with respect to any of the issues discussed herein, and no assurances can be
given that the IRS will not take contrary positions. Accordingly, significant
aspects of the U.S. federal income tax consequences of an investment in the
Notes are uncertain, and no assurance can be given that the IRS or the court
will agree that the Notes should be treated as maturing on the Remarketing Date.
Furthermore, no advice has been received or is expected to be sought from any
state, local or foreign taxing authority as to the income, franchise, personal
property or other taxation, or as to the treatment, of the Notes by any such
state, local or foreign jurisdiction. PROSPECTIVE PURCHASERS ARE STRONGLY URGED
TO CONSULT THEIR TAX ADVISERS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES
OF AN INVESTMENT IN THE NOTES (INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE
NOTES). EXCEPT WHERE INDICATED TO THE CONTRARY, THE FOLLOWING DISCUSSION ASSUMES
THAT THE COMPANY'S TREATMENT OF THE NOTES WILL BE RESPECTED FOR U.S. FEDERAL
INCOME TAX PURPOSES. PROSPECTIVE PURCHASERS SHOULD ALSO CONSULT THEIR TAX
ADVISERS WITH RESPECT TO ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
S-21
<PAGE>
TAX TREATMENT OF U.S. HOLDERS
Assuming the characterization of the Notes set forth above, the following
tax consequences will result with respect to U.S. Holders.
INTEREST INCOME
Interest on the Notes will generally be taxable as ordinary income for U.S.
federal income tax purposes when received or accrued by a U.S. Holder in
accordance with its regular method of tax accounting. The Company does not
anticipate that the initial issuance of the Notes will result in original issue
discount ("OID"), generally defined as the excess of the stated redemption price
at the maturity of the Notes over its issue price. However, if a Note is issued
with OID, the holder of such debt instrument with OID generally will be required
to recognize as ordinary income the amount of OID on the debt instrument as such
discount accrued, in accordance with a constant yield market.
GAIN OR LOSS ON SALE OR REDEMPTION
When a Note is sold or redeemed, the U.S. Holder will recognize gain or loss
equal to the difference between the amount realized on the sale or redemption
(excluding any amount attributable to accrued interest not previously included
in income) and the adjusted basis in its Notes. The adjusted basis of the Notes
generally will equal the U.S. Holder's cost, increased by any OID previously
includable in the U.S. Holder's income with respect to the Notes and reduced by
the principal payment previously received with respect to the Notes gain or loss
on sale or redemption of a Notes will generally be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to certain limitations.
ALTERNATIVE U.S. FEDERAL INCOME TAX TREATMENT
There can be no assurance that the IRS will agree with, or that a court will
uphold, the Company's treatment of the Notes as maturing on the Remarketing Date
and as thereafter being reissued should the Notes be remarketed, and it is
possible that the IRS could assert another characterization. In particular, the
IRS could seek to treat the Notes as maturing on the Stated Maturity Date and
possibly also to treat the issue price of the Notes as including the value of
the mandatory tender rights. Because of the possible reset interest rate, if the
Notes were treated as maturing on the Stated Maturity Date, Treasury regulations
relating to contingent payment debt obligations (the "Contingent Payment Debt
Regulations") would apply. In such case, the timing and character of income on
the Notes would be significantly affected. Among other things, U.S. Holders,
regardless of their regular method of tax accounting, would be required to
accrue income annually as OID, subject to the adjustments described below, at a
"comparable yield" on the adjusted issue price, which could be higher than the
actual cash payments received on the Notes in a taxable year. Furthermore, any
gain realized with respect to the sale or redemption of the Notes would
generally be treated as ordinary income, and any loss realized would generally
be treated as ordinary loss to the extent of the U.S. Holder's ordinary income
inclusions with respect to the Notes. Any remaining loss generally would be
treated as capital loss. In particular, upon the sale of a Notes (other than
through the mandatory tender), the IRS could take the position that the gain or
loss with respect to the mandatory tender rights and the gain or loss with
respect to the debt obligation must be separately determined, in which case any
deemed loss with respect to the mandatory tender rights would be treated as a
capital loss, and a corresponding amount of additional ordinary income would
need to be recognized by the U.S. Holder with respect to the sale. The ability
to use capital losses to offset ordinary income in determining taxable income is
generally limited.
S-22
<PAGE>
PROSPECTIVE U.S. PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE
NOTES.
