<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
SUBJECT TO COMPLETION, DATED AUGUST 27, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 21, 1997
16,200,000 SHARES
[ALLIED WASTE LOGO] ALLIED WASTE INDUSTRIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------------
Of the 16,200,000 shares of Common Stock offered, 3,240,000 shares are
being offered hereby in an international offering outside the United States and
12,960,000 shares are being offered in a concurrent United States offering. The
public offering price and the aggregate underwriting discount per share are
identical for both Offerings. See "Underwriting."
The 3,240,000 shares of Common Stock of Allied offered hereby are being
sold by Allied. Allied's Common Stock is listed on the National Market tier of
the Nasdaq Stock Market under the symbol "AWIN."
The last reported sales price of the Common Stock on the National Market
tier of the Nasdaq Stock Market on August 26, 1997 was $15.50 per share. See
"Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 4 OF THE ACCOMPANYING PROSPECTUS FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.
----------------------
THIS INTERNATIONAL PROSPECTUS IS INTENDED FOR USE ONLY IN CONNECTION WITH OFFERS
AND SALES OF COMMON STOCK OUTSIDE THE UNITED STATES AND IS NOT TO BE
SENT OR GIVEN TO ANY PERSON WITHIN THE UNITED STATES. THE COMMON STOCK
OFFERED HEREBY IS NOT BEING REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 FOR THE PURPOSE OF SALES OUTSIDE THE UNITED STATES.
----------------------
<TABLE>
<CAPTION>
PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
</TABLE>
- ---------------
(1) Allied has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated expenses of $ payable by Allied.
(3) Allied has granted the International Underwriters an option exercisable for
30 days after the date hereof to purchase up to 486,000 additional shares of
Common Stock at the public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, Allied has granted
the U.S. Underwriters a similar option with respect to an additional
1,944,000 shares as part of a concurrent United States offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Allied will be $ ,
$ and $ , respectively. See "Underwriting."
----------------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about , 1997, against payment therefor in immediately
available funds.
GOLDMAN SACHS INTERNATIONAL CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
----------------------
The date of this Prospectus Supplement is , 1997.
<PAGE> 2
[ART WORK]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus and incorporated herein
and therein by reference. The information contained in this Prospectus
Supplement assumes no exercise of the Underwriters' over-allotment options,
unless indicated otherwise. Unless the context otherwise requires, all
references in this Prospectus Supplement and the accompanying Prospectus to
"Allied" or the "Company" are to Allied Waste Industries, Inc. and its direct
and indirect subsidiaries on a consolidated basis, including Allied Waste North
America, Inc. ("AWNA"), a wholly-owned subsidiary of Allied, and its direct and
indirect subsidiaries. Information regarding shares of Common Stock, unless
otherwise indicated, is based on a per share market price of $15.50. This
Prospectus Supplement and the accompanying Prospectus, including documents
incorporated herein and therein by reference, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Allied's actual results could differ materially
from those set forth in the forward-looking statements. Certain risk factors
that might cause such a difference include, but are not limited to, those
discussed in the section "Risk Factors" beginning on page S-8 of this Prospectus
Supplement and the section "Risk Factors" beginning on page 4 of the
accompanying Prospectus.
THE COMPANY
Allied is the fifth largest non-hazardous solid waste management company in
the United States, as measured by revenues. Allied serves 1.4 million customers
through operations in 21 states located primarily in the midwest, northeast,
southeast and southwest United States. As of July 31, 1997, Allied provided its
services through a network of 82 collection companies, 39 transfer stations, 55
landfills and 22 recycling facilities. Allied had revenues of $246.7 million for
the year ended December 31, 1996 and $119.0 million and $395.2 million for the
six months ended June 30, 1996 and 1997, respectively. The substantial increase
in revenues in the first half of 1997 compared to the same period in 1996 is
primarily attributable to the acquisition by Allied of the solid waste business
of Laidlaw Inc. ("Laidlaw") on December 30, 1996 (the "Laidlaw Acquisition").
Allied was incorporated under the laws of the State of Delaware in July
1989. The principal executive offices of Allied are located at 15880 North
Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona, 85260 and its telephone
number is (602) 423-2946.
BUSINESS STRATEGY
The major components of Allied's business strategy consist of: (1)
operating vertically integrated non-hazardous solid waste service businesses
with a high rate of waste internalization; (2) managing these businesses locally
with a strong focus on operations; (3) maintaining a high rate of growth through
acquisitions and internal growth in existing and selected new markets; and (4)
maintaining the financial capacity, management capabilities and administrative
systems and controls to support on-going operations and future growth.
VERTICAL INTEGRATION AND INTERNALIZATION. The vertical integration
business model is the key element of Allied's operating philosophy and
growth strategy. The fundamental objective of the vertical integration
business model is to control the waste stream from the point of collection
through disposal and to achieve a high rate of waste internalization.
Allied seeks to build, through acquisitions and other market development
initiatives, market specific, vertically integrated operations typically
consisting of one or more collection companies, transfer stations,
processing centers and landfills. Within its markets, Allied seeks to
strengthen its competitive position and improve its financial returns by
acquiring additional operating assets, typically through "tuck-in"
collection company acquisitions. Allied believes that it can realize
competitive advantages and strong future growth by continuously
implementing this strategy
S-3
<PAGE> 4
across existing and new markets in the United States. Allied's
internalization rate, as measured by collection volumes, was approximately
57% for the first half of 1997.
FOCUS ON OPERATIONS. Allied's operations-oriented business strategy is
characterized by decentralized operations and local management with
significant experience in operating and growing solid waste businesses.
Allied only recruits operating managers with extensive industry experience,
usually with significant experience in their geographic markets. Allied's
senior executive management, senior operating management and regional vice
presidents currently average approximately 17, 21 and 24 years of industry
experience, respectively. By continuing to hire and retain experienced,
local market-oriented managers Allied believes that it will be well
positioned to react to changes in its markets and will be able to
capitalize on growth opportunities in existing and new markets.
MAINTAINING HIGH RATE OF GROWTH. Allied seeks to capitalize on the
on-going consolidation of the approximately $35 billion solid waste
industry in the United States. Allied intends to grow primarily by
acquiring privately-owned solid waste companies and through internal
growth. Allied also intends to take selective advantage of opportunities
when government entities privatize the operation of all or part of their
solid waste systems. In addition, Allied seeks to achieve broad geographic
and business mix diversification in its operations and market development
activities. Allied's revenue mix for the first six months of 1997 was
approximately 58% collection, 24% disposal, 8% transfer, 4% recycling and
6% other.
MAINTAINING CAPACITY FOR FUTURE GROWTH. Allied implements its business
strategy by maintaining effective internal controls, experienced management
and sufficient financial capacity. While Allied expects internal cash flows
to fund most of its working capital and capital expenditure requirements,
Allied intends to access the public and private capital markets, as
appropriate, to fund its continuing growth and market development
activities.
