SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 17, 1996
ALLIED WASTE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-19285 88-0228636
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
7201 EAST CAMELBACK ROAD, SUITE 375
SCOTTSDALE, ARIZONA 85251
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (602) 423-2946
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Laidlaw Solid Waste Management Group
(i) Report of Independent Public Accountants
(ii) Balance Sheets - August 31, 1995 and 1996
(iii) Statements of Operations for the Three Years Ended
August 31, 1996
(iv) Statements of Cash Flows for the Three Years Ended August 31,1996
(v) Notes to Financial Statements
(b) Pro Forma Combined Financial Statements of Allied Waste Industries,
Inc.
(i) Introduction
(ii) Pro Forma Combined Balance Sheet - September 30, 1996 (unaudited)
(iii) Pro Forma Combined Statement of Operations for the Nine Months
Ended September 30, 1996 (unaudited)
(iv) Pro Forma Combined Statement of Operations for the Year Ended
December 31, 1995 (unaudited)
(v) Notes to Pro Forma Combined Financial Statements (unaudited)
(c) Exhibits
23 Consent of Coopers & Lybrand
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the balance sheet of the Laidlaw Solid Waste Management Group
(as defined in Note 1) as at August 31, 1995 and 1996 and the statements of
operations and cash flows for the years ended August 31, 1994, 1995 and 1996.
These financial statements are the responsibility of the management of Laidlaw
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Laidlaw Solid Waste Management Group
as at August 31, 1995 and 1996 and the results of its operations and cash
flows for the years ended August 31, 1994, 1995 and 1996 in accordance with
United States generally accepted accounting principles.
COOPERS & LYBRAND
Chartered Accountants
Hamilton, Canada
September 30, 1996
<PAGE>
<TABLE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
Balance Sheets as at August 31, 1995 and 1996
(U.S. $000's)
<CAPTION>
1995 1996
<S> <C> <C>
ASSETS
Current Assets
Trade and other accounts receivable (net
of allowance for doubtful accounts of
$1,182; August 31, 1996 -- $1,224 $ 95,124 $ 102,966
Inventories 7,592 8,008
Other current assets 14,382 13,026
117,098 124,000
Fixed Assets
Land, landfill sites and improvements 443,721 460,051
Buildings 64,414 73,261
Vehicles and other 589,335 624,172
1,097,470 1,157,484
Less: Accumulated depreciation and amortization 527,602 590,924
569,868 566,560
Other Assets
Goodwill (net of accumulated amortization of
$37,825; August 31,1996 -- $42,549) 176,239 204,877
Deferred charges 3,180 15,407
Other 7,508 7,483
186,927 227,767
$ 873,893 $ 918,327
LIABILITIES
Current Liabilities
Accounts payable $ 78,212 $ 66,407
Accrued liabilities 62,296 56,779
Current portion of long-term debt (Note 3) 2,256 2,675
142,764 125,861
Long-Term Debt (Note 3) 2,821 1,895
Environmental and Other Long-Term Liabilities
(Note 4) 86,371 81,784
231,956 209,540
Commitments and Contingencies (Note 5)
Net Investment by Laidlaw Inc 641,937 708,787
$ 873,893 $ 918,327
The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
<TABLE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
Statements of Operations
For the Years Ended August 31, 1994, 1995 and 1996
(U.S. $000's)
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Revenue $ 714,765 $ 753,432 $ 763,534
Operating expenses (Note 6) 492,570 512,418 532,327
Selling, general and administrative
expenses (Note 6) 56,851 59,541 50,362
Depreciation and amortization 92,286 90,215 95,440
Income from operations 73,058 91,258 85,405
Interest expense (876) (367) (464)
Interest, dividend and other income 91 264 298
Income before income taxes (Note 1) 72,273 91,155 85,239
Pro forma income taxes (Note 1) 28,909 36,462 34,096
Pro forma net income $ 43,364 $ 54,693 $ 51,143
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
<TABLE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
Statements of Cash Flows
For the Years Ended August 31, 1994, 1995 and 1996
(U.S. $000's)
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Net Cash Provided By (Used In):
Operating activities $ 194,048 $ 196,695 $ 152,741
Investing activities (55,743) (117,700) (131,272)
Financing activities (190,447) (54,531) 45,381
(52,142) 24,464 66,850
Net investment by Laidlaw Inc. --
beginning of year 669,615 617,473 641,937
Net investment by Laidlaw Inc. --
end of year $ 617,473 $ 641,937 $ 708,787
Operating Activities
Income before income taxes for the year $ 72,273 $ 91,155 $ 85,239
Items not affecting cash:
Depreciation and amortization 92,286 90,215 95,440
Other 9,182 8,036 (5,431)
Cash provided by operating activities
before financing working capital 173,741 189,406 175,248
Cash provided by (used in) financing
working capital:
Trade and other accounts receivable (1,825) (3,958) (7,842)
Inventories (279) (500) (416)
Other current assets 4,445 (4,042) 1,356
Accounts payable and accrued liabilities 17,966 15,789 (15,605)
Net cash provided by operating activities $ 194,048 $ 196,695 $ 152,741
Investing Activities
Purchase of fixed assets $ (60,467) $(103,257) $ (79,572)
Proceeds from sale of fixed and other
assets 6,779 4,587 3,893
Purchase of other assets (187) -- (6,392)
Expended on acquisitions (Note 7) (2,213) (14,255) (49,226)
Net (increase) decrease in long-term
investments 345 (4,775) 25
Net cash used in investing activities $ (55,743) $(117,700) $(131,272)
Financing Activities
Repayment of long-term debt $ (3,430) $ (2,655) $ (507)
Net advances from (repayments to)
Laidlaw, Inc (187,017) (51,876) 45,888
Net cash provided by (used in) financing
activities $(190,447) $ (54,531) $ 45,381
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS
For the Years Ended August 31, 1994, 1995 and 1996
(U.S. $000's)
1. Basis of Presentation of Financial Statements
Under the terms of a Stock Purchase Agreement dated September 17, 1996 (the
"Agreement") among Allied Waste Industries, Inc. ("Allied") and certain
affiliates of Allied, and Laidlaw Inc. ("Laidlaw") and certain affiliates of
Laidlaw, Allied has offered to purchase the solid waste management business of
Laidlaw (the "Laidlaw Solid Waste Management Group" or the "Group"). The Group
provides solid waste collection, compaction, disposal, recycling, resource
recovery, transportation and transfer services to commercial, industrial and
residential customers in the United States and Canada. Laidlaw conducts this
solid waste management business directly or indirectly through its
subsidiaries, Laidlaw Waste Systems, Inc., Laidlaw Waste Systems (Canada) Ltd.