TREATMENT OF NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to U.S. federal income or withholding
tax on payments of principal, premium (if any) or interest (including original
issue discount and accruals under the Contingent Payment Debt Regulations, if
any) on a Note unless such non-U.S. Holder owns actually or constructively 10%
or more of the total combined voting power of the Company, is a controlled
foreign corporation related to the Company through stock ownership or is a bank
receiving interest described in Section 881(c)(3)(A) of the Code. Sections
871(h) and 881(c) of the Code, and applicable Treasury regulations, require
that, in order to obtain the exemption from withholding tax described above,
either the beneficial owner of the Notes or a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution") and that is
holding the Notes on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the Notes is not a
U.S. person. In general, such requirements will be fulfilled if the beneficial
owner of a Note certifies on IRS Form W-8, under penalties of perjury, that it
is not a U.S. person and provides its name and address, and any Financial
Institution holding the Notes on behalf of the beneficial owner files a
statement with the withholding agent to the effect that it has received such
statement from the Holder (and furnishes the withholding agent with a copy
thereof).
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax
on any amount which constitutes gain upon retirement or disposition of a Note
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax adviser in this
regard.
If a non-U.S. Holder of a Note is engaged in a trade or business in the
United States, and if interest (including OID, if any) or gain on the Note is
effectively connected with the conduct of such trade or business, the non-U.S.
Holder, although exempt from the withholding tax discussed above, will generally
be subject to regular U.S. income tax on interest and on any gain realized on
the sale, exchange or other disposition of a Note in the same manner as if it
were a U.S. Holder. In lieu of the statement described above, such Holder will
be required to provide to the Company a properly executed Form 4224 (or
successor form) in order to claim an exemption from withholding tax. In
addition, if such non-U.S. Holder is a foreign corporation, it may be subject to
a branch profits tax equal to 30% (or such lower rate provided by an applicable
treaty) of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax, interest
on and any gain recognized on the sale, exchange or other disposition of a Note
will be included in the effectively connected earnings and profits of such
non-U.S. Holder if such interest or gain, as the case may be, is effectively
connected with the conduct by the non-U.S. Holder of a trade or business in the
United States.
The Notes will not be includable in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% of the
interest and other "reportable payments" (including, under certain
circumstances, principal payments and sales proceeds) paid with respect to the
Notes if, in general, the holder fails to comply with certain certification
procedures and is not an exempt recipient under applicable provisions of the
Code.
S-23
<PAGE>
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. Prospective purchasers are urged to consult their tax
advisers regarding the New Regulations.
SUMMARY
THIS DISCLOSURE IS INTENDED TO BE A GENERAL SUMMARY ONLY. DUE TO THE
COMPLEXITY OF THE RULES DESCRIBED ABOVE, THE CURRENT UNCERTAINTY AS TO THE
MANNER OF THEIR APPLICATIONS TO HOLDERS OF THE NOTES AND POSSIBLE CHANGES IN
LAW, IT IS PARTICULARLY IMPORTANT THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN
TAX ADVISERS REGARDING THE TAX TREATMENT OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NOTES UNDER THE LAWS OF THE UNITED STATES AND THOSE OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
relating to the Notes (the "Underwriting Agreement"), the Company has agreed to
sell to the several Underwriters named below (the "Underwriters"), and the
several Underwriters have agreed to purchase from the Company, the principal
amounts of Notes set forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............................................. $ 120,000,000
J.P. Morgan Securities Inc...................................................................... 120,000,000
BancAmerica Robertson Stephens.................................................................. 120,000,000
Chase Securities Inc............................................................................ 120,000,000
Deutsche Bank Securities........................................................................ 120,000,000
----------------
Total..................................................................................... $ 600,000,000
----------------
----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the Notes offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions. If any of the Notes are purchased by the Underwriters pursuant to
the Underwriting Agreement, all the Notes must be purchased.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that the Underwriters may be required to make in
respect hereof.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers (who may
include the Underwriters) at such price, less a concession not in excess of
0.30% of the principal amount of the Notes. The Remarketing Dealer will pay to
the Company, on the same date the Underwriters pay the purchase price for the
Notes, an amount equal to 2.45% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may re-allow, discounts not in excess
of 0.20% of the principal amount of the Notes to any other Underwriter and
certain other dealers. After the initial offering, the offering price and other
selling terms of the Notes may be changed by the Underwriters.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Underwriters may overallot the Offering, creating a syndicate
short position. Underwriters may bid for and purchase the Notes in the open
market to cover such a syndicate short position. In addition, the Underwriters
may bid for and purchase the Notes in the open market to stabilize the price of
the Notes. These activities may stabilize or maintain the market price of the
Notes above independent market levels. The Underwriters are not required to
engage in these activities and may end these activities at any time.