INTEGRATION OF LAIDLAW ACQUISITION
Allied closed the Laidlaw Acquisition at the end of 1996 and substantially
completed the integration of the acquired operations by the end of the first
quarter of 1997. Allied has accomplished three primary objectives associated
with the Laidlaw Acquisition. First, Allied has realized substantial financial
benefits and operating efficiencies. Second, Allied has divested the Canadian
operations acquired from Laidlaw for approximately $518 million (the "Canadian
Sale") and used the net proceeds of this transaction to pay down debt. In
addition, pursuant to the USA Waste Transactions and the BFI Transaction (each
as defined below), Allied sold other non-vertically integrated operations
acquired from Laidlaw representing $46.5 million in annual revenues. Third,
Allied has recruited additional qualified personnel to increase management
capabilities.
RECENT DEVELOPMENTS AND MARKET DEVELOPMENT UPDATE
From January 1, 1997 to July 31, 1997, Allied completed the acquisition of
15 solid waste businesses (excluding the USA Waste Transactions (as defined
below)) representing approximately $87.7 million in annual revenue for which it
paid approximately $127.8 million (the "Acquired Businesses"). The Acquired
Businesses, which include three landfills, 13 collection companies, six transfer
stations and two recycling facilities, are located in 10 separate markets and
are expected to be integrated into existing operations. In addition, in July
1997, Allied exited a non-vertically integrated market by selling one collection
operation with approximately $12.0 million in annual revenue for which it
received consideration of approximately $7.1 million (the "BFI Transaction").
On June 12, 1997, Allied completed a series of transactions (the "USA Waste
Transactions") with USA Waste Services, Inc. ("USA Waste") pursuant to which
Allied acquired eight landfills (two of which were transferred to Allied in July
1997 after completion of certain regulatory matters), three collection
operations, five transfer stations and one recycling facility with an aggregate
of approxi-
S-4
<PAGE> 5
mately $68.1 million in annual revenue for consideration of $87.5 million. Also
pursuant to the USA Waste Transactions, Allied exited certain non-vertically
integrated markets by selling to USA Waste one landfill, two collection
operations and one recycling facility with an aggregate of approximately $34.5
million in annual revenue for which it received consideration of approximately
$61.3 million.
On August 12, 1997, Allied was awarded the contract to purchase (or, with
respect to one transfer facility, assume operation of) the active solid waste
disposal system for San Diego County, California, consisting primarily of four
landfills. Pursuant to the terms of the contract, Allied will pay $160 million
to San Diego County at closing which is expected to occur before year-end 1997.
In addition, Allied has agreed to reimburse San Diego County for up to
approximately $7.0 million of capital expenditures. When the acquisition is
completed, Allied expects to internalize the disposal of approximately 1,200
tons of waste per day, in addition to receiving from third parties 4,300 tons of
waste per day, and to establish a vertically integrated operation in San Diego.
The completion of this transaction is subject to certain normal regulatory
approvals and certain other conditions and consents by certain of Allied's
existing lenders. Although there can be no assurance that Allied will receive
such approvals, satisfy such conditions and obtain such consents, Allied expects
that it will do so.
In addition, Allied has entered into letters of intent to acquire 12 solid
waste businesses (the "Pending Acquisitions") representing an aggregate of
approximately $131 million in annual revenues.
There can be no assurance that the San Diego County transaction or the
Pending Acquisitions will be completed. Consummation of the Offerings (as
defined below) is not conditioned on consummation of the San Diego County
transaction or the Pending Acquisitions, nor is consummation of the San Diego
County transaction or the Pending Acquisitions conditioned on consummation of
the Offerings.
THE OFFERINGS
The offering hereby of 3,240,000 shares of Common Stock, par value $.01 per
share (the "Common Stock"), being offered in an international offering outside
the United States (the "International Offering") and the offering of 12,960,000
shares of Common Stock being offered in a concurrent United States offering (the
"U.S. Offering") are collectively referred to as the "Offerings." The closing of
each offering is conditioned upon the closing of the other offering.
<TABLE>
<S> <C>
International Offering........................... 3,240,000 shares
U.S. Offering.................................... 12,960,000 shares
Common Stock outstanding after the
Offerings(1)(2)................................ 96,008,391 shares
Use of Proceeds.................................. To reduce debt, to fund working capital
requirements and for general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol.................... "AWIN"
</TABLE>
- ---------------
(1) Assumes no exercise of the International Underwriters' and U.S.
Underwriters' over-allotment options to purchase an aggregate of up to
2,430,000 additional shares of Common Stock.
(2) Based on the number of shares of Common Stock outstanding as of July 31,
1997. Does not include Common Stock issuable upon conversion of Allied's
outstanding convertible securities or exercise of Allied's outstanding
options and warrants, as of July 31, 1997 as follows: (i) 254,455 shares
issuable upon conversion of convertible debt securities (with a weighted
average conversion price of $7.64 per share); (ii) 858,942 shares issuable
upon exercise of warrants to purchase Common Stock (with a weighted average
exercise price of $5.14 per share); and (iii) 6,966,992 shares issuable upon
exercise of stock options, of which 3,545,235 shares are issuable upon
exercise of currently vested and exercisable stock options (with a weighted
average exercise price of $6.60 per share). See "Capitalization."
S-5
<PAGE> 6
SUMMARY HISTORICAL AND PRO FORMA DATA
The summary historical financial data presented below as of and for the
three years ended December 31, 1996 and as of and for the six months ended June
30, 1996 and 1997 are derived from Allied's Consolidated Financial Statements
and notes thereto, included in Allied's filings under the Exchange Act and
incorporated by reference herein. The summary pro forma data presented below as
of and for the six months ended June 30, 1997 are derived from the Pro Forma
Combined Financial Statements included elsewhere herein. This summary financial
information should be read in conjunction with Allied's Consolidated Financial
Statements and the notes thereto, included in Allied's filings under the
Exchange Act and incorporated by reference herein, and "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Pro Forma Combined Financial Statements and the notes
thereto, included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED JUNE 30, 1997
------------------------------ JUNE 30, -----------------------
1994 1995 1996 1996 ACTUAL PRO FORMA(1)
-------- -------- -------- ------------ -------- ------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $158,354 $217,544 $246,679 $118,958 $395,184 $395,184
Operating income (loss)(2).......... 8,673 32,788 (59,267) 12,697 78,229 78,229
Interest expense, net(3)............ 12,368 10,656 7,147 4,425 45,603 39,692
Net income (loss) before
extraordinary loss(2)............. (3,006) 12,381 (66,015) 4,237 18,597 21,966
Extraordinary loss, net of income
tax benefit of $1,900 in 1994,
$8,940 in 1996 and $34,942 in
1997(4)........................... (3,029) -- (13,412) -- (52,412) --
Net income (loss)(2)................ (6,035) 12,381 (79,427) 4,237 (33,815) 21,966
PER SHARE DATA:
Net income (loss) before
extraordinary loss(2)............. $ (0.27) $ 0.15 $ (1.15) $ 0.06 $ 0.21 $ 0.22
Extraordinary loss(4)............... (0.12) -- (0.23) -- (0.60) --
Net income (loss)(2)................ (0.39) 0.15 (1.38) 0.06 (0.39) 0.22
OTHER DATA:
EBITDA(2)(5)........................ $ 25,604 $ 58,567 $(27,797) $ 28,105 $130,390 $130,390
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------------
ACTUAL PRO FORMA(6)
---------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $ 14,641 $ 14,641
Total assets..................................................... 2,008,837 2,007,192
Total debt....................................................... 1,439,692 1,201,143
Stockholders' equity............................................. 208,212 445,774
</TABLE>
- ---------------
(1) The unaudited pro forma combined statement of operations data, per share
data and other data for the six months ended June 30, 1997 give effect to
the Offerings and the application of the net proceeds therefrom as described
under "Use of Proceeds" and to the Discount Offering, the Laidlaw Repurchase
and the execution of the Amended Bank Agreement (each as defined in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations") as if they had occurred on January 1, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the Pro Forma Combined Financial Statements and the notes thereto
included elsewhere in this Prospectus Supplement.