and Laidlaw Medical Services Ltd.
The Agreement provides that all assets and liabilities associated with
Laidlaw's solid waste management business are being sold with the exception of
income tax assets and liabilities arising prior to the date of sale and any
intercompany investments, advances and loans. The Agreement specifies that any
income tax liabilities and any income tax assets arising prior to the date of
sale are the responsibility or benefit of Laidlaw. All intercompany
investments are to be transferred to Laidlaw prior to closing, and all
intercompany advances and loans are to be repaid to Laidlaw and its affiliates
prior to closing.
These special purpose financial statements give effect to the combination of
the operations constituting the Laidlaw Solid Waste Management Group, and the
exclusion of those assets and liabilities that will not be transferred from
Laidlaw to Allied under the terms of the Agreement. Accordingly, interest on
intercompany loans and advances have been excluded from the Group's statements
of operations. Current and deferred income taxes receivable and payable, and
intercompany loans and advances have been excluded from the balance sheets.
Pro forma income taxes included in the Statements of Operations reflect tax
expense assuming full tax basis in the assets at a combined federal, state and
provincial rate of 40%. These taxes do not reflect the tax expense that was
actually incurred by the Laidlaw Solid Waste Management Group under its actual
tax structure that existed during the periods.
The surplus funds of the Group are regularly transferred to Laidlaw, and any
financing requirements are provided by Laidlaw. Accordingly, no cash or bank
indebtedness balances are reported in these financial statements.
A statement of stockholders' equity has not been provided as it would be
inconsistent with the basis of presentation described above.
Except for the exclusions described in the preceding paragraphs, these
financial statements have been prepared in accordance with United States
generally accepted accounting principles.
As these financial statements have not been prepared for general purposes,
users may require additional information.
2. Summary of Significant Accounting Policies
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect reported amounts of assets, liabilities, income and expenses, and
disclosure of contingencies. Future events could alter such estimates in the
near term.
<PAGE>
A summary of significant accounting policies followed in the preparation of
these financial statements is as follows:
(a) Inventories
Inventories are valued at the lower of cost, determined on a first-in, first-
out basis, and replacement cost.
(b) Fixed assets
Landfill sites, preparation costs, and improvements are recorded at cost and
amortized on the basis of landfill capacity utilized during the year.
Depreciation and amortization of other property and equipment is provided
substantially on a straight-line basis over their estimated useful lives which
are as follows:
Buildings 20 to 40 years
Vehicles and other 5 to 15 years
Management periodically reviews the carrying values of its fixed assets to
determine whether such values are recoverable. Any resulting write downs are
charged against income.
(c) Other assets
Goodwill is amortized on a straight-line basis over forty years. The Group
reviews the value assigned to goodwill to determine if its recoverability has
been impaired by conditions affecting the Group. The amount of any impairment
is charged against income.
Deferred charges are amortized on a straight-line basis over a two to nine
year period depending on the nature of the deferred costs.
(d) Environmental liabilities
Environmental liabilities include accruals for costs associated with closure
and post-closure monitoring and maintenance of the Group's landfills,
remediation at certain of the Group's facilities and corrective actions at
Superfund sites. The Group accrues for closure and post-closure costs over the
life of the landfill site as airspace is consumed.
(e) Foreign currency translation
The Group's Canadian operations are all of a self-sustaining nature. The
accounts are translated to U.S. dollars on the following basis:
Assets and liabilities at the exchange rate in effect at the balance sheet
date and revenue and expenses at weighted monthly average exchange rates for
the year.
<PAGE>
(f) Financial instruments
The Group's accounts receivable, accounts payable and long-term debt
constitute financial instruments. Based on available market information, the
carrying value of these instruments approximates their fair value as at August
31, 1996 and 1995. Concentrations of credit risk in accounts receivable are
limited, due to the large number of customers comprising the Group's customer
base throughout North America. The Group performs ongoing credit evaluations
of its customers, but does not require collateral to support customer accounts
receivable. Management establishes an allowance for doubtful accounts based on
the credit risk applicable to particular customers, historical trends and
other relevant information.