The Notes will constitute a new issue of securities with no established
trading market. The Notes will not be listed on any securities exchange and
there can be no assurance that there will be a secondary market for the Notes.
From time to time, one or more of the Underwriters may make a market in the
Notes; however, at this time no determination has been made as to whether any of
the Underwriters will make a market in the Notes. Accordingly, there can be no
assurance as to whether an active trading market for any of the Notes will
develop or as to the liquidity of any trading market for the Notes.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged, and in the future may engage, in
investment banking and commercial banking services for the Company. Donaldson,
Lufkin & Jenrette Securities Corporation served as financial advisor to the
Company in connection with the Merger and was paid customary fees in connection
therewith. Donaldson, Lufkin & Jenrette Securities Corporation was lead manager,
and J.P. Morgan Securities Inc. and Deutsche Bank Securities were co-managers in
a public offering of senior notes of the Company completed in
S-25
<PAGE>
December 1997. Donaldson, Lufkin & Jenrette Securities Corporation was lead
manager, and J.P. Morgan Securities Inc. and Deutsche Bank Securities were
co-managers in a public offering of senior notes of the Company completed in
September 1997. Affiliates of J.P. Morgan Securities Inc., BancAmerica Robertson
Stephens, Chase Securities Inc. and Deutsche Bank Securities are lenders under
the Credit Facility and will receive repayment of certain amounts under the
Credit Facility from the proceeds of this Offering. As a result, this Offering
is subject to Rules 2710(c)(8) and 2720(c)(3)(C) of the Conduct Rules of the
National Association of Securities Dealers, Inc. An affiliate of J.P. Morgan
Securities Inc. serves as the agent under the Credit Facility and receives
customary compensation therefor. An affiliate of Chase Securities Inc. serves as
trustee under the Senior Indenture. See "Use of Proceeds."
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas, and certain
legal matters will be passed upon for the Underwriters by McDermott, Will &
Emery, Chicago, Illinois.
S-26
<PAGE>
INDEX TO FINANCIAL STATEMENTS
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General.................................................................................................... F-2
Combined Unaudited Pro Forma Condensed Balance Sheet as of March 31, 1998.................................. F-3
Combined Unaudited Pro Forma Condensed Statement of Operations for the Three Months Ended March 31, 1998... F-5
Combined Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1997........ F-6
Combined Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1996........ F-7
Combined Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1995........ F-8
Notes to Combined Unaudited Pro Forma Condensed Financial Statements....................................... F-9
</TABLE>
F-1
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following combined unaudited pro forma condensed financial statements
are based upon the historical financial statements of USA Waste and of Waste
Management and should be read in conjunction with those financial statements and
related notes. Such financial statements, as previously filed with the
Commission under the Exchange Act, are incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus. These combined unaudited
pro forma condensed financial statements give effect to the Merger by combining
the balance sheets and results of operations of USA Waste and Waste Management
using the pooling of interests method of accounting as if the companies had been
combined since their inception and as if Waste Management had issued 20 million
shares of Waste Management Common Stock as of March 31, 1998. The combined
unaudited pro forma condensed financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have been achieved had the Merger been
consummated as of the beginning of the periods presented, nor is it necessarily
indicative of the future operating results or financial position of New Waste
Management. The combined unaudited pro forma condensed financial information
does not give effect to any possible divestitures of business units which may be
required by the antitrust regulatory authorities or to any cost savings which
may result from the integration of USA Waste's and Waste Management's
operations, nor does such information include the nonrecurring costs directly
related to the Merger which are expected to be included in operations of New
Waste Management within the 12 months following the Merger. Such nonrecurring
costs have yet to be determined; however, such costs are expected to be
significant.
F-2
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1998
The following combined unaudited pro forma condensed balance sheet presents
the combined financial position of USA Waste and Waste Management as of March
31, 1998. Such unaudited pro forma combined condensed balance sheet is based on
the historical balance sheets of USA Waste and Waste Management as of March 31,
1998, after giving effect to the Merger using the pooling of interests method of
accounting and to the pro forma adjustments as described in the notes to
combined pro forma condensed financial statements.