S-6
<PAGE> 7
(2) Includes acquisition-related costs of $91.7 million which were incurred by
Allied in the year ended December 31, 1996 of which $84.6 million were
associated with the Laidlaw Acquisition and $7.1 million was related to
other acquisitions accounted for as poolings-of-interests and $1.5 million
and $6.7 million which were incurred by Allied in the year ended December
31, 1995 and the six months ended June 30, 1996, respectively, related to
acquisitions accounted for as pooling-of-interests. In addition, charges of
$2.1 million and $5.7 million, respectively, were incurred by Allied in the
years ended December 31, 1994 and 1996 for certain nonrecurring unusual
items. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(3) Includes a reduction in net interest expense of $3.5 million, $11.1 million,
$13.0 million, $6.9 million, $15.2 million and $15.2 million, respectively,
for capitalized interest. Net interest expense also includes $0.9 million,
$0.4 million, $0.9 million, $0.4 million, $11.3 million and $17.2 million,
respectively, of non-cash interest charges.
(4) In each of the periods ended December 31, 1994 and 1996, and June 30, 1997,
Allied replaced or redeemed certain of its indebtedness and recorded
extraordinary after-tax charges as a result of the early extinguishment of
debt. See Allied's Consolidated Financial Statements and the notes thereto,
included in Allied's filings under the Exchange Act and incorporated by
reference herein.
(5) Earnings before interest, taxes, depreciation and amortization ("EBITDA") is
not a measure of operating income, operating performance or liquidity under
generally accepted accounting principles. Allied includes EBITDA data
because it understands such data are used by certain investors to determine
Allied's historical ability to service its indebtedness.
(6) The unaudited pro forma combined balance sheet data at June 30, 1997 gives
effect to the Offerings as if they had occurred on June 30, 1997.
RISK FACTORS
See "Risk Factors" beginning on page S-8 of this Prospectus Supplement and
page 4 of the accompanying Prospectus for a discussion of certain factors which
should be considered by prospective investors in evaluating an investment in the
Common Stock.
S-7
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus Supplement and the
accompanying Prospectus, the following factors and the factors set forth under
"Risk Factors" in the accompanying Prospectus should be considered carefully in
evaluating an investment in Allied, in addition to the information under
"Disclosure Regarding Forward Looking Statements." To the extent that any risk
factor contained in this Prospectus Supplement conflicts with or supersedes any
risk factor contained in the accompanying Prospectus, the risk factor contained
in this Prospectus Supplement shall control.
RISK FACTORS DISCUSSED IN THE PROSPECTUS
The accompanying Prospectus contains an extensive discussion of risk
factors which should be carefully considered by any prospective investor in the
Common Stock. Among the topics covered are: (a) Risks Associated with Allied's
Strategy; Potential Difficulty in Obtaining Suitable Landfills, Collection
Operations, Transfer Stations and Permits; (b) Limited Operating History in
Regard to Acquired Businesses; (c) Capital Requirements and Limited Working
Capital; (d) Risk of Competition from Other Companies and Municipalities;
Landfill Alternatives; (e) Substantial Leverage; Ability to Service Debt;
Dependence on Distributions from Subsidiaries; (f) Restrictions Imposed by the
Amended Bank Agreement, the Allied Notes and the AWNA Notes; (g) Cost of
Compliance with Environmental Regulations; Risk of Future Litigation; and (h)
Hazardous Substances Liability.
SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL ADVERSE EFFECT ON STOCK PRICE;
REGISTRATION RIGHTS
Based on the number of outstanding shares of Common Stock as of July 31,
1997, upon consummation of the Offerings, Allied will have outstanding a total
of 96,008,391 shares of Common Stock, including the 16,200,000 shares being sold
in the Offerings and approximately 254,455 shares of Common Stock subject to
outstanding convertible debt securities, 858,942 shares of Common Stock subject
to outstanding warrants and 6,966,992 shares of Common Stock subject to stock
options granted under Allied's stock options plans. See Note 8 of Notes to
Allied's Consolidated Financial Statements, included in Allied's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, as amended, filed
under the Exchange Act and incorporated by reference herein. Of such shares,
approximately 61,401,365 shares of Common Stock, including the 16,200,000 shares
of Common Stock being sold in the Offerings (together with any shares sold upon
exercise of the Underwriters' over-allotment options), and approximately 254,455
shares issuable upon conversion of convertible debt securities, 616,827 shares
issuable upon exercise of warrants held by non-affiliates of Allied and
1,547,861 shares issuable upon exercise of vested stock options held by
non-affiliates of Allied will be immediately eligible for sale in the public
market without restriction, except for shares purchased by or issued to an
affiliate of Allied (within the meaning of the Securities Act), which will be
subject to the resale limitations of Rule 144 promulgated under the Securities
Act. 26,376,765 shares of Common Stock are owned by certain private securities
investment funds affiliated with either Apollo Advisors II, L.P. or the
Blackstone Group (collectively, the "Apollo/Blackstone Investors"). For so long
as the Apollo/Blackstone Investors remain an "affiliate" of Allied, any shares
of Common Stock held by the Apollo/Blackstone Investors will only be available
for public sale if such shares are registered under the Securities Act or sold
in accordance with an applicable exemption from registration, such as Rule 144,
pursuant to which the Apollo/Blackstone Investors would be subject to the volume
and other limitations under such rule. Three months after the Apollo/Blackstone
Investors were to cease to be an "affiliate" of Allied, all of such shares held
for more than two years would then immediately become eligible for public sale
without being subject to the limitations of Rule 144. In addition, the
Apollo/Blackstone Investors are entitled to require Allied to register their
shares of Common Stock at any time after May 15, 1999 and holders of 129,250
shares of Common Stock and holders of warrants to purchase 647,827 shares of
Common Stock currently may require Allied to register their shares of Common
Stock. Allied and its directors, executive officers and regional vice presidents
have agreed not to sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities of Allied that are substantially similar to the
shares of Common Stock, or any other
S-8
<PAGE> 9
security convertible into or exchangeable for, or that represent the right to
receive, shares of Common Stock or any such similar securities, except for
shares of Common Stock issuable pursuant to convertible debt securities,
warrants and stock options outstanding on the date of this Prospectus Supplement
and shares of Common Stock (or securities convertible or exchangeable into
shares of Common Stock) to be issued solely in connection with acquisitions, for
a period of 90 days after the date of this Prospectus Supplement without the
prior written consent of the Underwriters, except for the shares of Common Stock
offered in the Offerings.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock (including shares issuable upon the exercise of stock
options), or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock. See "Shares Eligible for Future
Sale."
