UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 0-19285
ALLIED WASTE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 88-0228636
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION.) IDENTIFICATION NO.)
7201 EAST CAMELBACK ROAD, SUITE 375, SCOTTSDALE, ARIZONA 85251
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 423-2946
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO ___
INDICATE THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S CLASS OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AS OF SEPTEMBER 30, 1996
COMMON STOCK 58,946,994
[PAGE]
ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
Page
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II Other Information
Item 1 Legal Proceedings 24
Item 2 Changes in Securities 24
Item 3 Defaults Upon Senior Securities 24
Item 4 Submission of Matters to a Vote of Securing Holders 24
Item 5 Other Information 24
Item 6 Exhibits and Reports on Form 8-K 24
Signature 25
[PAGE]
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30,
1995 1996
(unaudited)
ASSETS
Current Assets -
Cash and cash equivalents $ 4,016 $ 7,620
Accounts receivable, net of allowance of
$2,502 and $2,576 32,172 38,925
Income taxes receivable -- 5,079
Prepaid and other current assets 5,369 7,391
Current portion of landfills 7,103 7,103
Inventories 1,960 2,203
Deferred income taxes 2,669 1,825
Total current assets 53,289 70,146
Property and equipment, net 302,352 340,729
Goodwill, net 85,230 89,504
Other assets 17,835 36,263
Total assets $ 458,706 $ 536,642
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities --
Current portion of long-term debt to
related parties $ 121 $ 132
Current portion of long-term debt to
unrelated parties 37,460 15,127
Accounts payable 23,750 19,166
Accrued interest 5,995 1,027
Other accrued liabilities 14,028 13,249
Unearned income 9,273 11,434
Total current liabilities 90,627 60,135
Long-term debt to related parties, less current
portion 1,862 1,762
Long-term debt to unrelated parties, less current
portion 176,733 229,608
Convertible subordinated debt, net of discount 7,778 1,762
Deferred income taxes 25,649 27,519
Accrued closure and post-closure costs 10,530 10,202
Deferred royalties and other long-term obligations 9,222 10,921
Commitments and contingencies
Stockholders' Equity --
Preferred stock, aggregate liquidation preference
of $15,052 and $14,943 at December 31, 1995
and September 30, 1996, respectively 2 2
Common stock 474 589
Additional paid-in capital 134,326 194,142
Retained earnings 1,503 --
Total stockholders' equity 136,305 194,733
Total liabilities and stockholders' equity $ 458,706 $ 536,642
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
[PAGE]
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per share amounts and number of shares; unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1996 1995 1996
Revenues $ 161,910 $ 183,896 $ 57,240 $ 64,938
Cost of operations 89,663 101,153 31,078 35,454
Selling, general
and administrative expenses 24,869 27,152 8,262 8,688
Depreciation and amortization 19,759 23,032 6,976 7,624
Operating income before
pooling costs 27,619 32,559 10,924 13,172
Pooling costs 1,531 6,969 1,531 279
Operating income 26,088 25,590 9,393 12,893
Interest income (544) (257) (70) (115)
Interest expense 8,737 6,623 2,763 2,056
Income before income taxes 17,895 19,224 6,700 10,952
Income tax expense 7,615 9,428 2,973 5,393
Income before extraordinary
item 10,280 9,796 3,727 5,559
Extraordinary loss due to
early extinguishment of
debt, net of income tax
benefit of $7,347 in 1996 -- 11,024 -- 11,024
Net income (loss) 10,280 (1,228) 3,727 (5,465)
Dividends on preferred stock 3,101 861 975 287
Net income (loss) to common
shareholders $ 7,179 $ (2,089) $ 2,752 $ (5,752)
Income (loss) per share:
Income before
extraordinary loss $ 0.18 $ 0.15 $ 0.07 $ 0.09
Extraordinary item -- (0.18) -- (0.18)
Income (loss) $ 0.18 $ (0.03) $ 0.07 $ (0.09)
Weighted average common and
common equivalent shares
outstanding 39,836,466 59,791,034 43,657,901 61,421,648
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
[PAGE]
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Nine Months Ended
September 30,
1995 1996
Operating Activities --
Net income (loss) $ 10,280 $ (1,228)
Adjustments to reconcile net income (loss) to cash
provided by operating activities --
Extraordinary loss on early extinguishment of debt -- 18,371
Provisions for:
Depreciation and amortization 19,759 23,032
Closure and post-closure costs 1,353 1,035
Doubtful accounts 984 1,701
Deferred income taxes 5,292 3,056
(Gain) loss on sale of fixed assets (53) 1,943
Change in operating assets and liabilities,
excluding the effects of purchase acquisitions --
Accounts receivable, prepaid expenses,
inventories and other
(1,716) (19,392)
Accounts payable, accrued liabilities, unearned
income, closure and post-closure costs and other (6,117) (19,845)
Cash provided by operating activities 29,782 8,673
Investing Activities --
Cost of acquisitions, net of cash acquired (17,609) (4,057)
Capital expenditures (41,440) (32,625)
Proceeds from sale of fixed assets 843 588
Change in deferred acquisition costs and
notes receivable (10,766) (7,782)
Cash used for investing activities (68,972) (43,876)
Financing activities --
Net proceeds from sale of common stock,
preferred stock, stock options and warrants 29,730 47,999
Proceeds from long-term debt, net of issuance costs 48,480 223,351
Repayments of long-term debt (29,904) (232,046)
Other long-term obligations (591) 148
Dividends paid (2,681) (898)
Equity transactions of pooled companies (1,220) 253
Cash provided by financing activities 43,814 38,807
Increase in cash and cash equivalents 4,624 3,604
Cash and cash equivalents, beginning of period 5,223 4,016
Cash and cash equivalents, end of period $ 9,847 $ 7,620
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
[PAGE]
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Allied Waste Industries, Inc. ("Allied" or the "Company"), is
incorporated under the laws of the state of Delaware. Allied is a solid waste
management company providing non-hazardous waste collection, transfer,
recycling and disposal services in selected markets.
The condensed consolidated financial statements include the accounts of
Allied and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. The condensed consolidated
balance sheet as of December 31, 1995, which has been derived from audited
consolidated financial statements, and the unaudited interim condensed
consolidated financial statements included herein have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission (the
"SEC"). As applicable under such regulations, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted. The Company believes that the presentations and disclosures
herein are adequate to make the information not misleading when read in
connection with the Company's Annual Report on Form 10-K. The condensed
consolidated financial statements as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
such periods. The condensed consolidated financial statements and
accompanying notes have also been restated to reflect acquisitions accounted
for as poolings-of-interests (See Note 2).
Operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements of Allied Waste Industries, Inc and subsidiaries for the year ended
December 31, 1995 and the related notes thereto included in the Company's
Annual Report on Form 10-K filed with the SEC on March 27, 1996.
There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1995. For a description of these
policies, see Note 1 of Notes to Consolidated Financial Statements for the
year ended December 31, 1995 in the Company's Annual Report on Form 10-K.
Certain reclassifications have been made in prior period financial
statements to conform to the current presentation.
Goodwill and other assets --
Goodwill is the cost in excess of fair value of identifiable assets of
acquired businesses and has been amortized on a straight-line basis along with
certain miscellaneous intangible assets over a blended life of twenty-five
years. Miscellaneous intangible assets previously classified with goodwill
have been reclassified as Other Assets. These miscellaneous intangible assets
continue to be amortized in accordance with the terms of the respective
agreements and contracts ranging from 3 years to 10 years, while goodwill
continues to be amortized on a straight-line basis over forty years.
The Company continually evaluates whether events and circumstances have
occurred subsequent to its acquisition, that indicate the remaining useful
life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should
be evaluated for possible impairment, the Company uses an estimate of the
related business segment's discounted future cash flows over the remaining
life of the goodwill in measuring whether goodwill is recoverable.
[PAGE]
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Extraordinary item --
On July 31, 1996, the Company completed a tender offer (the "Tender
Offer") and purchased substantially all of its $100 Million 12% Senior
Subordinated Notes due 2004 (the "Senior Notes") at the redemption price of
$1,157.50 per $1,000 note. An extraordinary change to earnings related to the
Tender Offer of approximately $18 million ($11 million net of income tax
effect), or $0.18 per share, was charged to earnings in the third quarter of
1996. The Company also received a consent from a majority of the holders of
the Senior Notes to eliminate all substantive financial covenants associated
with the remaining Senior Notes.
Statements of cash flows --
The supplemental cash flow disclosures and non-cash transactions for the
nine months ended September 30, 1995 and 1996 are as follows (in thousands):
Nine Months Ended
September 30,
1995 1996
(unaudited)
Supplemental Disclosures --
Interest paid $ 17,916 $ 20,392
Income taxes paid 1,494 5,996
Non Cash Transactions --
Common or preferred stock issued
in purchase acquisitions $ 617 $ 5,497
Common stock contributed to 401(k) plan -- 219
Capital leases 15,226 11,655
Debt and liabilities incurred or assumed in
purchase acquisitions 1,179 5,039
Debt converted to common stock 627 5,485
Capitalized interest 7,509 10,013
Dividends and interest paid in common stock 906 --
2. Business Combinations
Acquisitions accounted for as purchases are reflected in the results of
operations since the date of purchase in Allied's condensed consolidated
financial statements. The results of operations for acquisitions accounted
for as poolings-of-interests are included in Allied's condensed consolidated
financial statements for all periods presented. Often the final determination
of the cost of certain of the Company's acquisitions is subject to resolution
of certain contingencies. Once such contingencies are satisfied, the purchase
price may be adjusted. Shares issued in connection with business acquisitions
have been valued taking into consideration certain restrictions placed on the
common stock issued to the seller in the transaction.