<TABLE>
<CAPTION>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ ---------------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 46,260 $ 311,861 $ -- $ 358,121
Short-term investments.................................... -- 3,053 -- 3,053
Accounts receivable, net.................................. 468,619 1,448,797 -- 1,917,416
Notes and other receivables............................... 56,321 26,577 -- 82,898
Deferred income taxes..................................... 46,196 -- -- 46,196
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... -- 158,964 -- 158,964
Prepaid expenses and other................................ 58,891 230,374 -- 289,265
------------ ------------ ---------------- -----------
Total current assets.................................. 676,287 2,179,626 -- 2,855,913
Notes and other receivables................................. 22,951 100,044 -- 122,995
Property and equipment, net................................. 4,601,573 7,126,426 (10,922)(a) 11,617,441
(99,636)(b)
Excess of cost over net assets of acquired businesses,
net....................................................... 1,905,285 3,674,333 (66,464)(a) 5,513,154
Other intangible assets, net................................ 126,526 11,746 -- 138,272
Net assets of continuing businesses held for sale........... -- 137,995 -- 137,995
Other assets................................................ 256,783 633,830 (28,124)(c) 862,489
------------ ------------ ---------------- -----------
Total assets.......................................... $ 7,589,405 $13,864,000 $ (205,146) $21,248,259
------------ ------------ ---------------- -----------
------------ ------------ ---------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 196,735 $ 687,419 $ -- $ 884,154
Accrued liabilities....................................... 185,631 1,683,398 -- 1,869,029
Obligation to former Wheelabrator Technologies Inc.
shareholders............................................ -- 876,232 (614,400)(d) 261,832
Deferred revenues......................................... 69,484 236,339 -- 305,823
Current maturities of long-term debt...................... 46,527 1,025,685 -- 1,072,212
------------ ------------ ---------------- -----------
Total current liabilities............................. 498,377 4,509,073 (614,400) 4,393,050
Long-term debt, less current maturities..................... 3,584,887 5,398,132 -- 8,983,019
Deferred income taxes....................................... 323,320 216,797 (25,029)(a) 520,293
5,205(b)
Closure, post-closure, and other liabilities................ 407,699 1,645,663 (85,557)(b) 1,967,805
------------ ------------ ---------------- -----------
Total liabilities..................................... 4,814,283 11,769,665 (719,781) 15,864,167
------------ ------------ ---------------- -----------
Minority interest in subsidiaries........................... -- 739,442 -- 739,442
------------ ------------ ---------------- -----------
</TABLE>
F-3
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET (CONTINUED)
MARCH 31, 1998
<TABLE>
<CAPTION>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ ---------------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<S> <C> <C> <C> <C>
Commitments and contingencies
Stockholders' equity:
Preferred stock:
USA Waste: $.01 par value; 10,000,000 shares authorized;
none issued........................................... -- -- -- --
Waste Management: $1 par value; 50,000,000 shares
authorized; none outstanding.......................... -- -- -- --
Common stock:
USA Waste: $.01 par value, 500,000,000 shares
authorized; historical 219,834,550 shares (572,269,938
pro forma shares) issued.............................. 2,198 -- 3,525(d) 5,723
Waste Management: $1 par value; 1,500,000,000 shares
authorized; 507,101,744 shares issued................. -- 507,102 (507,102)(d) --
Additional paid-in capital................................ 2,436,447 990,270 (11,250)(c) 3,267,468
(147,999)(d)
Retained earnings......................................... 374,459 1,730,516 (34,888)(a) 2,033,929
(19,284)(b)
(16,874)(c)
Accumulated other comprehensive income.................... (37,498) -- (278,800)(e) (316,298)
Foreign currency translation adjustment................... -- (253,938) (17,469)(a) --
271,407(e)
Treasury stock:
USA Waste: 23,485 shares, at cost....................... (484) -- -- (484)
Waste Management: 40,983,967 shares, at cost............ -- (1,265,976) 1,265,976(d) --
Restricted stock unearned compensation.................... -- (10,252) -- (10,252)
Employee stock benefit trust; 10,886,361 WMI shares, at
market (7,892,612 pro forma shares)..................... -- (335,436) -- (335,436)
Minimum pension liability................................. -- (7,393) 7,393(e) --
------------ ------------ ---------------- -----------
Total stockholders' equity.............................. 2,775,122 1,354,893 514,635 4,644,650
------------ ------------ ---------------- -----------
Total liabilities and stockholders' equity.............. $ 7,589,405 $13,864,000 $ (205,146) $21,248,259
------------ ------------ ---------------- -----------
------------ ------------ ---------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-4
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the three months ended March 31, 1998 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such period after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................................ $ 769,440 $ 2,131,621 $ -- 2,901,061
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 397,492 1,621,985 3,785(b) 1,757,707
(265,555)(f)