USE OF PROCEEDS
The net proceeds to be received by Allied from the Offerings are estimated
to be $238.5 million net of offering expenses and after deducting the estimated
underwriting discounts and commissions payable by Allied.
Allied anticipates that the net proceeds of the Offerings will be used to
reduce debt, to fund working capital requirements and for general corporate
purposes. Although the Company has not yet determined the specific allocation of
the net proceeds of the Offerings, this Prospectus Supplement assumes that all
of such net proceeds are used to reduce outstanding borrowings under the Amended
Bank Agreement.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the National Market tier of the Nasdaq Stock
Market ("Nasdaq") under the symbol "AWIN." The high and low prices per share for
the periods indicated were as follows:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Year ended December 31, 1995
First Quarter................................................ $ 5.000 $ 3.750
Second Quarter............................................... 7.250 4.750
Third Quarter................................................ 10.000 6.875
Fourth Quarter............................................... 9.000 6.375
Year ended December 31, 1996
First Quarter................................................ 9.250 6.500
Second Quarter............................................... 10.375 8.000
Third Quarter................................................ 10.125 6.438
Fourth Quarter............................................... 9.625 8.000
Year ended December 31, 1997
First Quarter................................................ 9.875 7.250
Second Quarter............................................... 18.125 8.000
Third Quarter (through August 26, 1997)...................... 17.563 14.500
</TABLE>
On August 26, 1997, the last reported sales price for the Common Stock, as
quoted by Nasdaq, was $15.50 per share. As of August 26, 1997, there were
approximately 533 record holders of the Common Stock.
All of the foregoing prices reflect interdealer quotations, without retail
markups, markdowns or commissions and may not necessarily represent actual
transactions.
S-9
<PAGE> 10
DIVIDEND POLICY
Allied has not paid dividends on its Common Stock, does not anticipate
paying any dividends thereon in the foreseeable future, and is prohibited under
the terms of certain of Allied's long-term indebtedness from paying such
dividends.
CAPITALIZATION
The following table sets forth the consolidated capitalization and other
financial data of Allied as of June 30, 1997 on an actual basis and as adjusted
to give effect to the Offerings and the application of the net proceeds
therefrom as described in "Use of Proceeds," assuming that all of such net
proceeds are used to reduce the outstanding amounts owed under the Amended Bank
Agreement. These data should be read in conjunction with "Selected Financial
Data", "Summary Pro Forma Condensed Combined Financial Data" and Allied's Pro
Forma Combined Financial Statements and the notes thereto included elsewhere
herein and Allied's Consolidated Financial Statements and the notes thereto,
included in Allied's filings under the Exchange Act and incorporated by
reference herein.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents......................................... $ 14,641 $ 14,641
========== ==========
Current portion of long-term debt................................. $ 50,486 $ 37,366
========== ==========
Long-term debt, net of current portion:
Amended Bank Agreement(1)....................................... $ 548,500 $ 323,071
Notes payable and obligations under capital leases.............. 75,706 75,706
AWNA 10 1/4% Senior Subordinated Notes due 2006................. 525,000 525,000
Allied 11.30% Senior Discount Notes due 2007.................... 240,000 240,000
---------- ----------
Total long-term debt......................................... 1,389,206 1,163,777
Stockholders' equity:
Preferred Stock(2).............................................. 1 1
Common Stock.................................................... 777 939
Additional paid in capital...................................... 319,028 557,415
Retained deficit................................................ (111,594) (112,581)
---------- ----------
Total stockholders' equity................................... 208,212 445,774
---------- ----------
Total capitalization.................................... $1,597,418 $ 1,609,551
========== ==========
</TABLE>
- ---------------
(1) In addition, at June 30, 1997 there was aggregate availability under the
Amended Bank Agreement of $256.3 million pursuant to a revolving credit
facility to be used solely for general corporate purposes (including to
finance capital expenditures and acquisitions permitted by the Amended Bank
Agreement).
(2) On July 24, 1997 all of the 9,496 shares of Preferred Stock outstanding as
of June 30, 1997 were converted in accordance with their terms into
1,356,571 shares of Common Stock.