[PAGE]
The following table summarizes acquisitions for the nine months ended
September 30, 1995 and 1996 (unaudited):
Nine Months
Ended September 30,
1995 1996
Number of businesses acquired and accounted
for as:
Poolings-of-interests 5 5
Purchases 11 12
Total consideration (in millions) $ 45.2 $ 101.9
Shares of common stock issued 3,867,185(1) 8,817,694(2)
_________________
(1) Includes 23,244 shares of contingently issuable common stock.
(2) Includes 774,804 shares of contingently issuable common stock.
The following table shows the effect on reported revenue and net
income of using the pooling-of-interests method of accounting for business
combinations during the nine months ended September 30, 1996.Revenues and net
income as previously reported have been restated as presented in the
following table (in thousands):
Before After
Pooling Effect of Pooling
Effects Poolings Effects
Nine months ended September 30, 1996 (unaudited)
Revenues 158,482 25,414 183,896
Net income (loss) 1,067 (2,295) (1,228)
Three months ended September 30, 1995 (unaudited)
Revenues 44,606 12,634 57,240
Net income 3,123 604 3,727
Nine months ended September 30, 1995 (unaudited)
Revenues 126,119 35,791 161,910
Net income 8,912 1,368 10,280
Year ended December 31, 1995
Revenues 169,865 47,679 217,544
Net income 11,584 797 12,381
Year ended December 31, 1994
Revenues 114,814 43,540 158,354
Net loss (6,731) 696 (6,035)
Year ended December 31, 1993
Revenues 69,206 39,742 108,948
Net income 2,319 323 2,642
Pooling costs of $279,000 and $7.0 million related to the 1996
Poolings were charged to expense during the three months and nine months
ended September 30, 1996, respectively. The after-tax impact of these
expenses on earnings per share was ($0.01) on the three months ended September
30, 1996 and ($0.08) on the nine months ended September 30, 1996. Pooling
costs include legal, accounting and consulting fees, stock registration costs,
and integration and other costs of business combination.
[PAGE]
Unaudited pro forma income statement data --
The following unaudited pro forma consolidated data for the year
ended December 31, 1995 and the nine months ended September 30, 1996
represents the results of operations of Allied as if the companies acquired
using the purchase method of accounting for business combinations in 1995 and
through September 30, 1996, had all occurred as of January 1, 1995. This data
does not purport to be indicative of the results of operations of Allied that
might have occurred nor which might occur in the future (in thousands, except
per share data).
December 31, September 30,
1995 1996
(unaudited)
Revenues $ 228,998 $ 184,180
Operating income 34,269 25,617
Net income (loss) 12,897 (984)
Net income (loss) to common shareholders 6,676 (1,845)
Net income (loss) per common share 0.16 (0.03)
EBITDA (1) 63,116 48,680
EBITDA(1) before pooling costs 64,772 55,649
___________________
(1 EBITDA represents operating income plus depreciation and amortization.
The Company has included EBITDA data (which are not a measure of financial
performance under generally accepted accounting principles) because it
understands such data are used by certain investors and creditors to
determine the Company's historical ability to service its indebtedness.
3. Property and Equipment
Property and equipment at December 31, 1995 and September 30, 1996 was as
follows (in thousands):
1995 1996
(unaudited)
Land and improvements $ 16,449 $ 17,364
Land held for permitting as landfills(1) 5,640 6,778
Landfills 179,463 210,233
Buildings and improvements 24,525 29,793
Vehicles and equipment 88,410 99,080
Containers and compactors 46,412 54,173
Furniture and office equipment 5,735 7,215
366,634 424,636
Accumulated depreciation and amortization (64,282) (83,907)
$ 302,352 $ 340,729
__________________
(1) These properties have been approved for use as a landfill, and the
Company is currently in the process of obtaining the necessary permits.
[PAGE]
4. Net Income (Loss) per Common Share
Net income (loss) per common share is calculated by dividing net income
less dividend requirements on preferred stock by the weighted average number
of common shares and common share equivalents outstanding during each period,
as restated to reflect acquisitions accounted for as poolings-of-interests.
The computation of weighted average common and common equivalent shares used
in the calculation of income per common share is as follows (unaudited):
Nine Months Ended
September 30,
1995 1996
Common shares outstanding 37,702,922 58,946,994
Effect of using weighted average
common shares outstanding during the period (1,608,306) (2,122,720)
Effect of stock options and warrants assumed
exercisable 2,549,275 2,196,589
Effect of Series C preferred stock assumed converted 234,820 --
Effect of shares assumed issued pursuant to earn-out 957,755 770,171
39,836,466 59,791,034
Conversion has not been assumed for Series D preferred stock, 9%
preferred stock, 7% preferred stock and convertible subordinated notes in 1995
and 1996, as the effect would not be dilutive. Additionally, conversion has
not been assumed for Series E preferred stock and $90 preferred stock in 1995,
as the effects would not be dilutive.
5. Subsequent Events
In September 1996, Allied entered into a definitive agreement to
acquire the non-hazardous solid waste business of Laidlaw, Inc. for
approximately $1.5 billion consisting of cash, common stock, notes and
warrants. The transaction is expected to close in early 1997.
[PAGE]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Condensed Consolidated Financial Statements and the notes thereto, included
elsewhere herein.
Introduction
The Company has experienced significant growth, a substantial portion of
which has resulted from the acquisition of solid waste businesses. Since
January 1, 1992, the Company has completed 89 acquisitions. In 1995 the
Company acquired 18 businesses and has acquired 17 businesses subsequent to
1995. See Note 2 to the Company's Condensed Consolidated Financial
Statements. The Company's Condensed Consolidated Financial Statements have
been restated to reflect the acquisition of companies accounted for using the
pooling-of-interests method for business combinations. Many of the
acquisitions were accounted for under the purchase method for business
combinations and, accordingly, the results of operations for such acquired
businesses are included in the Company's financial statements only from the
applicable date of acquisition. As a result, the Company believes its
historical results of operations for the periods presented are not directly
comparable.
General
Revenues. The Company's revenues are attributable primarily to fees
charged to customers for waste collection, transfer, recycling and disposal
services. The Company's collection services are generally provided under
direct agreements with its customers or pursuant to contracts with
municipalities. Commercial and municipal contract terms, where used,
generally range from 1 to 5 years and commonly have automatic renewal options.
The Company's landfill operations include both Company-owned landfills and
those operated for municipalities for a fee. The Company's strategy is to be
vertically integrated in each geographic region in which it is located as it
provides collection, transfer and disposal services. The tables below show
for the periods indicated the percentage of the Company's total revenues
attributable to services provided and to geographic region (unaudited):
Year Ended December 31, Nine Months Ended
1993 1994 1995 September 30, 1996
Collection (1) 76.8% 69.9% 64.7% 61.7%
Transfer 2.8 8.4 9.5 8.5
Landfill (1) 9.2 14.5 18.3 22.1
Other 11.2 7.2 7.5 7.7
Total revenues 100.0% 100.0% 100.0% 100.0%
Midwest 49.0% 48.7% 52.2% 50.0%
Southeast 28.8 30.2 28.0 30.4
Southwest 22.2 21.1 19.8 19.6
Total revenues 100.0% 100.0% 100.0% 100.0%
____________
(1) The portion of collection revenues attributable to disposal charges
for waste collected by the Company and disposed at the Company's landfills
have been excluded from collection revenues and included in landfill
revenues.
[PAGE]
The Company's strategy is to develop vertically integrated operations to
ensure internalization of waste it collects and thus realize higher margins
from its operations. By disposing of its waste at Company-operated landfills,
the Company retains the margin generated through disposal operations that
would otherwise be earned by third-party landfills. Approximately 70.3% of
Company-collected waste is disposed at Company-operated landfills as measured
using disposal costs in 1996. In addition, transfer stations are an integral
part of the disposal process. The Company locates its transfer stations in
areas where its landfills are outside of the population centers in which it
collects waste. Such waste is transloaded and transported to its landfills.
The increase in transfer and landfill revenues as a percentage of total
revenues from 2.8% and 9.2% in 1993 to 8.5% and 22.1% in 1996, respectively,
reflects the continued implementation of the Company's strategy. Although
transfer revenues typically generate lower operating margins, the increase in
transfer revenues, as a percentage of total revenues, is not expected to have
an adverse effect on the profitability of the Company.
Expenses. Cost of operations includes labor, maintenance and repairs,
equipment and facility rent, utilities and taxes, the costs of ongoing
environmental compliance, safety and insurance, disposal costs and costs of
independent haulers transporting Company waste to disposal sites. Disposal
costs include certain landfill taxes, host community fees, payments under
agreements with respect to landfill sites that are not owned, landfill site
maintenance, fuel and other equipment operating expenses, and accruals for
closure and post-closure monitoring expenses anticipated to be incurred in the
future.
