<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.
7% SENIOR NOTES DUE 2028
The 7% Senior Notes due 2028 are being issued by USA Waste Services, Inc., a
Delaware corporation. Interest on the 7% Senior Notes due 2028 is payable
semi-annually on January 15 and July 15 of each year commencing on January 15,
1999. The 7% Senior Notes due 2028 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 7% Senior Notes due 2028 are redeemable, in whole or in part, at the
option of the Company at any time and from time to time at a redemption price
equal to the Make-Whole Price set forth herein. See "Description of
Notes--Redemption at the Company's Option." The 7% Senior Notes due 2028 are not
subject to any sinking fund.
The 7% Senior Notes due 2028 will be represented by a Global Security
registered in the name of the nominee of The Depository Trust Company, which
will act as securities depositary. Beneficial interests in such Global
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by The Depository Trust Company and its direct and
indirect participants. Except as described herein, the 7% Notes due 2028 will
not be issued in definitive form. See "Description of Notes--Book-Entry,
Delivery and Form."
Concurrent with this Offering, the Company is offering pursuant to a
separate Prospectus Supplement $600,000,000 aggregate principal amount of 6 1/8%
Mandatorily Tendered Senior Notes due 2011. Consummation of this Offering is not
a condition to consummation of the offering of the 6 1/8% Mandatorily Tendered
Senior Notes due 2011, and consummation of the offering of the 6 1/8%
Mandatorily Tendered Senior Notes due 2011 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>
- -----------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 7% Senior Note due 2028......................................... 98.887% 0.875% 98.012%
Total............................................................... $ 593,322,000 $ 5,250,000 $ 588,072,000
- -----------------------------------------------------------------------------------------------------------------------
</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.
The 7% Senior Notes due 2028 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 7% Senior Notes due 2028 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.
DONALDSON, LUFKIN & JENRETTE
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
<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
S-3
<PAGE>
international markets, and had revenues in 1997 of approximately $9.2 billion.
As of the effective time of 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 Management.
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 7% Senior Notes due
2028 and the 6 1/8% Mandatorily Tendered Senior Notes due 2011 (the "2011
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
S-4
<PAGE>
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."
THE OFFERING
Securities Offered............ $600,000,000 aggregate principal amount of 7%
Senior Notes due 2028 (the "Notes").
Maturity...................... July 15, 2028.
Interest Payment Dates........ January 15 and July 15 of each year,
commencing January 15, 1999.
Optional Redemption........... The Notes are redeemable, in whole or in
part, at the option of the Company at any
time and from time to time at a redemption
price equal to the Make-Whole Price (as
defined herein). See "Description of
Notes--Redemption at the Company's Option."
Sinking Fund.................. None.
Ranking....................... 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."
Covenants..................... The indenture governing the Notes contains
covenants, including, but not limited to,
covenants limiting (i) the creation of liens
securing indebtedness, and (ii) sale and
leaseback transactions.
Use of Proceeds............... The net proceeds from the sale of the Notes
in this offering (the "Offering") and the
concurrent offering of 2011 Notes (the "2011
Notes Offering") are expected to be used to
repay outstanding indebtedness under the
Credit Facility. 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. See "Use of Proceeds."
S-5
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes in this Offering,
after deducting underwriting discounts and commissions and estimated offering
expenses, are $587.8 million.
The net proceeds of this Offering and the concurrent 2011 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. 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 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
S-6
<PAGE>
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-7
<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 2011 Notes Offering and the anticipated
application of the aggregate net proceeds of $1,183.6 million; 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 2011 Notes Offering. See "Use
of Proceeds."
The pro forma as adjusted combined 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 COMPANY PRO FORMA COMBINED
ACTUAL AS 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-9
<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
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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-10
<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-11
<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-12
<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 July 15, 2028 and will bear interest at the rate per
annum set forth on the front cover of this Prospectus Supplement. Interest on
the Notes will be payable semiannually on January 15 and July 15 of each year,
commencing January 15, 1999, to the persons in whose names the Notes are
registered at the close of business on the December 31 and June 30 immediately
preceding the 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.
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 Senior 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 1/2% 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
S-13
<PAGE>
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.
REDEMPTION AT THE COMPANY'S OPTION
The Notes will be redeemable at the option of the Company at any time and
from time to time, in whole or in part, upon not less than 30 nor more than 60
days notice to each Holder of Notes, at a redemption price equal to the
Make-Whole Price. "Make-Whole Price" means an amount equal to the greater of (i)
100% of the principal amount of the Notes and (ii) as determined by an
Independent Investment Banker, the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any portion
of such payments of interest accrued as of the date of redemption) discounted to
the date of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each
case, accrued and unpaid interest thereon to the date of redemption. Unless the
Company defaults in payment of the redemption price, on and after the date of
redemption, interest will cease to accrue on the Notes or portions thereof
called for redemption.
"Adjusted Treasury Rate" means, with respect to any date of redemption, the
rate per annum equal to the semi-annual yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such date of redemption, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such date of redemption, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such Business Day, (A) the
average of the Reference Treasury Dealer Quotations for such date of redemption,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Reference Treasury Dealer
Quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Company.
"Reference Treasury Dealer" means each of Donaldson, Lufkin & Jenrette
Securities Corporation; Credit Suisse First Boston Corporation; Goldman, Sachs &
Co.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; and Salomon Brothers
Inc.; and their respective successors; provided, however, that if any of the
foregoing shall not be a primary U.S. Government securities dealer in New York
City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any date of redemption, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such date of redemption.