S-10
<PAGE> 11
SELECTED FINANCIAL DATA
ALLIED HISTORICAL SELECTED FINANCIAL DATA
The selected historical financial data presented below as of and for the
five years ended December 31, 1996 are derived from Allied's Consolidated
Financial Statements, which have been audited by Arthur Andersen LLP,
independent public accountants. The selected historical financial data presented
below as of and for the six months ended June 30, 1996 and 1997 are derived from
Allied's unaudited consolidated financial statements. The selected historical
financial data for the six months ended June 30, 1996 and 1997, in the opinion
of management, include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation for such periods. The historical
results of operations for the six months ended June 30, 1997 are not necessarily
indicative of results to be expected for the entire year. The statement of
operations, balance sheet and other data have been restated to give effect to
transactions that were accounted for using the pooling-of-interests method for
business combinations. Although the statement of operations data for the year
ended December 31, 1996 includes one day of revenues and earnings for the
Laidlaw Acquired Businesses (as defined in the accompanying Prospectus), all of
the acquisition related fees and charges are included as part of acquisition
costs for the year. These selected historical financial data should be read in
conjunction with Allied's Consolidated Financial Statements and the notes
thereto, included in Allied's filings under the Exchange Act and incorporated by
reference herein, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Pro Forma Combined Financial Statements
and the notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF SHARES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $ 77,686 $ 108,948 $ 158,354 $ 217,544 $ 246,679 $ 118,958 $ 395,184
Cost of operations........ 49,661 68,374 98,086 120,738 138,437 65,699 218,282
Selling, general and
administrative
expenses................ 13,369 18,278 32,564 36,708 38,602 18,464 46,512
Depreciation and
amortization expense.... 7,991 10,637 16,931 25,779 31,470 15,408 52,161
Acquisition related
costs(1)................ -- -- -- 1,531 91,693 6,690 --
Unusual items(1).......... -- -- 2,100 -- 5,744 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)... 6,665 11,659 8,673 32,788 (59,267) 12,697 78,229
Interest income........... (201) (310) (1,073) (716) (2,110) (142) (1,104)
Interest expense(2)....... 4,580 7,633 13,441 11,372 9,257 4,567 46,707
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) before
income taxes............ 2,286 4,336 (3,695) 22,132 (66,414) 8,272 32,626
Income tax expense
(benefit)............... 717 1,694 (689) 9,751 (399) 4,035 14,029
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) before
extraordinary loss...... 1,569 2,642 (3,006) 12,381 (66,015) 4,237 18,597
Extraordinary loss, net of
income tax benefit of
$1,900 in 1994, $8,940
in 1996 and $34,942 in
1997(3)................. -- -- (3,029) -- (13,412) -- (52,412)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)......... 1,569 2,642 (6,035) 12,381 (79,427) 4,237 (33,815)
Dividends on preferred
stock................... (310) (927) (3,773) (4,070) (1,073) (575) (337)
Conversion fee on equity
securities
converted(4)............ -- -- -- (2,151) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) to
common shareholders..... $ 1,259 $ 1,715 $ (9,808) $ 6,160 $ (80,500) $ 3,662 $ (34,152)
=========== =========== =========== =========== =========== =========== ===========
Net income (loss) per
share:
Net income (loss) before
extraordinary loss...... $ 0.07 $ 0.08 $ (0.27) $ 0.15 $ (1.15) $ 0.06 $ 0.21
Extraordinary loss(3)..... -- -- (0.12) -- (0.23) -- (0.60)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)......... $ 0.07 $ 0.08 $ (0.39) $ 0.15 $ (1.38) $ 0.06 $ (0.39)
=========== =========== =========== =========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding...... 19,276,886 22,572,468 25,028,107 40,046,459 58,422,581 58,873,215 88,375,927
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
S-11
<PAGE> 12
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF SHARES)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA AT
PERIOD END:
Working capital
(deficit)............... $ (428) $ 3,892 $ (18,704) $ (44,441) $ 3,256 $ (31,591) $ (35,598)
Property and equipment,
net..................... 75,928 94,208 221,484 309,455 730,572 337,215 897,086
Goodwill, net............. 22,398 34,880 76,059 88,429 856,108 88,535 854,491
Total assets.............. 135,946 159,926 356,875 458,706 2,317,549 502,086 2,008,837
Long-term debt, net of
current portion......... 56,226 61,019 166,252 186,373 1,148,509 177,003 1,389,206
Stockholders' equity...... 51,323 70,277 89,972 136,305 275,558 200,519 208,212
OTHER DATA:
Operating income
(loss)(1)............... $ 6,665 $ 11,659 $ 8,673 $ 32,788 $ (59,267) $ 12,697 $ 78,229
Depreciation and
amortization............ 7,991 10,637 16,931 25,779 31,470 15,408 52,161
----------- ----------- ----------- ----------- ----------- ----------- -----------
EBITDA(1)(5).............. $ 14,656 $ 22,296 $ 25,604 $ 58,567 $ (27,797) $ 28,105 $ 130,390
=========== =========== =========== =========== =========== =========== ===========
EBITDA margin............. 18.9% 20.5% 16.2% 26.9% (11.3)% 23.6% 33.0%
Net cash provided by (used
in):
Operating activities...... $ 4,864 $ 11,152 $ 22,115 $ 44,437 $ 58,910 $ 476 $ (30,236)
Investing activities...... (14,597) (34,750) (97,640) (80,751) (1,423,513) (24,912) 334,072
Financing activities...... 10,857 21,855 76,936 35,107 1,410,681 22,855 (339,289)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total................. $ 1,124 $ (1,743) $ 1,411 $ (1,207) $ 46,078 $ (1,581) $ (35,453)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Includes acquisition-related costs of $91.7 million which were incurred by
Allied in the year ended December 31, 1996 of which $84.6 million was
associated with the Laidlaw Acquisition and $7.1 million were related to
other acquisitions accounted for as poolings-of-interests and $1.5 million
and $6.7 million which were incurred by Allied in the year ended December
31, 1995 and the six months ended June 30, 1996, respectively, related to
acquisitions accounted for as pooling-of-interests. In addition, charges of
$2.1 million and $5.7 million, respectively, were incurred by Allied in the
years ended December 31, 1994 and 1996 for certain non-recurring unusual
items. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(2) Includes a reduction in net interest expense of $0.4 million, $1.1 million,
$3.5 million, $11.1 million, $13.0 million, $6.9 million and $15.2 million,
respectively, for capitalized interest. Net interest expense also includes
$0.1 million, $0.5 million, $0.9 million, $0.4 million, $0.9 million, $0.4
million and $11.3 million, respectively, of non-cash interest charges.
(3) In each of the periods ended December 31, 1994 and 1996, and June 30, 1997,
Allied replaced or redeemed certain of its indebtedness and recorded
extraordinary after-tax charges as a result of the early extinguishment of
debt. See Allied's Consolidated Financial Statements and the notes thereto,
included in Allied's filings under the Exchange Act and incorporated by
reference herein.
(4) A non-cash conversion fee of $2.2 million was incurred in the fourth quarter
of 1995 as a result of an inducement offered by Allied to holders of certain
convertible preferred stock and convertible subordinated notes to exercise
their conversion option to receive Common Stock. The inducement fee
consisted of payment of dividends or interest from the conversion date
through the first call or redemption date of each convertible security.
Approximately 7.8 million shares of Common Stock were issued for conversion
and approximately 285,000 shares were issued for the conversion fee.
(5) EBITDA is not a measure of operating income, operating performance or
liquidity under generally accepted accounting principles. Allied includes
EBITDA data because it understands such data are used by certain investors
to determine Allied's historical ability to service its indebtedness.
S-12
<PAGE> 13
SUMMARY PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The unaudited summary pro forma condensed combined balance sheet as of June
30, 1997 gives effect to the Offerings as if they had occurred on June 30, 1997.
The unaudited summary pro forma condensed combined statement of operations data
for the six months ended June 30, 1997 give effect to the Offerings and the
application of the net proceeds therefrom as described under "Use of Proceeds"
and to the Discount Offering, the Laidlaw Repurchase and the execution of the
Amended Bank Agreement as if each had occurred on January 1, 1996. These
statements do not purport to be indicative of the financial position or results
of operations of Allied that might have occurred, nor are they indicative of
future financial position or results of operations. The summary pro forma
condensed combined financial data should be read in conjunction with the Pro
Forma Combined Financial Statements and the notes thereto, included elsewhere
herein, and Allied's Consolidated Financial Statements and the notes thereto,
included in Allied's filings under the Exchange Act and incorporated by
reference herein. See "Disclosure Regarding Forward Looking Statements."