(g) Revenue
Amounts billed to customers prior to providing the related services are
deferred and later reported as revenues in the period in which the services
are rendered.
(h) Accounting Pronouncements Not Yet Required to be Adopted
Management does not expect the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 121 to have a material effect on the Company's
financial position or results of operations. In 1996 the Company is required
to adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", issued by the Financial Accounting
Standards Board. SFAS No. 121 requires that long-lived assets be reviewed for
impairment whenever events or circumstances indicate that the carrying amount
of the asset may not be recoverable. If the sum of the expected future cash
flows (undiscounted and without interest charges) from an asset to be held and
used in operations is less than the carrying value of the asset, an impairment
loss must be recognized in the amount of the difference between the carrying
value and the fair value. Should events and circumstances indicate that any of
the Company's landfills be reviewed for possible impairment, such review for
recoverability will be made in accordance with Emerging Issues Task Force
Discussion Issue ("EITF") 95-23. The EITF outlines how cash flows for
environmental exit costs should be determined and measured.
3. Long-Term Debt
1995 1996
Notes due at various dates from 1997 to 2002 with
interest rates from 5% to 10% $ 4,961 $ 4,531
Capital leases payable, due in 1997 with interest
rates of 10% 116 39
5,077 4,570
Less: Current portion 2,256 2,675
$ 2,821 $ 1,895
The aggregate amount of minimum payments required on long-term debt in each of
the years indicated is as follows:
Year ending August 31,
1997 $ 2,675
1998 846
1999 293
2000 111
2001 569
Thereafter 76
$ 4,570
<PAGE>
4. Environmental Liabilities
The Group has recorded liabilities for closure and post-closure monitoring and
environmental remediation costs as follows:
1995 1996
Current portion of environmental liabilities,
included in accrued liabilities $ 23,530 $ 22,461
Non-current portion of environmental liabilities 79,888 76,240
$103,418 $ 98,701
The Group, in the normal course of its business, expends funds for
environmental protection and remediation, but does not expect these
expenditures to have a materially adverse effect on its financial condition or
results of operations, since its business is based upon compliance with
environmental laws and regulations and its services are priced accordingly.
Closure and post-closure monitoring and maintenance costs for U.S. landfills
are estimated based on the technical requirements of the Subtitle D
Regulations of the U.S. Environmental Protection Agency or the applicable
state requirements, whichever are stricter, and the air emissions standards
under the Clean Air Act, and include such items as final capping of the site,
methane gas and leachate management, groundwater monitoring, and operation and
maintenance costs to be incurred during the period after the facility closes
and ceases to accept waste. Closure and post-closure costs for the Group's
landfills in Canada are based upon the local landfill regulations governing
the facility.
The Group has also established procedures to routinely evaluate potential
remedial liabilities at sites which it owns or operated, or to which it
transported waste, including 14 sites listed on the Superfund National
Priority List (NPL). In the majority of situations, the Group's connection
with NPL sites relates to allegations that its companies (or their
predecessors) transported waste to the facilities in question, often prior to
the acquisition of such companies by the Group. The Group routinely reviews
and evaluates sites requiring remediation, including NPL sites, giving
consideration to the nature (i.e. owner, operator, transporter or generator),
and the extent (i.e. amount and nature of waste hauled to the location, number
of years of site operation by the Group, or other relevant factors) of the
Group's alleged connection with the site, the accuracy and strength of
evidence connecting the Group to the location, the number, connection and
financial ability of other named and unnamed potentially responsible parties
and the nature and estimated cost of the likely remedy. Where the Group
concludes that it is probable that a liability has been incurred, provision is
made in the financial statements, based upon management's judgement and prior
experience, for the Group's best estimate of the liability. Such estimates are
subsequently revised as deemed necessary as additional information becomes
available.
Estimates of the extent of the Group's degree of responsibility for
remediation of a particular site and the method and ultimate cost of
remediation require a number of assumptions and are inherently difficult. The
ultimate outcome of these items may differ from current estimates. Management
believes that its extensive experience in the environmental services business
provides a reasonable basis for making its estimates. However, these estimates
may include a range of possible outcomes. In such cases, management provides
for the amount within the range that constitutes its best estimate. It is less
than likely but more than remotely possible that the Group's potential
liability could be at the high end of such ranges, which would be
approximately $15 million in the aggregate higher than the estimates that have
been recorded in these financial statements. While the Group does not
currently anticipate that any adjustment to its estimates would be material to
its financial statements, it is reasonably possible that technological,
regulatory or enforcement developments, the results of environmental studies
or other factors could necessitate the recording of additional liabilities
that could be material. The impact of such future events cannot be estimated
at the current time.
<PAGE>
Where the Group believes that both the amount of a particular environmental
liability and the timing of the payments are reliably determinable, the cost
in current dollars is discounted to a present value assuming inflation of 3%
and a risk free discount rate of 8%. Discontinued amounts previously recorded
are accreted to reflect the effects of the passage of time. The Group's
closure and post-closure expense for the years ended August 31, 1994, 1995 and
1996 was $24.0 million, $18.6 million and $11.2 million, respectively, which
included accretion of interest on the closure and post-closure accrual of $3.0
million, $4.8 million and $5.5 million for the years ended August 31, 1994,
1995 and 1996, respectively.