General and administrative................................ 81,916 263,882 (217)(f) 345,581
Depreciation and amortization............................. 86,110 -- (424)(a) 351,458
265,772(f)
Loss from continuing operations held for sale,
net of minority interest................................ -- 2,416 -- 2,416
------------ ------------ --------------- -----------
565,518 1,888,283 3,361 2,457,162
------------ ------------ --------------- -----------
Income from operations.................................... 203,922 243,338 (3,361) 443,899
------------ ------------ --------------- -----------
Other income (expenses):
Interest expense.......................................... (38,368) (115,574) -- (153,942)
Interest income........................................... 1,799 4,310 -- 6,109
Minority interest......................................... -- (25,302) -- (25,302)
Other income, net......................................... 34,251 64,196 (28,124)(c) 70,323
------------ ------------ --------------- -----------
(2,318) (72,370) (28,124) (102,812)
------------ ------------ --------------- -----------
Income before income taxes................................ 201,604 170,968 (31,485) 341,087
Provision for income taxes................................ 80,642 96,551 170(a) 161,815
(4,298)(b)
(11,250)(c)
------------ ------------ --------------- -----------
Net income................................................ $ 120,962 $ 74,417 $ (16,107) $ 179,272
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings per common share........................... $ 0.55 $ 0.16 $ 0.33
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings per common share......................... $ 0.52 $ 0.16 $ 0.32
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares outstanding...... 219,201 455,096 (125,151)(g) 549,146
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding............................... 244,250 455,296 (125,206)(g) 574,340
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-5
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1997 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such year after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 2,613,768 $ 9,188,582 $ -- $11,802,350
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and
amortization shown below)............................... 1,345,769 7,195,376 17,766(b) 7,479,745
(1,079,166)(f)
General and administrative................................ 284,946 1,129,237 (939)(f) 1,413,244
Depreciation and amortization............................. 303,241 -- (990)(a) 1,382,356
1,080,105(f)
Merger costs.............................................. 109,411 -- -- 109,411
Unusual items............................................. 24,720 1,626,252 -- 1,650,972
Loss from continuing operations held for sale,
net of minority interest.................................. -- 9,930 -- 9,930
------------ ------------ --------------- -----------
2,068,087 9,960,795 16,776 12,045,658
------------ ------------ --------------- -----------
Income (loss) from operations............................... 545,681 (772,213) (16,776) (243,308)
------------ ------------ --------------- -----------
Other income (expense):
Interest expense.......................................... (104,261) (446,888) -- (551,149)
Interest income........................................... 7,634 37,580 -- 45,214
Minority interest......................................... -- (45,442) -- (45,442)
Other income, net......................................... 14,213 173,290 (61,331)(a) 126,172
------------ ------------ --------------- -----------
(82,414) (281,460) (61,331) (425,205)
------------ ------------ --------------- -----------
Income (loss) from continuing operations before
income taxes.............................................. 463,267 (1,053,673) (78,107) (668,513)
Provision for income taxes.................................. 189,944 215,667 (25,199)(a) 361,464
(18,948)(b)
------------ ------------ --------------- -----------
Income (loss) from continuing operations.................... $ 273,323 $ (1,269,340) $ (33,960) $(1,029,977)
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings (loss) per common share from
continuing operations..................................... $ 1.31 $ (2.72) $ (1.88)
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings (loss) per common share from continuing
operations................................................ $ 1.26 $ (2.72) $ (1.88)
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares
outstanding............................................... 208,246 466,601 (128,315)(g) 546,532
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding................................. 233,371 466,601 (153,440)(g) 546,532
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-6
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1996 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such year after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 1,649,131 $ 9,225,636 $ -- $10,874,767
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 881,401 6,660,766 21,135(b) 6,498,708
(1,064,594)(f)
General and administrative................................ 200,101 1,095,459 (1,089)(f) 1,294,471
Depreciation and amortization............................. 191,044 -- 1,065,683(f) 1,256,727
Merger costs.............................................. 126,626 -- -- 126,626
Unusual items............................................. 63,800 435,464 -- 499,264
Income from continuing operations held for sale, net of
minority interest......................................... -- (315) -- (315)