Selling, general and administrative expenses includes management,
clerical and administrative compensation and overhead, sales costs, community
relations expenses, and provisions for estimated uncollectible accounts
receivable and potentially unrealizable acquisition costs.
Depreciation and amortization includes depreciation of fixed assets and
amortization of landfill, airspace, goodwill and other intangible assets.
In connection with potential acquisitions, the Company incurs transaction
and integration costs which include stock registration, legal, accounting,
consulting, engineering and other direct costs. When an acquisition is
accounted for using the pooling-of-interests method for business combinations,
these costs are charged to the statement of operations as pooling costs.
When potential acquisitions are accounted for using the purchase method for
business combinations, these costs are capitalized. The Company routinely
evaluates such capitalized costs and expenses those costs which have no
further value. Indirect acquisition costs, such as executive salaries,
general corporate overhead and other corporate services, are expensed as
incurred.
Direct landfill development costs, such as engineering, upgrading,
construction and permitting costs, are capitalized and amortized based on
consumed airspace. The Company believes that the costs associated with the
engineering, owning and operating landfills will increase in the future as a
result of federal, state and local regulation and a growing community
awareness of the landfill permitting process. Although there can be no
assurance, the Company believes, that it will be able to implement price
increases sufficient to offset these increased expenses. All indirect
landfill development costs, such as executive salaries, general corporate
overhead, public affairs and other corporate services, are expensed as
incurred.
Accrued closure and post-closure costs represent an estimate of the
current value of the future obligation associated with closure and post-
closure monitoring of non-hazardous solid waste landfills currently owned or
operated by the Company. Site specific closure and post-closure engineering
cost estimates are prepared annually for landfills owned or operated by the
Company for which it is responsible for closure and post-closure. Estimated
costs are accrued based on accepted tonnage as landfill airspace is consumed.
Effective January 1, 1994 the Company changed its accounting policy to
discount its future closure and post-closure obligations where the Company
believes that both the amounts and timing of related payments are reliably
determinable. The Company periodically updates its estimates of future
closure and post-closure costs. The impact of changes which are determined to
be changes in estimates are accounted for on a prospective basis.
[PAGE]
The net present value of the closure and post-closure commitment is
calculated assuming inflation of 3.5% and a risk-free capital rate of 7.0%.
Discounted amounts previously recorded are accreted to reflect the effects of
the passage of time. Based on these assumptions, the Company's current
estimate of total future payments for closure and post-closure is $165
million, while the present value of such estimate is $55 million. At December
31, 1995 and September 30, 1996, respectively, accruals for landfill closure
and post-closure costs (including costs assumed through acquisitions) were
approximately $10.5 million and $10.2 million. The accruals reflect
relatively young landfills with estimated remaining lives, based on current
waste flows, that range from one to over 50 years, with an estimated average
remaining life of over 25 years based on current waste volumes.
During 1994, the Company's landfills became subject to the closure and
post-closure requirements of Subtitle D. Previously, the Company's landfills
were subject to local requirements. The principle changes under Subtitle D are
an extension of the post-closure monitoring period to 30 years and a
requirement to use clay or synthetic liners as capping materials. The Company
updated its estimates of future closure and post-closure costs in accordance
with its interpretations of Subtitle D.
[PAGE]
Results of Operations
Three Months Ended September 30, 1995 and 1996
The following table sets forth the percentage relationship that the
various items bear to revenues and the percentage change in dollar amounts for
the periods indicated. The statement of operations data have been restated to
give effect to transactions completed in 1995 and 1996, that were accounted
for using the pooling-of-interests method for business combinations. See Note
2 to the Company's Condensed Consolidated Financial Statements.
Three Months Ended September 30,
1996
Compared
to 1995
% Change
1995 1996 in Amounts
(unaudited)
Statement of Operations Data:
Revenues 100.0% 100.0 % 13.5 %
Cost of operations 54.3 54.6 14.1
Selling, general and administrative expenses 14.4 13.4 4.8
Depreciation and amortization 12.2 11.7 8.6
Operating income before pooling costs 19.1 20.3 20.6
Pooling costs 2.7 0.4 (81.4)
Operating income 16.4 19.9 37.3
Interest expense, net 4.7 3.0 (29.6)
Income tax provision 5.2 8.3 81.4
Extraordinary item, net -- 17.0 100.0
Net income 6.5% (8.4)% (246.6)%
Other Data:
EBITDA(1) before pooling costs 31.3% 32.0 % 16.2 %
EBITDA(1) after pooling costs 28.6% 31.6 % 25.3 %
_______________________
(1) EBITDA represents operating income plus depreciation and amortization.
The Company has included EBITDA data (which are not a measure of financial
performance under generally accepted accounting principles) because it
understands such data are used by certain investors and creditors to
determine the Company's historical ability to service its indebtedness.
Revenues. Revenues in 1996 were $64.9 million compared to $57.2 million
in 1995, an increase of 13.5%. Approximately 3.7% of the increase in
revenues is attributable to acquisitions and 9.8% is attributable to internal
growth. Revenues of $2.1 million in the third quarter of 1996 were generated
from companies acquired subsequent to June 1995, while increases in revenues
attributable to existing operations amounted to $5.6 million. Average price
increases as a percentage of revenues were approximately 3% of revenues while
the remainder of internal growth was from volume. Internal volume growth has
been affected by the decrease of disposal volumes from the City of Chicago
which in 1995 amounted to approximately $1.3 million compared to $0.6 million
in 1996 for the quarter. Internal growth adjusted for this loss of volume
between 1995 and 1996 is 11.1%.
Cost of Operations. Cost of operations in 1996 was $35.5 million
compared to $31.1 million in 1995, an increase of 14.1%. The increase in cost
of operations was primarily attributable to the increase in revenues described
above. As a percentage of revenues, cost of operations increased to 54.6% in
1996 from 54.3% in 1995. Operating cost margins were favorably impacted by a
decrease in disposal costs paid to third-parties measured as a percentage of
revenue and other operating efficiencies resulting from the integration of
businesses acquired in the past twelve months. Company-collected waste
disposed at Company-operated landfills was 73.5% of revenue during the three
months ended September 30, 1996 compared to 62.4% during 1995.
[PAGE]
Selling, General and Administrative Expenses. SG&A expenses increased to
$8.7 million in 1996 compared to $8.3 million in 1995, an increase of 4.8%.
As a percentage of revenues, SG&A decreased to 13.4% in 1996 compared to 14.4%
in 1995. The increase in SG&A expense resulted from expenses associated with
acquired companies and expenses incurred in connection with the Company's
increase in personnel and other expenses related to the anticipated growth of
the Company as it continues to acquire companies. The decrease in SG&A as a
percentage of revenues is attributable to a moderate increase in corporate
general and administrative expenses as compared to a greater percentage
increase in revenues.
Depreciation and amortization. Depreciation and amortization in 1996 was
$7.6 million compared to $7.0 million in 1995, an increase of 8.6%. The
increase in depreciation and amortization expense is due to acquisitions and
capital expenditures. Fixed assets have increased from $344.8 million at
September 30, 1995 to $424.6 million at September 30, 1996 and goodwill has
increased from $97.4 million at September 30, 1995 to $99.7 million at
September 30, 1996. As a percentage of revenues, depreciation and
amortization decreased to 11.7% in 1996 from 12.2% in 1995. This is primarily
the result of the reduction in depreciation expense for equipment and
amortization of intangibles offset somewhat by higher landfill amortization
which corresponds to the higher rate of waste internalization in 1996 and the
resulting decrease in third-party disposal costs.
Pooling costs. Costs of $279,000 were incurred in 1996 compared to $1.5
million in 1995 for transaction and integration costs directly related to
acquisitions accounted for using the pooling-of-interests method for business
combinations. The increase of $1.2 million is because more acquisitions were
completed in the third quarter of 1996 than the number completed in the same
period of 1995. Transaction costs include stock registration, legal,
accounting, consulting, engineering and other direct third-party costs
incurred to complete the acquisitions. Integration costs include
uncollectible accounts receivable write-offs, employee termination and
relocation, write down of fixed assets, lease termination, and deferred
repairs and maintenance of vehicles and equipment.
Net interest expense. Net interest expense was $1.9 million in 1996
compared to $2.7 million in 1995, a decrease of 29.6%. The decrease in
interest expense is due to the refinancing of the Company's $100 million
Senior Subordinated Notes ("the Senior Notes") resulting in a decrease in the
interest rate from 12% to 7% for the months of August and September 1996 of
approximately $833,000.
Income taxes. Income taxes reflect a 49.3% effective income tax rate in
1996 as compared to a 44.4% rate in 1995. The increase is primarily caused by
the income tax accounting treatment for S-Corporations when the pooling-of-
interests method of business combinations is used and the effects of one-time
pooling costs. Without considering the effect of pooled companies, the 1996
effective tax rate is estimated by the Company to be 45%. The one-time
increase does not have recurring consequences into successive fiscal years.
In addition, the Company's effective tax rate in 1996 and 1995 deviates from
the federal statutory rate of 35%, due primarily to the effects of differences
in the treatment of goodwill for book and tax purposes, state income taxes,
and other permanent differences.