ALLIED WASTE INDUSTRIES, INC.
SUMMARY PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- --------------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 14,641 $ -- $ 14,641
Other current assets................................ 153,011 -- 153,011
---------- --------- ----------
Total current assets........................... 167,652 -- 167,652
Property and equipment, net......................... 897,086 -- 897,086
Goodwill, net....................................... 854,491 -- 854,491
Other assets........................................ 89,608 (1,645) 87,963
---------- --------- ----------
Total assets.............................. $2,008,837 $ (1,645) $2,007,192
========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt................... $ 50,486 $ (13,120) $ 37,366
Other current liabilities........................... 152,764 -- 152,764
---------- --------- ----------
Total current liabilities...................... 203,250 (13,120) 190,130
Long-term debt, net of current portion.............. 1,389,206 (225,429) 1,163,777
Other long-term liabilities......................... 208,169 (658) 207,511
Stockholders' equity(2)............................. 208,212 237,562 445,774
---------- --------- ----------
Total liabilities and stockholders'
equity.................................. $2,008,837 $ (1,645) $2,007,192
========== ========= ==========
</TABLE>
- ---------------
(1) Reflects the Offerings and the application of the net proceeds therefrom as
described under "Use of Proceeds."
(2) On July 24, 1997 all of the 9,496 shares of Preferred Stock outstanding as
of June 30, 1997 were converted in accordance with their terms into
1,356,571 shares of Common Stock.
S-13
<PAGE> 14
ALLIED WASTE INDUSTRIES, INC.
SUMMARY PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
----------- -------------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND
NUMBER OF SHARES)
<S> <C> <C> <C>
Revenues....................................... $ 395,184 $ -- $ 395,184
Cost of operations............................. 218,282 -- 218,282
Selling, general and administrative expenses... 46,512 -- 46,512
Depreciation and amortization expense.......... 52,161 -- 52,161
----------- ------- -----------
Operating income............................... 78,229 -- 78,229
Interest income................................ (1,104) -- (1,104)
Interest expense............................... 46,707 (5,911) 40,796
----------- ------- -----------
Net income before income taxes................. 32,626 5,911 38,537
Income tax expense............................. 14,029 2,542 16,571
----------- ------- -----------
Net income before extraordinary loss........... 18,597 3,369 21,966
Dividends on preferred stock................... (337) -- (337)
----------- ------- -----------
Net income to common shareholders before
extraordinary loss........................... $ 18,260 $ 3,369 $ 21,629
=========== ======= ===========
Net income per common share before
extraordinary loss........................... $ 0.21 $ 0.22
=========== ===========
Weighted average common and common equivalent
shares....................................... 88,375,927 96,644,260
=========== ===========
</TABLE>
- ---------------
(1) Reflects adjustments for the reduction in net interest expense associated
with the application of the net proceeds from the Offerings as described in
"Use of Proceeds" and for the Discount Offering, the Laidlaw Repurchase and
the execution of the Amended Bank Agreement and an increase to the
outstanding Common Stock associated with the Offerings.
S-14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data," included elsewhere herein, and Allied's Consolidated Financial
Statements and the notes thereto, included in Allied's filings under the
Exchange Act and incorporated by reference herein.
INTRODUCTION
Allied has experienced significant growth, a substantial portion of which
has resulted from the acquisition of solid waste businesses. From January 1,
1992 to June 30, 1997, the Company completed 112 acquisitions including the
Laidlaw Acquisition. In 1996, the Company acquired 22 businesses including the
Laidlaw Acquisition and from January 1, 1997 to July 31, 1997 it acquired 15
businesses, excluding the assets acquired in the USA Waste Transactions. See
Note 2 of Notes to Allied's Consolidated Financial Statements included in
Allied's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
as amended, and Notes 2 and 6 of Notes to Allied's Consolidated Financial
Statements included in Allied's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997, as amended, filed under the Exchange Act and incorporated
by reference herein. Allied's Consolidated Financial Statements have been
restated to reflect the acquisition of companies accounted for using the
pooling-of-interests method for business combinations. The majority 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 Allied's financial statements only from the
applicable date of acquisition. As a result, Allied believes its historical
results of operations for the periods presented are not directly comparable.
On December 30, 1996, Allied completed the Laidlaw Acquisition for total
consideration of approximately $1.5 billion comprised of $1.2 billion cash, 14.6
million shares of Common Stock, a warrant (the "Laidlaw Warrant") to acquire
20.4 million shares of Common Stock at an exercise price of $8.25 per share, and
two junior subordinated debentures with an aggregate book value of $110.7
million and a face amount of $318.3 million, comprised of a $150 million face
amount 7% Junior Subordinated Debenture and a $168.3 million face amount Zero
Coupon Debenture (collectively, the "Allied Debentures"). The cash consideration
was financed from the proceeds of a $1.275 billion senior credit facility (the
"1996 Bank Agreement") and the sale of $525 million of 10 1/4% Senior
Subordinated Notes due 2006 of AWNA (the "AWNA Notes").
On March 16, 1997, pursuant to a share purchase agreement with USA Waste,
Allied completed the Canadian Sale for approximately $518 million. Allied used
the net proceeds from the Canadian Sale to pay down approximately $517 million
in debt under the 1996 Bank Agreement. Allied acquired the Canadian operations
in connection with the Laidlaw Acquisition. In addition, pursuant to the USA
Waste Transactions and the BFI Transaction, Allied sold other non-vertically
integrated operations acquired from Laidlaw representing $46.5 million in annual
revenues.
On May 15, 1997, pursuant to a securities purchase agreement (the "Laidlaw
Securities Purchase Agreement") among Allied, Laidlaw and Laidlaw
Transportation, Inc. ("Laidlaw Transportation" and, together with Laidlaw, the
"Laidlaw Group") and the Apollo/Blackstone Investors, Allied repurchased (the
"Laidlaw Repurchase") the Allied Debentures and the Laidlaw Warrant, which were
issued in connection with the Laidlaw Acquisition, from the Laidlaw Group for
cash consideration of $230 million. The cash consideration was financed from
$230 million of net proceeds realized from the sale of $418 million aggregate
principal amount of 11.30% Senior Discount Notes due 2007 of Allied (the "Allied
Notes") in a private offering (the "Discount Offering") on May 15, 1997.