The majority of the Group's active landfill sites have estimated remaining
lives ranging from 2 to approximately 88 years based upon current site plans
and anticipated annual volumes of waste. As at August 31, 1996, the Group
estimates that during this remaining site life, it will provide for an
additional $254 million (1995 -- $247 million) of closure and post-closure
costs, including accretion for the discount recognized to date. The change in
the expected aggregate undiscounted amount from 1995 to 1996 results primarily
from changes in available airspace.
Anticipated payments of environmental liabilities for each of the next five
years and thereafter are as follows:
Year ending August 31,
1997 $ 22,461
1998 11,396
1999 14,320
2000 12,049
2001 12,276
Thereafter 280,286
$ 352,788
5. Commitments and Contingencies
(a) Lease commitments
Rental expense incurred under operating leases amounted to $9,778, $7,609 and
$8,968 in the years ended August 31, 1994, 1995, and 1996 respectively.
Rentals payable under operating leases for premises and equipment are as
follows:
Year ending August 31,
1997 $ 8,365
1998 4,896
1999 4,524
2000 4,009
2001 3,329
Thereafter 20,063
$ 45,186
<PAGE>
(b) Legal proceedings
The Group is subject to extensive and evolving laws and regulations and has
implemented its own environmental safeguards to respond to regulatory
requirements. In the normal course of business, the Group provides for closure
and post-closure accruals to comply with all governmental regulations.
In the normal course of conducting its operations, the Group may become
involved in certain legal and administrative proceedings. Some of these
actions may result in fines, penalties or judgments against the Group which
may have an impact on the financial results for a particular period.
Management expects that such matters in process at August 31, 1996 will not
have a materially adverse effect on this Group's financial position or its
results from operations.
The consolidated federal income tax returns of the Laidlaw Transportation,
Inc. U.S. Consolidated Tax Group (the United States subsidiaries of the
Laidlaw Solid Waste Management Group are members of this taxpayer group) for
the fiscal years ended August 31, 1986, 1987 and 1988 have been under audit by
the Internal Revenue Service. In March 1994, the Laidlaw Transportation, Inc.
U.S. Consolidated Tax Group received a Statutory Notice of Deficiency
proposing that the Laidlaw Transportation, Inc. U.S. Consolidated Tax Group
pay additional taxes relating to disallowed deductions in those income tax
returns. The principal issue involved relates to the timing and the
deductibility for tax purposes of interest attributable to loans owing to
related foreign persons. The Laidlaw Transportation, Inc. U.S. Consolidated
Tax Group has petitioned the United States Tax Court (captioned as Laidlaw
Transportation, Inc. & Subsidiaries et al v. Commissioner of Internal Revenue,
Docket Nos. 9361-94 and 9362-94) for a redetermination of claimed deficiencies
of approximately $50.3 million (plus interest of approximately $67.6 million
as of August 31, 1996). In August 1996, the Laidlaw Transportation, Inc. U.S.
Consolidated Tax Group received Revenue Agent's reports proposing that the
Laidlaw Transportation, Inc. U.S. Consolidated Tax Group pay additional taxes
of approximately $161.3 million (plus interest of approximately $105.7 million
as of May 31, 1996) relating to disallowed deductions in federal income tax
returns for the fiscal years ended August 31, 1989, 1990 and 1991 based on the
same issues. The Laidlaw Transportation, Inc. U.S. Consolidated Tax Group
intends to vigorously contest these claimed deficiencies. Although the final
outcome cannot be predicted with certainty, Laidlaw, based upon a thorough
review of the facts and the advice of counsel, believes that the ultimate
disposition of these issues will not have a materially adverse effect upon
Laidlaw's consolidated financial position or results of operations. No
provision for these matters has been recorded in the financial statements of
the Group.
Under the Agreement, Laidlaw is responsible for, and has agreed to indemnify,
Allied and the Laidlaw Solid Waste Management Group against all United States
and Canadian federal, state, provincial, territorial, local and foreign income
tax liabilities of the Laidlaw Transportation, Inc. U.S. Consolidated Tax
Group.
(c) Letters of credit and guarantees
At August 31, 1996, the Group had $24,341 (1995 -- $41,101) in outstanding
letters of credit, of which the most significant are in support of the Group's
undertakings in respect of landfill closure and post-closure activities
required in obtaining regulatory operating permits. In addition, Laidlaw and
its affiliates have provided financial assurances, guarantees and additional
letters of credit in the aggregate amount of approximately $180 million for
closure and post-closure activities and bid bonds.
<PAGE>
6. Related Party Transactions
Included in operating expenses and selling, general and administrative
expenses are management fees, insurance premiums and rental charges paid to
affiliated companies as follows:
1994 1995 1996
Management fees $ 6,862 $ 4,957 $ 4,297
Insurance premiums $ 19,127 $ 17,098 $ 18,335
Rental charges $ 199 $ 196 $ 198
The above expenses represent the Group's share of all direct and indirect
overhead and corporate costs on a fully allocated basis which reflects all of
the Group's costs of doing business.