Extraordinary item. On July 31, 1996, the Company completed the Tender
Offer and purchased substantially all of the Senior Notes at the redemption
price of $1,157.50 per $1,000 note. An extraordinary charge related to the
Tender Offer of approximately $18 million ($11 million net of income tax
effect), or $0.18 per share, was charged to earnings in the third quarter of
1996. The Company also received a consent from a majority of the holders of
the Senior Notes to eliminate all substantive financial covenants associated
with the remaining Senior Notes.
[PAGE]
Nine Months Ended September 30, 1995 and 1996
The following table sets forth the percentage relationship that the
various items bear to revenues and the percentage change in dollar amounts for
the periods indicated:
Nine Months Ended September 30,
1996
Compared
to 1995
% Change
1995 1996 in Amounts
(unaudited)
Statement of Operations Data:
Revenues 100.0% 100.0 % 13.6 %
Cost of operations 55.4 55.0 12.8
Selling, general and administrative expenses 15.4 14.8 9.2
Depreciation and amortization 12.2 12.5 16.2
Operating income before pooling costs 17.0 17.7 17.9
Pooling costs 0.9 3.8 366.7
Operating income 16.1 13.9 (1.9)
Interest expense, net 5.1 3.5 (22.0)
Income tax expense 4.7 5.1 23.8
Extraordinary item, net of tax benefit -- 6.0 100.0
Net income (loss) 6.3% (0.7)% (111.9)%
Other Data:
EBITDA(1) before pooling costs 29.3% 30.2 % 17.3 %
EBITDA(1) after pooling costs 28.3% 26.4 % 6.0 %
_________________________
(1) EBITDA represents operating income plus depreciation and amortization.
The Company has included EBITDA data (which are not a measure of financial
performance under generally accepted accounting principles) because it
understands such data are used by certain investors and creditors to
determine the Company's historical ability to service its indebtedness.
Revenues. Revenues in 1996 were $183.9 million compared to $161.9
million in 1995, an increase of 13.6%. Approximately 5.3% of the increase in
revenues is attributable to acquisitions and 8.3% is attributable to internal
growth. Revenues of $8.5 million in the first nine months of 1996 were
generated from companies acquired subsequent to December 1994, while increases
in revenues attributable to existing operations amounted to $13.5 million.
Average price increases as a percentage of revenues were approximately 3% of
revenues while the remainder of internal growth was from volume.
Cost of Operations. Cost of operations in 1996 was $101.2 million
compared to $89.7 million in 1995, an increase of 12.8%. The increase in cost
of operations was primarily attributable to the increase in revenues described
above. As a percentage of revenues, cost of operations decreased to 55.0% in
1996 from 55.4% in 1995. Operating cost margins were favorably impacted by a
decrease in disposal costs paid to third-parties measured as a percentage of
revenue and other operating efficiencies resulting from the integration of
businesses acquired in the past twelve months. Company-collected waste
disposed at Company-operated landfills was 70.3% of revenue in 1996 compared
to 61.1% in 1995.
Selling, General and Administrative Expenses. SG&A expenses increased to
$27.2 million in 1996 compared to $24.9 million in 1995, an increase of 9.2%.
As a percentage of revenues, SG&A decreased to 14.8% in 1996 compared to 15.4%
in 1995. The increase in SG&A expense resulted from expenses associated with
acquired companies and expenses incurred in connection with the Company's
increase in personnel and other expenses related to the anticipated growth of
the Company as it continues to acquire companies. The decrease in SG&A as a
percentage of revenues is attributable to a moderate increase in corporate
general and administrative expenses as compared to a greater percentage
increase in revenues.
[PAGE]
Depreciation and amortization. Depreciation and amortization in 1996 was
$23.0 million compared to $19.8 million in 1995, an increase of 16.2%. The
increase in depreciation and amortization expense is due to acquisitions and
capital expenditures. Fixed assets have increased from $344.8 million at
September 30, 1995 to $424.6 million at September 30, 1996 and goodwill has
increased from $97.4 million at September 30, 1995 to $99.7 million at
September 30, 1996. As a percentage of revenues, depreciation and
amortization increased to 12.5% in 1996 from 12.2% in 1995. This increase is
primarily because amortization of landfill airspace as a percentage of
revenues increased to 3.2% in 1996 from 2.5% in 1995 resulting from an
increase in the rate of waste internalization.
Pooling costs. Costs of $7.0 million were incurred in the first nine
months of 1996 compared to $1.5 million in the first nine months of 1995 for
transaction and integration costs directly related to acquisitions accounted
for using the pooling-of-interests method for business combinations.
Transaction costs include stock registration, legal, accounting, consulting,
engineering and other direct third-party costs incurred to complete the
acquisitions. Integration costs include uncollectible accounts receivable
write-offs, employee termination and relocation, write down of fixed assets,
lease termination, and deferred repairs and maintenance of vehicles and
equipment.
Net Interest Expense. Net interest expense was $6.4 million in 1996
compared to $8.2 million in 1995, a decrease of 22.0%. The decrease in net
interest expense is partially due to the conversion of subordinated debt into
common stock in the fourth quarter of 1995 which resulted in a reduction to
annual interest charges of approximately $800,000. In addition, the Company
refinanced the Senior Notes on July 31, 1996 resulting in a decrease in the
interest rate from 12% to 7% for the months of August and September 1996 or
approximately $833,000.
Income Taxes. Income taxes reflect a 49.1% effective income tax rate in
1996 as compared to a 42.6% rate in 1995. The increase is primarily caused
by the income tax accounting treatment for S-Corporations when the pooling-of-
interests method of accounting for business combinations is used and the
effects of one-time pooling costs. Without considering the effect of pooled
companies, the 1996 effective tax rate is estimated by the Company to be 45%.
In addition, the Company's effective tax rate in 1996 and 1995 deviates from
the federal statutory rate of 35%, due primarily to the effects of differences
in the treatment of goodwill for book and tax purposes, state income taxes,
and other permanent differences.
Extraordinary item. On July 31, 1996, the Company completed the Tender
Offer and purchased substantially all of the Senior Notes at the redemption
price of $1,157.50 per $1,000 note. An extraordinary charge related to the
Tender Offer of approximately $18 million ($11 million net of income tax
benefit), or $0.18 per share, was charged to earnings in the third quarter of
1996. The Company also received a consent from a majority of the holders of
the Senior Notes to eliminate all substantive financial covenants associated
with the remaining Senior Notes.
[PAGE]
Liquidity and Capital Resources
Because of the capital intensive nature of the solid waste industry, the
Company has used, and expects to continue using amounts in excess of the cash
generated from operations to fund acquisitions and capital expenditures,
including landfill development. In connection with acquisitions, the Company
has assumed or incurred indebtedness with relatively short-term repayment
schedules, thereby increasing its current and medium-term liabilities.
Additionally, operating equipment has been acquired using financing leases
which have short and medium-term maturities. As a result, the Company has
periodically had low levels of working capital or working capital deficits.
Historically, the Company has satisfied its acquisition, working capital and
capital expenditure needs primarily through bank financing, public offerings
and private placements of debt and equity securities. Between January 1, 1994
and September 30, 1996, the Company has completed a $100 million public
offering of the Senior Notes, a $50 million private placement of Common Stock,
a $300 million senior revolving credit facility and a $48 million public
equity offering.
During the nine months ended September 30, 1995 and 1996, the Company's
cash flows for operating, investing and financing activities were as follows
(in millions; unaudited):
Nine Months Ended
September 30,
1995 1996
Operating Activities:
Net income (loss) $ 10.3 $ (1.2)
Extraordinary loss on early extinguishment of debt -- 18.4
Non-cash operating expenses(1) 27.4 28.8
(Gain) loss on sale of fixed assets (0.1) 1.9
Increase in operating assets and liabilities, net (7.8) (39.2)
Cash provided by operating activities 29.8 8.7
Investing Activities:
Cost of acquisitions, net of cash acquired (17.6) (4.1)
Capital expenditures (41.4) (32.6)
Proceeds from sale of fixed assets 0.8 0.6
Other (10.8) (7.8)
Cash used for investing activities (69.0) (43.9)
Financing Activities:
Net proceeds from sale and redemption of common stock,
preferred stock, stock options and warrants 29.7 48.0
Proceeds from long-term debt, net of issuance costs 48.5 223.4
Repayments of long-term debt (29.9) (232.0)
Other (4.5) (0.6)
Cash provided by financing activities 43.8 38.8
Increase in cash and cash equivalents $ 4.6 $ 3.6
________________
(1) Consists principally of provisions for depreciation and amortization,
landfill closure and post-closure costs, doubtful accounts, potentially
unrealizable acquisition costs and deferred income taxes.
[PAGE]
The Company's capital expenditure and working capital requirements
have increased significantly, reflecting the Company's rapid growth by
acquisition and development of revenue producing assets, and will increase
further as the Company continues to pursue its business strategy. During 1995
the Company acquired 18 businesses in 6 states for approximately $45.3 million
of which approximately $24.3 million of such consideration was paid in common
stock and $7.8 million was paid in seller notes. Total annualized revenues of
those operations are approximately $33 million. These amounts include one
landfill acquired for approximately $9.9 million with estimated annual
revenues of $3.7 million. Subsequent to December 31, 1995 the Company
purchased 17 operating solid waste businesses with estimated annual revenues
of $65.7 million for an aggregate purchase price of approximately $101.9
million of which approximately $72.7 million of such consideration was paid in
common stock. These amounts include one acquisition in a new market for
approximately $82 million which accounts for $42 million in annual revenues.