Contemporaneously with the Laidlaw Repurchase, pursuant to the Laidlaw
Securities Purchase Agreement, the Apollo/Blackstone Investors acquired 14.6
million shares of Common Stock (the "Laidlaw Shares") issued in connection with
the Laidlaw Acquisition from Laidlaw Transportation and also acquired
approximately 11.8 million shares of Common Stock
S-15
<PAGE> 16
from TPG Partners, L.P. and TPG Parallel I, L.P. (collectively, the "TPG
Group"). Pursuant to the terms of the Shareholders Agreement dated May 15, 1997
between Allied and the Apollo/ Blackstone Investors (the "Shareholders
Agreement"), the Apollo/Blackstone Investors have the right to designate a
maximum of four members of the Board of Directors of Allied based upon the
amount of Common Stock owned by the Apollo/Blackstone Investors. The
Shareholders Agreement also grants the Apollo/Blackstone Investors certain
registration rights regarding the shares of Common Stock owned by the
Apollo/Blackstone Investors and restricts the Apollo/Blackstone Investors from
engaging in certain activities or transactions which could result in a change in
control of Allied. See "Principal Stockholders -- Apollo/Blackstone
Transaction."
In June 1997, Allied entered into an Amended and Restated Credit Agreement
(the "Amended Bank Agreement") with Credit Suisse First Boston, as
administrative and collateral agent, Citibank, N.A. as documentation agent and
Goldman Sachs Credit Partners, LP, as syndication agent, which replaced the 1996
Bank Agreement. The Amended Bank Agreement provides a six and one-half year
senior secured $500 million term loan facility (the "Term Loan Facility") and a
six and one-half year senior secured $400 million revolving credit facility (the
"Revolving Credit Facility"). See Allied's Current Report on Form 8-K dated
August 27, 1997 filed under the Exchange Act for Allied's pro forma combined
statements of operations for the year ended December 31, 1996 and the six months
ended June 30, 1997, which give effect to the Laidlaw Acquisition, the Canadian
Sale, the sale of Allied's non-core medical waste assets, the Discount Offering,
the Laidlaw Repurchase and the execution of the Amended Bank Agreement as if
each had occurred on January 1, 1996.
On June 12, 1997, Allied completed the USA Waste Transactions pursuant to
which Allied acquired eight landfills (two of which were transferred to Allied
in July 1997 after completion of certain regulatory matters), three collection
operations, five transfer stations and one recycling facility with an annual
aggregate revenue of $68.1 million for consideration of $87.5 million. Also
pursuant to the USA Waste Transactions, Allied sold to USA Waste one landfill,
two collection operations and one recycling facility with an aggregate of
approximately $34.5 million in annual revenue for which it received
consideration of approximately $61.3 million.
In addition, pursuant to the BFI Transaction, in July 1997 Allied exited a
non-vertically integrated market by selling one collection operation with
approximately $12.0 million in annual revenue for which it received
consideration of approximately $7.1 million.
GENERAL
REVENUES. Allied's revenues are attributable primarily to fees charged to
customers for waste collection, transfer, recycling and disposal services.
Allied'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 one to five years and
commonly have automatic renewal options. Allied's landfill operations include
both Company-owned landfills and those operated for municipalities for a fee.
Allied is fully integrated in each geographic region in which it is located as
it provides collection, transfer, processing and disposal services. The
S-16
<PAGE> 17
tables below show for the periods indicated the percentage of Allied's total
reported revenues attributable to services provided and to geographic region:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------- ENDED
1994 1995 1996 JUNE 30, 1997
----- ----- ----- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Collection(1)....................................... 69.9% 64.7% 61.9% 57.8%
Transfer............................................ 8.4 9.5 8.5 7.5
Landfill(1)......................................... 14.5 18.3 22.0 24.4
Other............................................... 7.2 7.5 7.6 10.3
----- ----- ----- -----
Total Revenues............................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Central States...................................... --% --% --% 9.0%
Great Lakes......................................... 31.9 33.2 31.3 21.9
Midwest............................................. 16.8 19.0 18.7 16.2
Northeast........................................... -- -- -- 11.9
Southeast........................................... 30.2 28.0 30.6 12.1
West................................................ 21.1 19.8 19.4 28.9
----- ----- ----- -----
Total Revenues............................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
- ---------------
(1) The portion of collection and third-party transfer revenues attributable to
disposal charges for waste collected by Allied and disposed at Allied's
landfills have been excluded from collection revenues and included in
landfill revenues.
Allied'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 waste at Company-owned and/or operated landfills,
Allied retains the margin generated through disposal operations that would
otherwise be earned by third-party landfills. Approximately 57% of
Company-collected waste is disposed of at Company-owned and/or operated
landfills as measured using disposal costs in the first half of 1997. In
addition, transfer stations are an integral part of the disposal process. Allied
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
economically transported to its landfills.
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 the disposal site. 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
estimated closure and post-closure monitoring expenses anticipated to be
incurred in the future.
Selling, general and administrative expenses include 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 expense includes depreciation of fixed assets
and amortization of landfill airspace, goodwill and other intangible assets.
In connection with potential acquisitions, Allied incurs and capitalizes
certain transaction and integration costs which include stock registration,
legal, accounting, consulting, engineering and other direct costs. When an
acquisition is completed and is accounted for using the pooling-of-interests
method for business combinations, these costs are charged to the statement of
operations as acquisition related costs. When a completed acquisition is
accounted for using the purchase method for business combinations, these costs
are capitalized. Allied routinely evaluates capitalized
S-17
<PAGE> 18
transaction and integration costs and expenses those costs related to
acquisitions not likely to occur. Indirect acquisition costs, such as executive
salaries, general corporate overhead and other corporate services, are expensed
as incurred.
Certain direct landfill development costs, such as engineering, upgrading,
construction and permitting costs, are capitalized and amortized based on
consumed airspace. Allied believes that the costs associated with 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, Allied 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 and/or
operated by Allied. Site specific closure and post-closure engineering cost
estimates are prepared annually for landfills owned and/or operated by Allied
for which it is responsible for closure and post-closure. The present value of
estimated future costs are accrued based on accepted tonnage as landfill
airspace is consumed. Discounting of future costs is applied where Allied
believes that both the amounts and timing of related payments are reliably
determinable. Allied 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.
The net present value of the closure and post-closure commitment is
calculated assuming inflation of 2.5% and a risk-free capital rate of 7.0%.