7. Acquisitions
A summary of the Group's acquisitions of solid waste management companies in
the periods indicated is as follows:
1994 1995 1996
Assets acquired -- at fair value:
Fixed assets $ 715 $ 8,271 $ 11,906
Goodwill 1,553 6,960 37,056
Long-term investments and other assets -- -- 6,606
2,268 15,231 55,568
Long-term liabilities assumed 55 794 8,155
Working capital -- (182) 1,813
Expended on acquisitions $ 2,213 $ 14,255 $ 49,226
Number of businesses acquired 7 11 9
Annualized revenue acquired $ 4,000 $ 15,000 $ 41,000
Pro forma data (unaudited)
Condensed pro forma statements of operations data, as if acquisitions each
year had occurred at the beginning of the previous year, are as follows:
1994 1995 1996
Statements of Operations Data:
Revenue $ 731,357 $ 805,202 $ 776,658
Income from operations $ 74,794 $ 97,833 $ 87,019
<PAGE>
8. Segmented Geographic Information
1994 1995 1996
United States:
Revenue $ 452,644 $ 484,858 $ 493,681
Income from operations $ 34,514 $ 50,334 $ 60,420
Total identifiable assets $ 554,498 $ 575,826 $ 578,542
Canada:
Revenue $ 262,121 $ 268,574 $ 269,853
Income from operations $ 38,544 $ 40,924 $ 24,985
Total identifiable assets $ 280,177 $ 298,067 $ 339,785
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
Prior to the closing of the acquisition of the Laidlaw Solid Waste
Management Group ("LSW Subsidiaries") and the related financing (collectively,
the "Transactions"), substantially all of the operating assets and liabilities
of Allied will be contributed (the "Contribution") from Allied to Allied Waste
North America, Inc. ("Allied U.S.").
The unaudited pro forma combined balance sheet reflects Allied U.S.
after the Contribution and gives effect to the Transactions as if each had
occurred on September 30, 1996. The unaudited pro forma combined statements
of operations for the nine months ended September 30, 1996 and the year ended
December 31, 1995 give effect to (i) the acquisition of companies accounted
for using the purchase method for business combinations completed in 1995 and
1996, which are considered to be significant; (ii) the completion of the
Contribution and the Transactions contemplated herein for approximately $1.5
billion; (iii) the issuances of 11.7 million shares of Common Stock in a
private placement and the application of the net proceeds therefrom; (iv) the
conversion and exercise of certain convertible securities and warrants into an
aggregate of approximately 9.8 million shares of Common Stock; and (v)
completion of a public offering of 7.6 million shares of Common Stock, and the
application of the net proceeds therefrom, as if each had occurred on January
1, 1995.
The pro forma adjustments related to the purchase allocation of the
Transactions are preliminary and does not give effect to an appraisal of the
assets of the LSW Subsidiaries which Allied intends to obtain at or near the
closing of the acquisition of the LSW Subsidiaries. The unaudited pro forma
combined financial statements do not reflect adjustments for certain financial
benefits, operational efficiencies and non-recurring items. These statements
do not purport to be indicative of the combined financial position or
combined results of operations of Allied and the LSW Subsidiaries that might
have occurred, nor are they indicative of future financial position or results
of operations.
The unaudited pro forma combined financial statements should be read
in conjunction with the Notes to Pro Forma Combined Financial Statements, the
historical consolidated financial statements of Allied and the notes thereto
and the historical financial statements of the LSW Subsidiaries and the notes
thereto.
<PAGE>
<TABLE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED BALANCE SHEET
September 30, 1996
(Unaudited)
(amounts in thousands)
<CAPTION>
Pro Forma
LSW Adjustments
Historical Subsidiaries Related
(Note 1) (Note 2) to (Note 3) Pro Forma
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 7,620 $ -- $ 1,500,000 (a) $ 56,620
(1,265,000)(b)
(186,000)(c)
Other current assets 62,526 124,000 -- 186,526
Total current assets 70,146 124,000 49,000 243,146
Property and equipment, net 340,729 566,560 100,000 (d) 1,007,289
Goodwill, net 89,504 204,877 974,625 (e) 1,064,129
(204,877)(f)
Other assets 36,263 22,890 33,500 (g) 92,653
Total assets $536,642 $ 918,327 $ 952,248 $2,407,217
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 15,259 $ 2,675 $ -- $ 17,934
Other current liabilities 44,876 123,186 -- 168,062
Total current liabilities 60,135 125,861 -- 185,996
Long-term debt, net of current
portion 233,132 1,895 1,500,000 (a) 1,659,774
110,747 (i)
(186,000)(c)
Other long-term liabilities 48,642 81,784 40,000 (j) 220,426
50,000 (h)
Stockholders' equity 194,733 708,787 (708,787)(k) 341,021
146,288 (l)
Total liabilities and equity $536,642 $ 918,327 $ 952,248 $2,407,217
</TABLE>
The accompanying notes are an integral part of this pro forma combined balance
sheet.