For the calendar year 1996, the Company estimates it will have an annual cash
requirement of approximately $1.2 million for preferred stock dividends and
approximately $23.0 million for interest costs. For the calendar year 1996,
the Company expects to spend approximately $58 million for capital
expenditures, $40 million of which is expected to relate to existing
operations in order to maintain current revenue streams and $18 million of
which is expected to relate to operations anticipated to result in growth in
revenue streams. As the Company continues to acquire waste operations,
additional capital amounts will be required during 1996 for the capital
expenditure requirements related to those acquired businesses.
Subsequent to the announcement of the acquisition of the Laidlaw
Solid Waste business (the "Acquisition") in September 1996, the Company has
delayed to a large extent its ongoing aquisition program. As a result, the
Company does not expect to complete any significant acquisition until the
Acquisition closing which is expected to occur in early 1997.
The Company is also required to provide financial assurances to
governmental agencies under applicable environmental regulations relating to
its landfill operations. These financial assurances include the use of a
captive insurance subsidiary, performance bonds, letters-of-credit and trust
deposits required principally to secure the Company's estimated landfill
closure and post-closure obligations and collection contracts. At September
30, 1996, the Company had outstanding approximately $1.7 million in captive
insurance contracts, $24.3 million of performance bonds, approximately $20.4
million in letters-of-credit and approximately $0.2 million of trust deposits.
The Company expects that financial assurance obligations will increase in the
future as it acquires and expands its activities and that a greater percentage
of the financial assurances will be provided through the captive insurance
subsidiary and letters-of-credit.
In January 1994, the Company issued the Senior Notes. The net
proceeds from the sale of the Senior Notes after underwriting discount and
other expenses, were approximately $95 million. On July 31, 1996, the Company
completed the Tender Offer and purchased substantially all of its Senior
Notes at the redemption price of $1,157.50 per $1,000 principal amount. In
connection with the Tender Offer, the Company recognized an extraordinary
charge of $18.4 million ($11.0 million net of income tax benefit), or $0.18
per share, in the third quarter of 1996. The Company also received a consent
from a majority of the holders of the Senior Notes to eliminate all
substantive financial covenants associated with the remaining Senior Notes.
Simultaneous with the redemption and consent on July 31, 1996, the
Company completed a new $300 million revolving credit facility ("the Credit
Facility") agented by Credit Suisse which added 11 new banks to its existing
six-bank Credit Agreement. The Credit Facility, subject to certain
limitations, provides for revolving loans up to $300 million based on certain
financial ratios of the Company and for standby letters-of-credit of up to $50
million. The revolving credit facility may be used to repay existing debt,
make acquisitions of solid waste companies and for general corporate purposes.
The letter-of-credit facility may be used to provide financial assurances of
landfill closure and post-closure obligations. Loans outstanding under the
revolving credit facility are payable in July 1999, whereas letters-of-credit
may expire no later than one year after the maturity date, subject to certain
provisions. The Credit Facility contains a number of covenants that, among
other things, require the Company to maintain certain financial ratios, and
limit the Company's ability to make acquisitions and purchase fixed assets
above certain amounts, incur additional secured indebtedness, transfer or sell
assets, create liens, pay dividends except on certain preferred stock, make
optional payments on certain subordinated indebtedness (including the Senior
Subordinated Notes), enter into certain transactions with affiliates or enter
into a merger, consolidation or sale of substantially all its assets. The
Credit Facility is secured by a pledge of the stock of substantially all of
the Company's subsidiaries and a lien on substantially all of the Company's
personal property. Upon execution of the Credit Facility, the Company had
approximately $125 million of additional borrowings available under the Credit
Facility.
[PAGE]
During 1995, the Company offered to holders of certain of its
convertible securities an inducement to exercise their conversion option to
receive Allied common stock. The inducement consisted of the payment of
dividends and interest that the holders of these securities would have
received from the date of conversion through the first call or redemption date
of each security. In total, 7.8 million shares of common stock were issued
upon conversion. All of the $90 preferred stock was converted and
substantially all of the Series D preferred stock, 6% Convertible subordinated
notes and 9% preferred stock were converted. Accordingly, the Company's
annual dividend and interest requirements decreased by approximately $2.7
million and $0.8 million, respectively. The inducement resulted in a 1995
conversion fee charge of approximately $2.2 million paid in 284,696 shares of
common stock which was charged to the 1995 statement of operations.
On January 24, 1996, the Company completed a public offering of 7.6
million shares of common stock for approximately $48 million net of $5.2
million in underwriter discounts, commissions and offering costs. The net
proceeds from the offering were used to repay amounts outstanding under the
Credit Facility and for other general corporate purposes.
The Company has lease facilities (the "Lease Facilities") that allow
it to enter into equipment leases at rates ranging from similar term treasury
note rates plus 2.5% to 3.5% for terms of 36 to 84 months. At September 30,
1996 the Company had equipment leases outstanding of $38.6 million and
available lease commitments of approximately $9.8 million.
The Company expects that Subtitle D and other regulations that apply
to the non-hazardous waste disposal industry will require the Company, as well
as others in the industry, to alter operations and to modify or replace
existing facilities. Such expenditures have been and will continue to be
substantial. Further regulatory changes could accelerate expenditures for
closure and post-closure monitoring and obligate the Company to spend sums in
addition to those presently reserved for such purposes. These factors,
together with the other factors discussed above, could substantially increase
the Company's operating costs and impair the Company's ability to invest in
its facilities.
The Company intends to meet its future capital expenditures and
working capital requirements with cash flow from operations, borrowings under
the Credit Facility and the Lease Facilities. The Company may need to raise
additional capital to fund the acquisition and integration of additional solid
waste businesses. The Company may raise such funds through lease financings,
bank financings or public or private offerings of its debt and equity
securities. There can be no assurance that the Company will be able to secure
such funding, if necessary on favorable terms, if at all. If the Company is
not successful in securing such funding, the Company's ability to pursue its
business strategy may be impaired and results of operations for future periods
may be negatively affected.
In connection with the consummation of the Acquisition, the Company
will enter into a $1.225 billion senior bank financing and will issue $475
million of senior subordinated notes.
[PAGE]
Disclosure Regarding Forward Looking Statements
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" includes forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended ("Forward Looking
Statements"). All statements other than statements of historical fact
included in this section, are Forward Looking Statements. Although the
Company believes that the expectations reflected in such Forward Looking
Statements are reasonable, it can give no assurance that such expectations
will prove to have been correct. Generally, these statements relate to
business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, number of acquisitions and projected
or anticipated benefits from acquisitions made by or to be made by the
Company, or projections involving anticipated revenues, earnings, levels of
capital expenditures or other aspects of operating results. All phases of the
Company operations are subject to a number of uncertainties, risks and other
influences, many of which are outside the control of the Company and any one
of which, or a combination of which, could materially affect the results of
the company's operations and whether Forward Looking Statements made by the
Company ultimately prove to be accurate. Such important factors ("Important
Factors") that could cause actual results to differ materially from the
Company's expectations are disclosed in this section and elsewhere in this
report. All subsequent written and oral Forward Looking Statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Important Factors described below that
could cause actual results to differ from the Company's expectations
Competition: The solid waste collection and disposal business is highly
competitive and requires substantial amounts of capital. The Company competes
with numerous waste management companies, a number of which have significantly
larger operations and greater resources than the Company. The Company also
competes with those counties and municipalities that maintain their own waste
collection and disposal operations. Forward Looking Statements assume that
the Company will be able to effectively compete with the other waste
management companies.
Availability of Acquisition Targets: The Company's ongoing acquisition
program is a key element of its expansion strategy. In addition, obtaining
landfill permits has become increasingly difficult, time consuming and
expensive. There can be no assurance, however, that the Company will succeed
in obtaining landfill permits or locating appropriate acquisition candidates
that can be acquired at price levels that the Company considers appropriate
and that reflects historical prices. The Forward Looking Statements assume
that a number of acquisition candidates and landfill properties sufficient to
meet the Company's goals will be available for purchase and that the Company
will be able to complete the acquisition at prices that the Company has
experienced in the past two years.
Integration: The Company's financial position and results of operations
depend to a large extent on the integration of recently acquired businesses.
The Forward Looking Statements assume that integration of acquired companies,
including the internalization of waste, will require from three to nine months
from the date the acquisition closes. Failure to achieve effective
integration in the anticipated time period or at all could have an adverse
effect on the Company's future results of operations.
Ongoing Capital Requirements: To the extent that internally generated
cash and cash available under the Company's existing credit facilities are not
sufficient to provide the cash required for future operations, capital
expenditures, acquisitions, debt repayment obligations and/or financial
assurance obligations, the Company will require additional equity and/or debt
financing in order to provide such cash. The Company has incurred significant
debt obligations in the last two years, which entail substantial debt service
costs. The Forward Looking Statements assume that the Company will be able to
raise the capital necessary to finance such requirements at rates that are as
good as or better than those it is currently experiencing. There can be no
assurance, however, that such financing will be available or, if available,
will be available on terms satisfactory to the Company.