------------ ------------ --------------- -----------
1,462,972 8,191,374 21,135 9,675,481
------------ ------------ --------------- -----------
Income from operations...................................... 186,159 1,034,262 (21,135) 1,199,286
------------ ------------ --------------- -----------
Other income (expense):
Interest expense.......................................... (60,497) (462,424) -- (522,921)
Interest income........................................... 6,699 27,904 -- 34,603
Minority interest......................................... -- (41,289) -- (41,289)
Other income, net......................................... 6,376 102,014 -- 108,390
------------ ------------ --------------- -----------
(47,422) (373,795) -- (421,217)
------------ ------------ --------------- -----------
Income from continuing operations before income taxes....... 138,737 660,467 (21,135) 778,069
Provision for income taxes.................................. 70,398 436,473 (20,255)(b) 486,616
------------ ------------ --------------- -----------
Income from continuing operations........................... $ 68,339 $ 223,994 $ (880) $ 291,453
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings per common share from continuing
operations................................................ $ 0.39 $ 0.46 $ 0.55
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings per common share from continuing
operations................................................ $ 0.37 $ 0.46 $ 0.54
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares outstanding........ 173,993 489,171 (134,522)(g) 528,642
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding................................. 182,680 490,029 (134,758)(g) 537,951
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-7
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1995 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such year after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 1,216,082 $ 9,100,225 $ -- $10,316,307
------------ ------------ --------------- -----------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 672,117 6,514,932 22,924(b) 6,176,196
(1,033,777)(f)
General and administrative................................ 169,686 1,091,747 (1,241)(f) 1,260,192
Depreciation and amortization............................. 143,878 -- 1,035,018(f) 1,178,896
Merger costs.............................................. 26,539 -- -- 26,539
Unusual items............................................. 4,733 389,359 -- 394,092
Income from continuing operations held for sale, net of
minority interest......................................... -- (25,110) -- (25,110)
------------ ------------ --------------- -----------
1,016,953 7,970,928 22,924 9,010,805
------------ ------------ --------------- -----------
Income from operations...................................... 199,129 1,129,297 (22,924) 1,305,502
------------ ------------ --------------- -----------
Other income (expense):
Interest expense:
Nonrecurring............................................ (10,994) -- -- (10,994)
Other................................................... (58,619) (463,861) -- (522,480)
Interest income........................................... 6,682 34,883 -- 41,565
Minority interest......................................... -- (81,367) -- (81,367)
Other income, net......................................... 4,891 252,695 -- 257,586
------------ ------------ --------------- -----------
(58,040) (257,650) -- (315,690)
------------ ------------ --------------- -----------
Income from continuing operations before income taxes....... 141,089 871,647 (22,924) 989,812
Provision for income taxes.................................. 60,313 451,741 (19,169)(b) 492,885
------------ ------------ --------------- -----------
Income from continuing operations........................... $ 80,776 $ 419,906 $ (3,755) $ 496,927
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Basic earnings per common share from continuing
operations................................................ $ 0.56 $ 0.86 $ 1.00
------------ ------------ -----------
------------ ------------ -----------
Diluted earnings per common share from continuing
operations................................................ $ 0.54 $ 0.86 $ 0.99
------------ ------------ -----------
------------ ------------ -----------
Weighted average number of common shares outstanding........ 143,346 485,346 (133,470)(g) 495,222
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
Weighted average number of common and dilutive potential
common shares outstanding................................. 150,575 500,312 (137,586)(g) 513,301
------------ ------------ --------------- -----------
------------ ------------ --------------- -----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
F-8
<PAGE>
USA WASTE AND WASTE MANAGEMENT
NOTES TO COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The combined unaudited pro forma condensed financial statements assume the
issuance of USA Waste Common Stock in exchange for all outstanding Waste
Management Common Stock. Such financial statements also assume that the Merger
will be accounted for using the pooling of interests method of accounting
pursuant to Opinion No. 16 of the Accounting Principles Board. The pooling of
interests method of accounting assumes that the combining companies have been
merged from their inception, and the historical financial statements for periods
prior to consummation of the Merger are restated as though the companies had
been combined from their inception.