<PAGE>
<TABLE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
(Unaudited)
(in thousands except for per share amounts and number of shares)
<CAPTION>
Pro Forma
Adjustments Pro Forma
Completed LSW Related to Pro Forma Financing
Historical Acquisitions Subsidiaries Acquisitions for the Transactions
(Note 1) (Note 2) (Note 2) (Note 3) Acquisitions (Note 4) Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $183,896 $ 165 $ 573,407 $ -- $ 757,468 $ -- $757,468
Cost of
operations 101,153 101 400,701 -- 501,955 -- 501,955
Selling,
general and
administrative
expenses 27,152 24 36,909 -- 64,085 -- 64,085
Depreciation
and
amortization
expense 23,032 15 71,366 14,737 (b) 109,150 -- 109,150
Pooling costs 6,969 -- -- -- 6,969 -- 6,969
Operating
income 25,590 25 64,431 (14,737) 75,309 -- 75,309
Interest
income (257) -- -- -- (257) -- (257)
Interest
expense 6,623 -- -- 3,284 (d) 114,074 (409)(b) 113,665
(10,349)(e)
114,516 (f)
Income (loss)
before
income taxes 19,224 25 64,431 (122,188) (38,508) 409 (38,099)
Income tax
expense
(benefit) 9,428 10 -- (23,103) (13,665) 164 (13,501)
Net income
(loss) before
extraordinary
loss 9,796 15 64,431 (99,085) (24,843) 245 (24,598)
Dividends (861) -- -- -- (861) -- (861)
Net income
(loss) to
common
shareholders
before
extraordinary
loss $ 8,935 $ 15 $ 64,431 $(99,085) $ (25,704) $ 245 $ (25,459)
Net income
(loss) per
common share
before
extraordinary
loss $ 0.15 $ (0.35)
Weighted
average
common and
common
equivalent
shares 59,791,034 73,114,675
The accompanying notes are an integral part of this pro forma combined
financial statement.
</TABLE>
<PAGE>
<TABLE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
(in thousands except for per share amounts and number of shares)
<CAPTION>
Pro Forma
Adjustments Pro Forma
Completed LSW Related to Pro Forma Financing
Historical Acquisitions Subsidiaries Acquisitions for the Transactions
(Note 1) (Note 2) (Note 2) (Note 3) Acquisitions (Note 4) Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $217,544 $9,019 $ 756,215 $ (207)(a) $ 982,571 $ -- $982,571
Cost of
operations 119,238 4,317 522,561 (207)(a) 645,909 -- 645,909
Selling,
general and
administrative
expenses 36,708 1,918 57,572 96,198 -- 96,198
Depreciation
and
amortization
expense 27,279 1,116 91,720 19,851 (b) 139,966 -- 139,966
Pooling costs 1,531 -- -- -- 1,531 -- 1,531
Operating
income 32,788 1,668 84,362 (19,851) 98,967 -- 98,967
Interest
income (716) -- -- -- (716) -- (716)
Interest
expense 11,316 13 -- 393 (c) 156,891 (125)(a) 151,841
4,378 (d) (4,925)(b)
(11,897)(e)
152,688 (f)
Conversion
fee on
debt
securities
converted 56 -- -- -- 56 (56)(c) --
Income
(loss)
before
taxes 22,132 1,655 84,362 (165,413) (57,264) 5,106 (52,158)
Income tax
expense
(benefit) 9,751 662 -- (32,420) (22,007) 2,042 (19,965)
Net income
(loss)
before
extraordinary
loss 12,381 993 84,362 (132,993) (35,257) 3,064 (32,193)
Dividends (4,070) -- -- -- (4,070) 2,743 (1,327)
Conversion
fee on
equity
securities
converted (2,151) -- -- -- (2,151) 2,151 --
Net income
(loss) to
common
shareholders
before
extraordinary
loss $ 6,160 $ 993 $ 84,362 $(132,993) $ (41,478) $7,958 $(33,520)
Net income
(loss) per
common share $ 0.15 $ (0.47)
Weighted
average
common and
common
equivalent
shares 40,046,459 71,407,951
</TABLE>
The accompanying notes are an integral part of this pro forma combined
financial statement.
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
1. Historical
The historical balances represent the financial position and results of
operations of Allied for each of the indicated dates and periods as reported
in the historical consolidated financial statements of Allied included
elsewhere in this Offering Circular. The historical consolidated financial
statements have been restated to reflect acquisitions accounted for as
poolings-of-interests.
2. Historical Amounts Related to Acquisitions
The amounts related to the LSW Subsidiaries in the September 30, 1996 pro
forma combined balance sheet represent the historical combined balance sheet
of the LSW Subsidiaries. The amounts in the pro forma combined statements of
operations represent the results of operations of the companies purchased in
1995 and 1996 ("Completed Acquisitions"), and the results of operations of the
LSW Subsidiaries contemplated in the Transactions, for the period prior to
acquisition date, for each period presented.
The following represents acquisitions included in these pro forma combined
financial statements (collectively referred to as "Acquisitions.").
January 1995 -- Allied acquired Pen-Rob, Inc. ("Pen-Rob") for total
consideration of approximately $1.5 million.
May 1995 -- Allied acquired L and M Disposal, Inc. for total consideration of
approximately $518,000.
June 1995 -- Allied acquired Illinois Development Corporation ("IDC") for
total consideration of approximately $4.2 million.
September 1995 -- Allied acquired Duckett Disposal, Inc. ("Duckett") and
Brickyard Disposal and Recycling, Inc. ("Brickyard") for total consideration
of approximately $14.4 million.