[PAGE]
Economic Conditions: The Company's business is affected by general
economic conditions. The Forward Looking Statements assume that the Company
will be able to achieve internal volume and price growth which is not impacted
by an economic downturn. (As revenue of the Company continues to grow it is
likely that the rates of internal growth will reflect growth rates which are
less than those experienced in 1995 and 1996.) There can be no assurance that
an economic downturn will not result in a reduction in the volume of waste
being disposed of at the Company's operations and/or the price that the
Company can charge for its services.
Weather Conditions: Protracted periods of inclement weather may
adversely affect the Company's operations by interfering with collection and
landfill operations, delaying the development of landfill capacity and/or
reducing the volume of waste generated by the Company's customers. In
addition, particularly harsh weather conditions may result in the temporary
suspension of certain of the Company's operations. The Forward Looking
Statements do not assume that such weather conditions will occur.
Dependence on Senior Management: The Company is highly dependent upon
its senior management team. In addition, as the Company continues to grow,
its requirements for operations management with waste industry experience will
also increase. The availability of such experienced management is not known.
The Forward Looking Statements assume that experienced management will be
available when needed by the Company at compensation levels that are within
industry norms. The loss of the services of any member of senior management
or the inability to hire experienced operations management could have a
material adverse effect on the Company.
Influence of Government Regulation: The Company's operations are subject
to and substantially affected by extensive federal, state and local laws,
regulations, orders and permits, which govern environmental protection, health
and safety, zoning and other matters. These regulations may impose
restrictions on operations that could adversely affect the Company's results,
such as limitations on the expansion of disposal facilities, limitations on or
the banning of disposal of out-of-state waste or certain categories of waste
or mandates regarding the disposal of solid waste. Because of heightened
public concern, companies in the waste management business may become subject
to judicial and administrative proceedings involving federal, state or local
agencies. These governmental agencies may seek to impose fines or to revoke
or deny renewal of operating permits or licenses for violations of
environmental laws or regulations or to require remediation of environmental
problems at sites or nearby properties, or resulting from transportation or
predecessors' transpiration and collection operations, all of which could have
a material adverse effect on the Company. Liability may also arise from
actions brought by individuals or community groups in connection with the
permitting or licensing of operations, any alleged violations of such permits
and licenses or other matters. The Forward Looking Statements assume that
there will be no materially negative impact on its operations due to
government regulation.
Potential Environmental Liability: The Company may incur liabilities for
the deterioration of the environment as a result of its operations. Any
substantial liability for environmental damage could materially adversely
affect the operating results and financial condition of the Company. Due to
the limited nature of the Company's insurance coverage of environmental
liability, if the Company were to incur liability for environmental damage,
its business and financial condition could be materially adversely affected.
The Forward Looking Statements assume that the Company will not incur any
material environmental liabilities other than those for which a provision has
been recorded in the consolidated financial statements and disclosed in the
notes thereto.
Inflation and Prevailing Economic Conditions
To date, inflation has not had a significant impact on the Company's
operations. Consistent with industry practice, most of the Company's
contracts provide for a pass through of certain costs, including increases in
landfill tipping fees and, in some cases, fuel costs. The Company therefore
believes it should be able to implement price increases sufficient to offset
most cost increases resulting from inflation. However, competitive factors
may require the Company to absorb cost increases, resulting from inflation.
The Company is unable to determine the future impact of a sustained economic
slowdown.
[PAGE]
Seasonality
The Company believes that its collection and landfill operations can be
adversely affected by protracted periods of inclement weather which could
delay the development of landfill capacity or transfer of waste and/or reduce
the volume of waste generated.
[PAGE]
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
No changes to previously reported information.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
10.1 Amended and Restated By-Laws
11.1 Statement regarding the computation of per share earnings -
primary.
11.2 Statement regarding the computation of per share earnings -
fully diluted.
12 Ratio of earnings to fixed charges
27 Financial data schedule
(b) Reports on Form 8-K
July 11, 1996. The Company's Current Report on Form 8-K
reports the tender offer related to the $100 million Senior
Subordinated Notes.
September 25, 1996. The Company's Current Report on Form 8-K
reports the signing of an definitive agreement to purchase the
solid waste business of Laidlaw, Inc.
[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/H. STEVEN UTHOFF
H. Steven Uthoff
Vice President and Controller
(Principal Financial Officer)
By: /s/PETER S. HATHAWAY
Peter S. Hathaway
Vice President, Chief Accounting Officer
and Treasurer
(Principal Accounting Officer)
Date: November 5, 1996
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AMENDED AND RESTATED
BYLAWS
OF
ALLIED WASTE INDUSTRIES, INC.
as of May 31, 1996
ARTICLE I
STOCKHOLDERS
Section I.1. Annual Meetings. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place,
either within or without the State of Delaware, as may be designated by
resolution of the Board of Directors from time to time; provided, that each
successive annual meeting shall be held on a date within 13 months after the
date of the preceding annual meeting. Any other proper business may be
transacted at the annual meeting.
Section I.2. Special Meetings. Special meetings of stockholders
for any purpose or purposes may be called at any time by the Board of
Directors, or by a committee of the Board of Directors which has been duly
designated by the Board of Directors, and whose powers and authority, as
expressly provided in a resolution of the Board of Directors, include the
power to call such meetings, but such special meetings may not be called by a
stockholder, or any other person or persons.
Section I.3. Notice of Meeting; Waiver of Notice. Whenever
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which shall state the place, date
and hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise provided by law,
the written notice of any meeting shall be given not less than ten nor more
than 60 days before the date of the meeting to each stockholder entitled to
vote at such meeting. If mailed, such notice shall be deemed to be given when
deposited in the mail, postage prepaid, directed to the stockholder at his
address as it appears on the records of the Corporation. Notice need not be
given to any stockholder who submits a written waiver of notice, signed by
such stockholder, whether before or after the time stated therein. Attendance
of a person at a meeting of the stockholders shall constitute a waiver of
notice of such meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice.
Section I.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section I.5. Quorum. At each meeting of stockholders, except as
otherwise provided by law, the Certificate of Incorporation, or these Bylaws,
the holders of a majority of the votes entitled to be cast at the meeting,
present in person or by proxy, shall constitute a quorum. In the absence of a
quorum, the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided in Section 1.4 of these bylaws until
a quorum shall attend. Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for purposes of determining the existence of a quorum; provided,
however, that the foregoing shall not limit the right of any corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
Section I.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a vice president, or in the absence of the foregoing persons by
a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section I.7. Voting; Proxies. Each stockholder entitled to vote at
any meeting of stockholders shall be entitled to the number of votes
designated by the Certificate of Incorporation, except as otherwise provided
by law or these Bylaws, for each share of stock held by him which has voting
power upon the matter in question. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for him
by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy
bearing a later date with the Secretary of the Corporation. Voting at
meetings of stockholders need not be by written ballot unless the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or by proxy at such meeting shall so determine;
provided, however, that all elections of directors must be by written ballot.
The Corporation shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof.
At all meetings of stockholders for the election of directors a plurality of
the votes cast shall be sufficient to elect any nominee. All other elections
and questions shall, unless otherwise provided by law or by the Certificate of
Incorporation or these Bylaws, be decided by the vote of the holders of a
majority of the votes entitled to be cast thereon present in person or by
proxy at the meeting, provided that (except as otherwise required by law or by
the certificate of incorporation) the Board of Directors may require a larger
vote upon any election or question.
Section I.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled
to notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than 60 nor less than ten days before the date of such
meeting, nor more than 60 days prior to any other action. If no record date
is fixed: (1) the record date for determining stockholders entitled to notice
of, or to vote at, a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held; and (2) the record date for determining stockholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
Section I.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders or the books of the Corporation, or to vote in person
or by proxy at any meeting of stockholders.