Pursuant to the rules and regulations of the Commission, the combined
unaudited pro forma condensed statements of operations exclude the results of
operations associated with discontinued businesses, extraordinary items and
cumulative effects of accounting changes. The combined unaudited pro forma
condensed financial statements do not give effect to any cost savings which may
result from the integration of USA Waste's and Waste Management's operations,
nor do they include the nonrecurring costs directly related to the Merger which
are expected to be included in operations of New Waste Management within twelve
months succeeding the Merger. Such nonrecurring costs have yet to be determined;
however, such costs are expected to be significant.
Certain reclassifications have been made to the historical financial
statements of USA Waste and Waste Management to conform to the pro forma
presentation. Such reclassifications are not material to the combined unaudited
pro forma condensed financial statements.
2. PRO FORMA ADJUSTMENTS
(a) In June 1997, Waste Management sold a majority of its Canadian solid
waste businesses to USA Waste and, as a result of such sale, recorded a pre-tax
gain of approximately $61,331,000. USA Waste accounted for this transaction as a
purchase business combination and allocated the purchase price to the assets
acquired and liabilities assumed accordingly. Assuming that USA Waste and Waste
Management had been combined since their inception, the gain recorded by Waste
Management in 1997 has been eliminated and the basis recorded by USA Waste for
assets acquired and liabilities assumed has been restored to Waste Management's
historical book value. In addition, the Combined Unaudited Pro Forma Condensed
Statement of Operations for the year ended December 31, 1997 and the three
months ended March 31, 1998 have been adjusted for the effect of lower
amortization as a result of restoring the book basis of the assets acquired and
liabilities assumed by USA Waste to the historical book value of Waste
Management.
(b) Adjustments have been made to conform the accounting for certain
landfill related issues as if the companies had been combined since their
inception. The net impact of those adjustments on income (loss) from continuing
operations was an increase of $1,182,000 and $513,000 for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively, and a
decrease of $3,755,000 and $880,000 for the years ended December 31, 1995 and
1996, respectively.
(c) In November 1997, USA Waste purchased a 49% limited partner interest in
a limited partnership, which was formed for the purpose of acquiring shares of
Waste Management Common Stock on the open market. The limited partnership
purchased shares of Waste Management Common Stock during November 1997 and sold
substantially all of such shares in March 1998. For the three months ended March
31, 1998, USA Waste recorded other income of $28,124,000 for its equity in the
earnings of the limited
F-9
<PAGE>
2. PRO FORMA ADJUSTMENTS (CONTINUED)
partnership. An adjustment has been made to reverse USA Waste's equity in the
earnings of the limited partnership to account for the transaction as if the
companies had been combined since their inception.
(d) The stockholders' equity accounts have been adjusted to reflect the
assumed issuance of 352,435,388 shares of USA Waste Common Stock for the
486,117,777 shares of Waste Management Common Stock issued and outstanding based
on an exchange ratio of 0.725 of a share of USA Waste Common Stock for each
outstanding share of Waste Management Common Stock. The assumed issuance of
shares considers the 507,101,744 shares of Waste Management Common Stock issued,
the 40,983,967 shares of Waste Management Common Stock held in treasury that
will be cancelled upon consummation of the Merger, and the 20 million shares of
Waste Management Common Stock that were issued to reverse certain share
repurchases effected by Waste Management. The 20 million shares of Waste
Management Common Stock were assumed to be issued through a public sale at an
offering price of $32 per share and net issuance costs of 4% with net proceeds
of $614,400,000 used to reduce the obligation to former WTI stockholders. The
actual proceeds from the Waste Management Common Stock offering did not differ
materially from the amounts assumed. See Note 3 below. The actual number of
shares of USA Waste Common Stock to be issued pursuant to the Merger will be
based upon the number of shares of Waste Management Common Stock issued and
outstanding immediately prior to the consummation of the Merger.