January 1996 -- Allied acquired Service Waste, Inc. for total consideration of
approximately $6.2 million, including approximately 778,000 shares of Common
Stock.
February 1996 -- Allied acquired Clayco Sanitation Company, Inc. ("Clayco")
for total consideration of approximately $2.9 million.
September 1996 -- Allied entered into a stock purchase agreement to purchase
the LSW Subsidiaries for total consideration of approximately $1.5 billion, as
follows (in thousands):
Cash $ 1,200,000
7% Debenture 77,567
Zero Coupon Debenture 33,180
Common Stock 101,288
Warrant 45,000
Total $ 1,457,035
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The LSW Subsidiaries balance sheet data reflects balances at August 31,
1996. Amounts for the LSW Subsidiaries statement of operations for the year
ended December 31, 1995 and for the nine months ended September 30, 1996 are
for the 12 months ended February 29, 1996 and the nine months ended August 31,
1996, respectively. Revenues and income before pro forma income taxes of
$365.0 million and $43.0 million, respectively, for the six months ended
February 28, 1995 have been excluded and replaced with revenues and income
before pro forma income taxes of $367.7 million and $36.1 million,
respectively, for the six months ended February 29, 1996 in the LSW
Subsidiaries' pro forma statement of operations for the year ended December
31, 1995. Revenues and
income before pro forma income taxes of $190.1 million and $21.0,
respectively, for the three months ended November 30, 1995 have been excluded
in the LSW Subsidiaries' pro forma statement of operations for the nine months
ended September 30, 1996. Revenues and income before pro forma income taxes of
$177.6 million and $15.1 million, respectively, for the three months ended
February 29, 1996 have been included in the LSW Subsidiaries statement of
operations for the 12 months ended February 29, 1996 and the nine months ended
August 31, 1996.
3. Pro Forma Adjustments
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following:
Pro Forma Combined Balance Sheet
(a) To reflect the completion of a $525 million private placement of
senior subordinated notes (the "Notes") and the funding of $975 million
of a senior credit facility (the "Senior Credit Facility"). Allied has
commitments from prospective buyers to purchase in excess of $525
million of the Notes. Closing on the sale of the Notes is expected in
December 1996. The interest rate on the Notes as of September 30, 1996
would have been 10.25%.
(b) To reflect cash paid in connection with the acquisition of the LSW
Subsidiaries.
(c) To reflect repayment of debt in connection with the refinancings
contemplated in the Transactions.
(d) To reflect the allocation of purchase price to property and equipment
of the LSW Subsidiaries to reflect the estimated fair value of such
assets.
(e) To reflect goodwill recorded in connection with the
acquisition of the LSW Subsidiaries.
(f) To remove goodwill recorded on the books of the LSW Subsidiaries.
(g) To reflect commitment fees paid in connection with the Notes and the
Senior Credit Facility contemplated in the acquisition of the LSW
Subsidiaries.
(h) To accrue for costs expected to be incurred as a result of the
acquisition of the LSW Subsidiaries including severance and transition
pay, office relocation, lease and other contract terminations and the
assumption of environmental remediation costs related to the certain
third-party contaminated waste sites and landfills of LSW Subsidiary.
(i) To reflect the issuance of the $318 million face value of Allied Waste
Holdings (Canada) Ltd. 7% debentures and zero coupon debenture
(collectively, the "Allied Canada Debentures") recorded at the
discounted amount of $111 million using a 14% implicit interest rate, in
connection with the acquisition of the LSW Subsidiaries.
(j) To reflect the deferred tax liability related to temporary differences
between book and tax basis of Allied Canada Debentures and certain fixed
assets in connection with the acquisition of the LSW Subsidiaries.
<PAGE>
(k) To reflect the elimination of investment in subsidiary in connection
with the acquisition of the LSW Subsidiaries.
(l) To reflect the issuance of 14.6 million shares of Common Stock at
$9.25 per share, net of a 25% discount to reflect restrictions on the
Common Stock, and the Warrant valued at $45 million in connection with
the acquisition of the LSW Subsidiaries.
Pro Forma Combined Statements of Operations
(a) To eliminate rent expense and rental revenue between Allied and IDC.
(b) To reflect the amortization of goodwill recorded in connection with
the Acquisitions, calculated based on a 40 year life of goodwill, as
follows (in thousands):
Nine Months
Year Ended Ended
Total December 31, September 30,
Goodwill 1995 1996
L and M Disposal, Inc., for the 4 months
ended April 30, 1995 $ 601 $ 6 $ --
IDC, for the 5 months ended May 31,
1995 1,046 11 --
Duckett Disposal, Inc. for the 8 months
ended August 31, 1995 3,510 59 --
Service Waste, Inc. for the year ended
December 31, 1995 2,649 66 --
Clayco Sanitation Company, Inc. for the
year ended December 31, 1995 and
the month ended January 31, 1996 2,703 68 6
LSW Subsidiaries for the year ended
December 31, 1995 and the 9 months
ended September 30, 1996 974,625 19,641 14,731
Total pro forma goodwill and
amortization $985,134 $ 19,851 $ 14,737
(c) To reflect interest expense on debt issued or assumed in connection
with the Completed Acquisitions, calculated as follows (in thousands):
Year Ended
December 31, 1995
Duckett seller notes, interest at 7% for 8 months $ 163
Brickyard seller notes, interest at 7% for 8 months 148
Clayco seller notes, interest at 9% for 12 months 82
$ 393
(d) To reflect amortization of commitment fees related to the Notes and
the Senior Credit Facility contemplated in connection with the
acquisition of the LSW Subsidiaries.