Section I.10. Director Nominees. Only persons who are nominated in
accordance with the procedures set forth in this paragraph shall be eligible
for election as directors of the Corporation. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of stockholders (a) by or at the direction of the Board of Directors or (b) by
any stockholder of the Corporation entitled to vote for the election of
directors at such meeting who complies with the procedures set forth in this
paragraph. All nominations by stockholders shall be made pursuant to timely
notice in proper written form to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to, or mailed and received
at, the principal executive offices of the Corporation not less than 75 days
nor more than120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders (the "Anniversary Date"); provided,
however, that in the event the annual meeting is scheduled to be held on a
date more than 30 days before the Anniversary Date or more than 60 days after
the Anniversary Date, notice by the stockholder to be timely must be delivered
not later than the close of business on the later of (a) the 75th day prior to
the scheduled date of such annual meeting or (b) the 15th day following the
day on which public announcement of the date of such annual meeting is first
made by the Corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice under these Bylaws. Notwithstanding anything to the
contrary in this paragraph, in the event that the number of directors to be
elected to the Board of Directors or the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least
75 days prior to the Anniversary date, a stockholder's notice required by this
paragraph shall also be considered timely, but only with respect to nominees
for any new position created by such increase, if such notice shall be
delivered to, or mailed to and received by the Corporation at its principal
executive office not later than the close of business on the 15th day
following the day on which such public announcement is first made by the
Corporation. To be in proper written form, such stockholder's notice to the
Secretary shall set forth in writing (a) as to each person whom such
stockholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person, (ii)
the principle occupation or employment of such person, (iii) the class and
number of shares of the Corporation which are beneficially owned by such
person, and (iv) all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, including, without limitation,
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected; and (b) as to such
stockholder giving notice, (i) his or her name and address, as they appear on
the Corporation's books, (ii) the class and number of shares of stock of the
Corporation which are beneficially owned by such stockholder, and (iii) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons pursuant to which the nomination
or nominations are to be made by such stockholder. At the request of the
Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
director unless nominated in accordance with the procedures set forth in the
Bylaws of the Corporation. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made
in accordance with the procedures prescribed by the Bylaws of the Corporation,
and if he shall so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section I.11. Stockholder Proposals. At any special meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of Directors. At any
annual meeting of the stockholders, only such business shall be conducted as
shall have been brought before the meeting (a) by or at the direction of the
Board of Directors or (b) by any stockholder who complies with the procedures
set forth in this paragraph. For business properly to be brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to, or mailed and received
at, the principal executive offices of the Corporation not less than 75 days
nor more than 120 days prior to the Anniversary Date; provided, however, that
in the event the annual meeting is scheduled to be held on a date more than 30
days before the Anniversary Date or more than 60 days after the Anniversary
Date, timely notice by the stockholder must be delivered not later than the
close of business on the later of (a) the 75th day prior to the scheduled date
of such annual meeting or (b) the 15th day following the day on which the
public announcement of the date of such annual meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of
an annual meeting commence a new time period for the giving of a stockholder's
notice under these Bylaws. To be in proper written form, such stockholder's
notice to the Secretary shall set forth in writing as to each matter such
stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (b) his or
her name and address, as they appear on the Corporation's books, (c) the class
and number of shares of stock of the Corporation which are beneficially owned
by such stockholder, (d) the names and addresses of other stockholders known
by the stockholder proposing such business to support such proposal, and the
class and number of shares of the Corporation's capital stock beneficially
owned by such other stockholders, and (e) any material interest on such
stockholder in such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this paragraph. The chairman of
an annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in
accordance with the provisions of this paragraph, and, if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
ARTICLE II
Board of Directors
Section II.1. General Powers. The property, affairs and business of
the Corporation shall be managed by, or under the direction of, the Board of
Directors.
Section II.2. Number. The Board of Directors shall consist of ten
members; provided, however, if the Company's EBITDA (defined as the amount of
the Company's and its Subsidiaries' consolidated net income determined in
accordance with generally accepted accounting principles plus interest
expense, income taxes, depreciation and amortization) for the year ended
December 31, 1995, is less than $45.0 million, the Board of Directors shall
consist of twelve members; provided, further that if the Company has EBITDA of
at least $50.0 million for the year ended December 31, 1996, then the Board of
Directors will be reduced to ten members. In addition to the foregoing, in
the event the parties to the Voting Agreement dated July 13, 1992 (the "Voting
Agreement"), by and among the Corporation, Houston Venture Partners, Ltd.,
Equus Investments II L.P. and Hambro EDC L.P. I, exercise their right to cause
the election of one director of the Corporation as contained in the Voting
Agreement, the Board of Directors shall be expanded by one additional member
beyond the then existing number of members of the board, and Purchaser (as
such term is defined in that certain Securities Purchase Agreement dated
October 27, 1994, as amended (the "Purchase Agreement"), between the
Corporation and TPG Partners, L.P.) shall be entitled to designate one
additional Purchaser Designee (as defined in the Purchase Agreement) for a
total of five Purchaser Designees, such additional designee being subject to
the provisions of Section 7.3 of the Purchase Agreement, including the
termination provisions contained therein; Purchaser shall only be entitled to
such additional designee for so long as the voting rights under the Voting
Agreement are being exercised (subject to the provision of Section 7.3 of the
Purchase Agreement, as described above).
Section II.3. Election; Resignation; Removal; Vacancies. The Board
of Directors shall initially consist of the persons so designated in the
certificate of incorporation. At the first annual meeting of stockholders
and at each annual meeting thereafter, the stockholders shall elect directors
to replace those directors whose terms then expire . Any director may resign
at any time upon written notice to the Corporation. Any director may be
removed, for cause, at any time by the affirmative vote of a majority in
interest of the holders of record of stock entitled to vote at an election of
directors, at an annual meeting or at a special meeting of the stockholders
called for that purpose. Any vacancy occurring in the Board of Directors, for
whatever reason , may be filled by a majority of the remaining member s of the
Board of Directors, although such majority is less than a quorum , or by a
plurality of the votes cast at a meeting of stockholders , and each director
so elected shall hold office until the expiration of the term of the director
whom he has replaced. Notwithstanding the foregoing, any vacancy occurring in
the Board of Directors due to a Purchaser Designee ceasing to serve on the
Board of Directors for whatever reason shall be filled by the Purchaser
designating a new Purchaser Designee; upon such designation, such Purchaser
Designee shall be, without further action , elected to the Board of Directors
to serve the remaining term of the Director whose ceasing to serve caused the
vacancy to exist.
Section II.4. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the Board of Directors may from time to time determine,
and if so determined notices thereof need not be given.
Section II.5. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary,
or by any member of the Board of Directors. Reasonable notice thereof shall
be given by the person or persons calling the meeting, set at least two days
before the date of the special meeting or by causing the same to be delivered
to each director personally or to be transmitted by telegraph, cable,
wireless, telephone or orally at least 24 hours before the meeting is schedule
to commence.
Section II.6. Telephonic Meetings Permitted. Members of the Board
of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee by means of
conference telephone or similar communications equipment by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting pursuant to this bylaw shall constitute presence in person at such
meeting.
Section II.7. Quorum; Vote Required for Action. At all meetings of
the Board of Directors a majority of the Board of Directors shall constitute a
quorum for the transaction of business. Except as otherwise provided by the
Certificate of Incorporation or these Bylaws, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors. In the absence of a quorum a majority of the
directors present may adjourn any meeting from time to time until a quorum be
had.
Section II.8. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board of Directors, if any, or
in his absence by the Vice Chairman of the Board of Directors, if any, or in
his absence by the President, or in their absence by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section II.9. Informal Action by Directors. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or of such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or of such committee.
Section II.10. Compensation of Directors. Directors may receive such
sums as compensation for their services and expenses as may be directed by
resolution of the Board of Directors; provided that nothing herein contained
shall be construed to preclude any director from serving the Corporation in
any other capacity, and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for their service and
expenses.
Section II.11. Approval of Certain Corporate Action. The affirmative
vote of greater than 66.66% of the entire Board of Directors shall be required
for the approval of any (i) acquisition of assets or capital stock in a
transaction or a series of related transactions providing for the payment of
consideration by the Corporation in excess of the lesser of (x) $15.0 million
or (y) 10% of the Corporation's consolidated revenues for the preceding 12
calendar months ("Consolidated Revenues"); provided, however, that at such
time as the Corporation has consummated acquisitions not subject to approval
under this Section totaling $30.0 million during any calendar year, all
subsequent acquisitions providing for the payment of consideration by the
Corporation in excess of $5 million (which are not a part of an acquisition
program previously approved by 66.66% of the Board of Directors) shall require
the approval contemplated by this Section; (ii) sale, transfer or other
conveyance of assets not subject to this Section totaling $30.0 million during
any calendar year, all subsequent dispositions with consideration payable to
the Corporation in excess of $5 million (which are not a part of an asset sale
program previously approved by 66.66% of the Board of Directors) shall require
the approval contemplated by this Section; (iii) issuance by the Corporation,
in a transaction or series of related transactions of (a) capital stock or any
securities convertible into or exchangeable for capital stock of the
Corporation for consideration in excess of $10,000,000 or (b) notes, debt
securities or other instruments evidencing obligations for borrowed money
(other than the Corporation's secured credit facility and its lease facility,
each in an amount not to exceed $25.0 million) with a principal amount in
excess of $15,000,000; (iv) the removal or termination of the Chairman of the
Board and Chief Executive Officer or the President and Chief Operating Officer
of the Corporation; or (v) annual budgets.
ARTICLE III
COMMITTEES
Section III.1. Committees. The Board of Directors may, by resolution
passed by a majority thereof, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the
committee, the members thereof present at any meeting and not disqualified
from voting, whether or not they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
provided, however, that no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of
Directors as provided in Section 151(a) of the General Corporation Law, fix
any of the preferences or rights of the shares), adopting an agreement of
merger or consolidation, recommending to the stockholders a dissolution of the
Corporation or a revocation of dissolution, or amending these Bylaws; provided
further, that unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section III.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same manner as
the Board of Directors conducts its business pursuant to Article II of these
Bylaws.
ARTICLE IV
OFFICERS
Section IV.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, elect a Chairman of
the Board of Directors and a Vice Chairman of the Board of Directors from
among its members. The Board of Directors may also elect one or more Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers. Unless otherwise provided in the resolution of election
or appointment each such officer shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Any
officer may resign at any time upon written notice to the Corporation. The
Board of Directors may remove any officer with or without cause at any time,
but such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation. Any number of offices may be held by
the same person. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special
meeting.
Section IV.2. Powers and Duties of Executive Officers Generally.
The officers of the Corporation shall have such powers and duties in the
management of the Corporation as may be prescribed herein or by resolution of
the Board of Directors. The Board of Directors may require any officer, agent
or employee to give security for the faithful performance of his duties.