(e) Adjustments have been made to reclassify Waste Management's foreign
currency translation adjustment and minimum pension liability to accumulated
other comprehensive income to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(f) Adjustments have been made to reclassify Waste Management's depreciation
and amortization from operating expenses and general and administrative expenses
to a separate line item to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(g) Pro forma basic earnings per common share for each period are based on
the combined weighted average number of common shares outstanding, after giving
effect to the issuance of 0.725 of a share of USA Waste Common Stock for each
share of Waste Management Common Stock. Pro forma diluted earnings per common
share for each period are based on the combined weighted average number of
common and dilutive potential common shares outstanding, after giving effect to
the issuance of 0.725 of a share of USA Waste Common Stock for each outstanding
share of Waste Management Common Stock. The combined weighted average shares
outstanding used in the pro forma basic and diluted earnings per share
calculations are net of the shares of Waste Management Common Stock that are
held by the Waste Management employee stock benefit trust and are treated
similar to treasury shares for earnings per share calculation purposes. The
combined pro forma diluted earnings per share for the year ended December 31,
1995 and the three months ended March 31, 1998 have been calculated assuming
conversion of certain convertible debt, and therefore interest, net of taxes, of
$9,100,000 and $5,014,000, respectively, has been added back to income from
continuing operations for this calculation. The USA Waste diluted earnings per
common share for the year ended December 31, 1997 includes 25,125,000 dilutive
potential common shares that become antidilutive for purposes of calculating the
combined pro forma diluted earnings per common share.
3. PRO FORMA EFFECT OF WASTE MANAGEMENT EQUITY OFFERING ON RESULTS OF OPERATIONS
As previously discussed, in order for the Merger to qualify as a pooling of
interests, approximately 20 million shares of Waste Management Common Stock were
issued to reverse certain share repurchases effected by Waste Management. The 20
million shares were assumed to be issued at an offering price of $32 per share,
with net issuance costs of 4% and net proceeds to Waste Management of
$614,400,000. The actual proceeds from the Waste Management Common Stock
offering did not differ materially from the
F-10
<PAGE>
3. PRO FORMA EFFECT OF WASTE MANAGEMENT EQUITY OFFERING ON RESULTS OF OPERATIONS
(CONTINUED)
amounts assumed. The assumed proceeds from the sale of stock of $614,400,000,
after payment of dividends on such stock based on the historical dividend rate,
were used to reduce outstanding indebtedness at an average borrowing rate of 6%.
The applicable tax rate is assumed to be 42%. The following table summarizes the
pro forma effect of the equity offering as if the offering has occurred at the
beginning of the periods presented in the Combined Unaudited Pro Forma Condensed
Statements of Operations:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ----------------
1995 1996 1997 1998
---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Pro forma income (loss) from continuing operations...... $ 496,927 $ 291,453 $ (1,029,977) $ 179,272
Decrease in interest expense as a result of equity
offering, net of tax benefit.......................... 20,964 20,943 20,915 5,316
---------- ---------- ------------- --------
Pro forma income (loss) from continuing operations after
equity offering....................................... $ 517,891 $ 312,396 $ (1,009,062) $ 184,588
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Pro forma basic earnings per common share from
continuing operations after equity offering........... $ 1.02 $ 0.58 $ (1.80) $ 0.33
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Pro forma diluted earnings per common share from
continuing operations after equity offering........... $ 1.00 $ 0.57 $ (1.80) $ 0.32
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Weighted average number of common shares outstanding
after equity offering................................. 509,722 543,142 561,032 563,646
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Weighted average number of common and potential dilutive
shares outstanding after equity offering.............. 527,801 552,451 561,032 588,840
---------- ---------- ------------- --------
---------- ---------- ------------- --------
</TABLE>
F-11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE TO ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PROSPECTUS SUPPLEMENT PAGE
Prospectus Supplement Summary.................. S-3
Use of Proceeds................................ S-5
Ratios of Earnings to Fixed Charges............ S-5
Capitalization................................. S-7
Selected Historical and Summary Combined
Unauditied Pro Forma Condensed Financial
Information.................................. S-8
Description of the Notes....................... S-12
Certain United States Federal Income Tax
Considerations............................... S-21
Underwriting................................... S-25
Legal Matters.................................. S-26
Index to Financial Statements.................. F-1
<CAPTION>
PROSPECTUS
<S> <C> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
The Company.................................... 4
Recent Developments............................ 4
Use of Proceeds................................ 4
Ratios of Earnings to Fixed Charges............ 5
Description of Debt Securities................. 5
Description of Capital Stock................... 29
Plan of Distribution........................... 30
Validity of Securities......................... 31
Experts........................................ 31
</TABLE>
$600,000,000
USA WASTE
SERVICES, INC.
6 1/8% MANDATORILY TENDERED
SENIOR NOTES DUE 2011
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
DONALDSON, LUFKIN & JENRETTE
J.P. MORGAN & CO.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES
JULY 14, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