(e) To reflect the reduction of interest expense resulting from the
repayment of certain indebtedness with the proceeds from the Senior
Credit Facility contemplated in connection with the acquisition of the
LSW Subsidiaries, calculated as follows (in thousands):
Nine Months
Year Ended Ended
December 31, September
1995 30, 1996
1994 $100 million senior subordinated notes,
interest at 10.75% for one month during 1995 $ (897) $ --
1994 $100 million senior subordinated notes,
interest at 12% for 11 months and 7 months
during 1996 (11,000) (7,000)
Credit Agreement, interest at 9.25% for 7
months during 1996 -- (1,179)
Credit Facility interest at 7% for 2 months
during 1996 -- (2,170)
Total pro forma interest savings $ (11,897) $ (10,349)
<PAGE>
(f) To reflect interest expense related to the Senior Credit Facility, the
Notes, and the Allied Canada Debentures calculated as follows (in
thousands):
Year Ended Nine Months Ended
December 31, 1995 September 30, 1996
Senior Credit Facility, interest at 8.5% $ 82,875 $ 62,156
Notes, interest at 10.25% 53,813 40,360
7% Debenture, implicit interest at 14% 11,200 8,400
Zero Coupon Debenture, implicit interest
at 14% 4,800 3,600
Total pro forma interest expense $ 152,688 $ 114,516
An increase in the interest rate of one-eighth of a percent on the Senior
Credit Facility would increase interest expense $1.2 million and $0.9 million
and decrease net income $0.7 million and $0.5 million for the year ended
December 31, 1995 and the nine months ended September 30, 1996, respectively.
4. Financing Transactions
The pro forma combined financial statements assume that (i) Allied issued 11.7
million shares of Common Stock on January 1, 1995 in connection with a private
placement of equity which closed on January 31, 1995, (ii) certain holders of
preferred stock, convertible debt and warrants converted their preferred stock
or convertible debt into or exercised their warrants for, an aggregate of
approximately 9.8 million shares of Common Stock and, (iii) Allied completed a
public offering of 6.5 million shares of Common Stock in January 1996.
The pro forma combined financial statements do no include the extraordinary
charge of $18 million ($11 million net of income tax benefit) related to the
early extinguishment of debt.
The adjustments related to the financing transactions reflected in the pro
forma combined financial statements give effect to the following:
(a) To reflect reduction of interest expense resulting from the repayment
of certain indebtedness of Allied from the proceeds of the private
placement of equity completed in 1996.
(b) To reflect reduction of interest expense resulting from the conversion
of certain convertible subordinated debt into common stock and the
repayment of certain indebtedness from the proceeds of the sale of 7.6
million shares of Common Stock in a public offering completed in 1996.
(c) To reflect the elimination of one-time costs related to the conversion
of debt securities converted in 1995.
<PAGE>
5. Net Income (Loss) Per Common Share
Pro forma net income per common share is calculated by dividing pro forma net
income to common shareholders less requirements on Series D preferred stock,
7% preferred stock, and 9% preferred stock by the pro forma weighted average
common and common equivalent shares outstanding during the periods. Pro forma
weighted average common and common equivalent shares have been computed as
follows:
Nine Months
Year Ended Ended
December 31, September 30,
1995 1996
Historical weighted average common shares 37,823,370 57,594,445
Pro forma effect of issuing common shares for --
Service Waste acquired and accounted for as
a purchase 889,445 100,631
The LSW Subsidiaries contemplated to be acquired
and accounted for as a purchase 14,600,000 14,600,000
Common shares issued pursuant to a private
placement 962,433 --
Common shares issued in connection with the
public offering 7,606,282 638,484
Conversion of convertible subordinated debt
into common shares 1,827,639 172,883
Conversion of Series C Preferred into
common shares 233,533 --
Conversion of Series D Preferred into
common shares 731,255 --
Conversion of 9% Preferred into common shares
and issuances of inducement conversion shares 4,859,991 --
Conversion of $90 Preferred into common shares
and issuances of inducement conversion shares 1,343,374 --
To remove the impact of contingently issuable
shares (23,244) --
Exercise of warrants 553,873 8,232
71,407,951 73,114,675
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant, Allied Waste Industries, Inc., has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ PETER S. HATHAWAY
Peter S. Hathaway
Vice President, Chief Accounting Officer
and Treasurer
(Principal Accounting Officer)
Date: November 29, 1996
<PAGE>
EXHIBIT 23
November 27, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Allied Waste Industries, Inc. on Form S-4 Registration # 33-3585 of our report
dated September 30, 1996, to the Directors of Laidlaw Inc. on the balance
sheets of the Laidlaw Solid Waste Management Group as at August 31, 1995 and
1996 and the statements of operations and cash flows for years ended August
31, 1994, 1995 and 1996, which report is incorporated in the Form 8K/A1.
This letter is provided to securities regulatory authorities pursuant to the
requirements of their securities legislation and is not for any other purpose.
/s/ Coopers & Lybrand
Chartered Accountants
Hamilton, Canada