Section IV.3. Duties of Chief Executive Officer. The chief
executive officer shall preside at all meetings of the stockholders, and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the Company, except where required or permitted by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Company. To the extent permitted by law, his
signature upon bonds or debentures authenticated by the signature of a trustee
may be by facsimile. He shall perform such other duties and have such other
duties as may be prescribed from time to time by the Board of Directors and
the Corporation.
Section IV.4. Duties of President. The president shall be the chief
operating officer of the Company. He shall, in the absence or disability of,
or in the event of a vacancy in the office of, the chief executive officer,
perform the duties and exercise the powers of such chief executive officer.
He shall be responsible for the general and active management of the business
of the Company, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall perform such other duties and
have such other duties as may be prescribed from time to time by the Board of
Directors of the Corporation.
Section IV.5. Duties of the Vice President. The vice presidents
shall, in the order of their organizational ranking, in the absence or
disability, or in the event of a vacancy in the office, of the president,
perform the duties and exercise the powers of the president, and shall perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors of the Corporation.
Section IV.6. Duties of the Secretary. The secretary shall keep, or
cause to be kept, in books provided for that purpose, the minutes of the
meetings of the stockholders, the Board of Directors, or any committee
thereof, and shall see that all notices are duly given in accordance with the
provisions of these Bylaws and, as required by law, shall be custodian of the
records of the Corporation. He shall keep in safe custody the seal of the
Corporation and, when authorized by the board, affix such seal to any document
requiring it, and when so affixed, it shall be attested by his signature, or
by the signature of the treasurer or an assistant secretary. He shall perform
such duties and have such powers incident to the office of the secretary, and
shall perform such other duties and have such other powers as may be
prescribed from time to time by the Board of Directors of the Corporation.
Section IV.7. Duties of the Assistant Secretary. Any assistant
secretary shall, at the request of the Secretary, in his absence or
disability, or in the event of a vacancy in such office, perform the duties
and be vested with the powers of the Secretary. Each assistant secretary
shall perform such other duties and have such other powers as may be
prescribed from time to time by the Board of Directors of the Corporation.
Section IV.8. Duties of the Treasurer. The treasurer shall have
charge and custody of, and be responsible for, all funds and securities of the
Corporation, and shall deposit all such funds in the name of the Corporation
in such banks, trust companies and other depositories as shall be designated
by the Board of Directors. He shall render a statement of the condition of
the finances of the Corporation at all meetings of the Board of Directors, and
a full financial report at any annual meeting of the stockholders. He shall
exhibit to any director of the Corporation, the books of account and records
of the Corporation, or of any corporation controlled by the Corporation, upon
reasonable request and during normal business hours at the executive offices
of the Corporation. He shall perform such other duties and have such other
powers as may be prescribed from time to time by the Board of Directors of the
Corporation.
ARTICLE V
STOCK
Section V.1. Certificates. Certificates for shares of the capital
stock of the Corporation shall be in such form not inconsistent with law as
shall be approved by the Board of Directors. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, if any, or the
President or Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation, certifying the
number of shares owned by him in the Corporation. Any of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent, or registrar at
the date of issuance.
Section V.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it, which certificate is
alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
ARTICLE VI
INDEMNIFICATION
Section VI.1. Indemnification in Non-Derivative Proceedings. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section VI.2. Indemnification in Derivative Proceedings. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; provided, however, that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless, and only to the
extent that, the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section VI.3. Indemnification when Director, Officer or Employee
Successful in Defense of Action. To the extent that a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
Sections 6.1 and 6.2 of this Article, or in defense of any claim, issue or
matter therein, the Corporation shall indemnify such director, officer,
employee or agent against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section VI.4. Determination of Right to Indemnification. Any
indemnification under Sections 6.1 and 6.2 of this Article (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 6.1 and 6.2 of this
Article. Such determination shall be made (1) by the Board of Directors, by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section VI.5. Advancement of Expenses. Expenses incurred by an
officer or director in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article. Such expenses incurred by other
employees and agents shall be so paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate.
Section VI.6. Rights Hereunder Not Exclusive. The indemnification
and advancement of expenses provided by, or granted pursuant to, this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in an official capacity and as to action in another capacity
while holding such office.
Section VI.7. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the General
Corporation Law of the State of Delaware or this Article.
Section VI.8. Definition of Corporation. For purposes of this
Article, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
Section VI.9. Certain Definitions. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this section.
Section VI.10. Continuation of Rights. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
MISCELLANEOUS
Section VII.1. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January in each year and shall end on the last day
of December next following.
Section VII.2. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors.
Section VII.3. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of Directors
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if: (1) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or a committee
which authorizes the contract or transaction.
Section VII.4. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account, and minutes books, may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, microphotographs, or any other
information storage device, provided that the records so kept can be converted
into clearly legible form within a reasonable time. The Corporation shall so
convert any records so kept upon the request of any person entitled to inspect
the same.
Section VII.5. Amendment of Bylaws. These bylaws may be altered or
repealed, and new bylaws made, by the Board of Directors. Notwithstanding
anything to the contrary that may be contained herein, Section 2.2, the last
sentence of Section 2.11 and the second sentence of Section 7.5 may only be
amended with the affirmative vote of seven members of the Corporation's Board
of Directors.
Adopted by the Board of Directors of
the Corporation on May 31, 1996.
/s/ Steven M. Helm
Steven M. Helm, Secretary
EXHIBIT 11.1
ALLIED WASTE INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS -
PRIMARY
(in thousands except for per share amounts and number of shares)
Nine Months Three Months
Ended September 30, Ended September 30,
1995 1996 1995 1996
(unaudited) (unaudited)
Income before extraordinary
item $ 10,280 $ 9,796 $ 3,727 $ 5,559
Extraordinary loss due to early
extinguishment of debt, net of
benefit -- 11,024 -- 11,024
Net income loss 10,280 (1,228) 3,727 (5,465)
Dividends on preferred stock 3,101 861 975 287
Adjusted net income (loss)
to common shareholders $ 7,179 $ (2,089) $ 2,752 $ (5,752)
Historical weighted average
common shares outstanding 36,094,616 56,824,274 37,580,789 58,596,423
Common Stock Equivalents -
Stock options and warrants 1,526,137 2,024,854 2,636,788 1,485,675
Series C preferred 234,820 -- 234,820 --
Issuable pursuant to
earn-out agreements 957,755 770,171 957,755 74,804
Weighted average common and
common equivalent shares 38,813,328 59,619,299 41,410,152 60,856,902
Primary net income (loss)
per share:
Income (loss) before
extraordinary item $ 0.19 $ 0.15 $ 0.07 $ 0.09
Extraordinary item -- (0.18) -- (0.18)
Adjusted net income (loss)$ 0.19 $ (0.03) $ 0.07 $ (0.09)
EXHIBIT 11.2
ALLIED WASTE INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS -
FULLY DILUTED
(in thousands except for per share amounts and number of shares)
Nine Months Three Months
Ended September 30, Ended September 30,
1995 1996 1995 1996
(unaudited) (unaudited)
Income before extraordinary
item $ 10,280 $ 9,796 $ 3,727 $ 5,559
Extraordinary loss due to early
extinguishment of debt, net of
benefit -- 11,024 -- 11,024
Net income (loss) 10,280 (1,228) 3,727 (5,465)
Dividends on preferred stock 3,101 861 975 287
Interest savings upon conversion
of convertible securities -- -- 136 --
Adjusted net income (loss) $ 7,179 $ (2,089) $ 2,888 $ (5,752)
Historical weighted average
common shares outstanding 36,094,617 56,824,274 37,580,789 58,596,423
Common stock equivalents -
Stock options and warrants 2,549,274 2,196,589 2,636,788 2,050,421
Series C preferred 234,820 -- 234,820 --
Assumed conversions -
Series D preferred --(*) -- (*) 762,748 --
9% cumulative convertible
preferred --(*) -- (*) --(*) --(*)
$90 cumulative convertible
preferred --(*) -- --(*) --
7% cumulative convertible
preferred --(*) --(*) --(*) --(*)
Convertible notes --(*) --(*) 1,485,001 --(*)
Issuable pursuant to earn-out
agreements 957,755 770,171 957,755 774,804
Weighted average common and
common equivalent shares: 39,836,466 59,791,034 43,657,901 61,421,648
Fully diluted net income (loss)
per share:
Income (loss) before
extraordinary item $ 0.18 $ 0.15 $ 0.07 $ 0.09
Extraordinary item -- (0.18) -- (0.18)
Adjusted net income (loss) $ 0.18 $ (0.03) $ 0.07 $ (0.09)
________________________
(*) Assumed conversion of each of these securities, on an individual
basis, has an anti-dilutive effect on earnings per share.
EXHIBIT 12
ALLIED WASTE INDUSTRIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands except for ratios)
Nine Months
Ended September 30,
1995 1996
(unaudited)
Fixed Charges:
Interest expensed $ 8,422 $ 6,185
Interest capitalized 7,509 10,013
Total interest expense 15,931 16,198
Interest component of rent expense 690 1,190
Amortization/write-off of debt issuance costs 315 438
Total Fixed Charges $ 16,936 $ 17,826
Earnings:
Income (loss) from continuing operations
before income taxes $ 17,895 $ 19,224
Plus fixed charges 16,936 17,826
Less interest capitalized (7,509) (10,013)
Total Earnings $ 27,322 $ 27,037
Ratio of earnings to fixed charges 1.6x 1.5x