The Company may purchase the Notes in the open market, by tender or
otherwise. The Notes so purchased may be held, resold or surrendered to the
Trustee for cancellation. If applicable, the Company will comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended
S-14
<PAGE>
(the "Exchange Act"), and other securities laws and regulations in connection
with any such purchase. The Notes may be defeased in the manner provided in the
Senior Indenture.
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 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.
S-15
<PAGE>
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 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-16
<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
Credit Suisse First Boston Corporation........................................................ 120,000,000
Goldman, Sachs & Co........................................................................... 120,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................................ 120,000,000
Salomon Brothers Inc.......................................................................... 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
0.50% of the principal amount of the Notes. The Underwriters may allow, and such
dealers may re-allow, discounts not in excess of 0.35% 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. Merrill Lynch, Pierce, Fenner and Smith Incorporated served as
financial advisor to Waste Management in connection with the Merger and was paid
customary fees in connection therewith. Donaldson, Lufkin &
S-17
<PAGE>
Jenrette Securities Corporation was lead manager, and Merrill Lynch, Pierce,
Fenner & Smith Incorporated was a co-manager in a public offering of senior
notes of the Company completed in December 1997. Donaldson, Lufkin & Jenrette
Securities Corporation was lead manager, and Merrill Lynch, Pierce, Fenner &
Smith Incorporated was a co-manager in a public offering of senior notes of the
Company completed in September 1997. 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-18
<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
----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
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
----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
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
--------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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
----------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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
-------------------------------------------------------------
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
----------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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
USA WASTE MANAGEMENT ADJUSTMENTS
------------ ----------- ----------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating revenues.................................................... $ 1,216,082 $9,100,225 $ --
------------ ----------- ----------------
Costs and expenses:
Operating (exclusive of depreciation and amortization shown
below)............................................................ 672,117 6,514,932 22,924(b)
(1,033,777)(f)
General and administrative.......................................... 169,686 1,091,747 (1,241)(f)
Depreciation and amortization....................................... 143,878 -- 1,035,018(f)
Merger costs........................................................ 26,539 -- --
Unusual items....................................................... 4,733 389,359 --
Income from continuing operations held for sale, net of minority
interest............................................................ -- (25,110) --
------------ ----------- ----------------
1,016,953 7,970,928 22,924
------------ ----------- ----------------
Income from operations................................................ 199,129 1,129,297 (22,924)
------------ ----------- ----------------
Other income (expense):
Interest expense:
Nonrecurring...................................................... (10,994) -- --
Other............................................................. (58,619) (463,861) --
Interest income..................................................... 6,682 34,883 --
Minority interest................................................... -- (81,367) --
Other income, net................................................... 4,891 252,695 --
------------ ----------- ----------------
(58,040) (257,650) --
------------ ----------- ----------------
Income from continuing operations before income taxes................. 141,089 871,647 (22,924)
Provision for income taxes............................................ 60,313 451,741 (19,169)(b)
------------ ----------- ----------------
Income from continuing operations..................................... $ 80,776 $ 419,906 $ (3,755)
------------ ----------- ----------------
------------ ----------- ----------------
Basic earnings per common share from continuing operations............ $ 0.56 $ 0.86
------------ -----------
------------ -----------
Diluted earnings per common share from continuing
operations.......................................................... $ 0.54 $ 0.86
------------ -----------
------------ -----------
Weighted average number of common shares outstanding.................. 143,346 485,346 (133,470)(g)
------------ ----------- ----------------
------------ ----------- ----------------
Weighted average number of common and dilutive potential common shares
outstanding......................................................... 150,575 500,312 (137,586)(g)
------------ ----------- ----------------
------------ ----------- ----------------
<CAPTION>
COMBINED
PRO FORMA
------------
<S> <C>
Operating revenues.................................................... $ 10,316,307
------------
Costs and expenses:
Operating (exclusive of depreciation and amortization shown
below)............................................................ 6,176,196
General and administrative.......................................... 1,260,192
Depreciation and amortization....................................... 1,178,896
Merger costs........................................................ 26,539
Unusual items....................................................... 394,092
Income from continuing operations held for sale, net of minority
interest............................................................ (25,110)
------------
9,010,805
------------
Income from operations................................................ 1,305,502
------------
Other income (expense):
Interest expense:
Nonrecurring...................................................... (10,994)
Other............................................................. (522,480)
Interest income..................................................... 41,565
Minority interest................................................... (81,367)
Other income, net................................................... 257,586
------------
(315,690)
------------
Income from continuing operations before income taxes................. 989,812
Provision for income taxes............................................ 492,885
------------
Income from continuing operations..................................... $ 496,927
------------
------------
Basic earnings per common share from continuing operations............ $ 1.00
------------
------------
Diluted earnings per common share from continuing
operations.......................................................... $ 0.99
------------
------------
Weighted average number of common shares outstanding.................. 495,222
------------
------------
Weighted average number of common and dilutive potential common shares
outstanding......................................................... 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>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Prospectus Supplement Summary................ S-3
Use of Proceeds.............................. S-6
Ratios of Earnings to Fixed Charges.......... S-6
Capitalization............................... S-8
Selected Historical and Summary Combined
Unaudited Pro Forma Condensed Financial
Information................................ S-9
Description of the Notes..................... S-13
Underwriting................................. S-17
Legal Matters................................ S-18
Index to Financial Statements................ F-1
PROSPECTUS
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.
7% SENIOR NOTES DUE 2028
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
DONALDSON, LUFKIN & JENRETTE
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
JULY 14, 1998
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