Discounted amounts previously recorded are accreted to reflect the effects of
the passage of time. Allied's current estimate of total future payments for
closure and post-closure is $623.6 million while the present value of such
estimate is $190.5 million. At December 31, 1996, and June 30, 1997, accruals
for landfill closure and post-closure costs (including costs assumed through
acquisitions) were approximately $107.5 million and $109.7 million,
respectively. The accruals reflect relatively young landfills with estimated
remaining lives, based on current waste flows, that range from 1 to over 75
years, and an estimated average remaining life of greater than 30 years.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that the various
items bear to revenues and the percentage of change in dollar amounts for the
periods indicated. The statement of operations data have been restated to give
effect to acquisitions that were accounted for using the pooling-of-interests
method for business combinations. See Note 2 of Notes to Allied's Consolidated
Financial Statements, included in Allied's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as amended, and Note 2 of Notes to Allied's
Consolidated Financial
S-18
<PAGE> 19
Statements included in Allied's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997, as amended, filed under the Exchange Act and incorporated
by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------- ----------------------------------
1995 1996 1997
COMPARED COMPARED COMPARED
TO 1994 TO 1995 TO 1996
% CHANGE % CHANGE % CHANGE
1994 1995 IN AMOUNTS 1996 IN AMOUNTS 1996 1997 IN AMOUNTS
----- ----- ---------- ----- ---------- ----- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. 100.0% 100.0% 37.4% 100.0% 13.4% 100.0% 100.0% 232.2%
Cost of operations.................... 61.9 55.5 23.1 56.1 14.7 55.2 55.2 232.2
Selling, general and administrative
expenses............................. 20.6 16.9 12.7 15.6 5.2 15.5 11.8 151.9
Depreciation and amortization
expense.............................. 10.7 11.9 52.3 12.8 22.1 13.0 13.2 238.5
Acquisition related costs............. -- 0.7 100.0 37.2 5,889.1 5.6 -- (100.0)
Unusual costs......................... 1.3 -- (100.0) 2.3 100.0 -- -- --
----- ----- ------- ----- ------- ----- ----- ------
Operating income (loss)............... 5.5 15.0 278.0 (24.0) (280.8) 10.7 19.8 516.1
Interest expense, net................. 7.8 4.9 (13.8) 2.9 (32.9) 3.7 11.5 930.6
Income tax expense (benefit).......... (0.4) 4.5 1,515.2 (0.2) (104.1) 3.4 3.6 247.7
Extraordinary loss, net of income tax
benefit.............................. 1.9 -- (100.0) 5.4 100.0 -- 13.3 100.0
----- ----- ------- ----- ------- ----- ----- ------
Net income (loss).................... (3.8)% 5.6% 305.2% (32.1)% (741.5)% 3.6% (8.6)% (898.1)%
===== ===== ======= ===== ======= ===== ===== ======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
REVENUES. Revenues for the six months ended June 30, 1997 were $395.2
million compared to $119.0 million in the comparable period in 1996, an increase
of 232.2%. Revenues of approximately $265.4 million in the first six months of
1997 were generated from companies acquired subsequent to the end of the same
period in the prior year, while increases in revenues attributable to existing
operations ("Internal Growth") amounted to $10.8 million. If the Laidlaw
Acquisition, net of the Canadian Sale, is included in the same period in the
prior year, Internal Growth would have approximated 9% with 5% attributable to
net volume increases and 4% attributable to price increases.
COST OF OPERATIONS. Cost of operations for the six months ended June 30,
1997 was $218.3 million compared to $65.7 million in the comparable period in
1996, an increase of 232.2%. The increase in cost of operations was primarily
attributable to the increase in revenues described above. As a percentage of
revenues, cost of operations remained constant at 55.2%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased to
$46.5 million for the six months ended June 30, 1997 compared to $18.5 million
in the comparable period in 1996, an increase of 151.9%. As a percentage of
revenues, SG&A decreased to 11.8% in 1997 compared to 15.5% in 1996. 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 growth of the Company. The decrease
in SG&A as a percentage of revenues can be attributed to the substantial
increase in the revenues of the Company resulting principally from the Laidlaw
Acquisition. Operating margins were favorably impacted by financial benefits and
operational efficiencies associated with the Laidlaw Acquisition and the
significant increase in revenues.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the six
months ended June 30, 1997 was $52.2 million compared to $15.4 million in the
comparable period in 1996, an increase of 238.5%. The increase in depreciation
and amortization expense is due to acquisitions and capital expenditures. Fixed
assets have increased from $414.3 million at June 30, 1996 to $1,004.9 million
at June 30, 1997 and goodwill has increased from $98.0 million at June 30, 1996
to $877.6 million at June 30, 1997. As a percentage of revenues, depreciation
and amortization
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<PAGE> 20
increased to 13.2% for the six months ended June 30, 1997 from 13.0% in the
comparable period in 1996. This is primarily the result of an increase in
amortization of goodwill as a percentage of revenues to 2.8% for the six months
ended June 30, 1997 from 1.9% in the comparable period in 1996 resulting from
increased goodwill partially offset by a decrease in landfill amortization as a
percentage of revenues to 2.7% for the six months ended June 30, 1997 from 3.2%
in the comparable period in 1996 resulting from decreased internalization in
connection with the Laidlaw Acquisition.
ACQUISITION RELATED COSTS. In the first six months of 1996, Allied
incurred transaction and integration costs of approximately $6.7 million
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 downs
of fixed assets, lease terminations, and deferred repairs and maintenance of
vehicles and equipment. During the first six months of 1997, no material
acquisition related costs were incurred.
NET INTEREST EXPENSE. Net interest expense was $45.6 million for the six
months ended June 30, 1997 compared to $4.4 million in the comparable period in
1996, an increase of 930.6%. The increase in interest expense is due to the
increase in debt from $205.7 million at June 30, 1996 to $1.4 billion at June
30, 1997. This increase in debt outstanding is primarily the result of debt
incurred in connection with the Laidlaw Acquisition net of the application of
the net proceeds received in connection with the Canadian Sale.
INCOME TAXES. Income taxes reflect a 43% effective income tax rate for the
six months ended June 30, 1997 as compared to a 49% rate in the comparable
period in 1996. The Company's effective rate in the six months ended June 30,
1997 and 1996 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 LOSS, NET. On May 15, 1997, the Company repurchased from the
Laidlaw Group the $150 million 7% Junior Subordinated Debenture, the $168.3
million Zero Coupon Debenture and a warrant to purchase 20.4 million shares of
Common Stock, used as partial consideration for the purchase of Laidlaw's solid
waste business in 1996 for an aggregate purchase price of $230 million in cash.
An extraordinary charge related to the Laidlaw Repurchase of approximately $65.7
million ($39.4 million net of income tax benefit) was charged to earnings in the
second quarter of 1997. In addition, the Company replaced its $1.275 billion
1996 Bank Agreement with the $900 million Amended Bank Agreement on June 5, 1997
and recognized an extraordinary charge of approximately $21.6 million ($13.0
million net of income tax benefit) in the second quarter of 1997.
YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUES. Revenues in 1996 were $246.7 million compared to $217.5 million
in 1995, an increase of 13.4%. Approximately 4.3% of the increase in revenues is
attributable to acquisitions and 9.1% is attributable to internal growth.
Revenues of $9.4 million for 1996 were generated from companies acquired
subsequent to the end of the prior year, while increases in revenue attributable
to existing operations amounted to $19.8 million. Average price increases as a
percentage of revenue were approximately 3% of revenue while the remainder of
internal growth was from volume.
COST OF OPERATIONS. Cost of operations in 1996 was $138.4 million compared
to $120.7 million in 1995, an increase of 14.7%. This 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 56.1% in
1996 from 55.5% in 1995. Operating costs were affected by an increase in the
percentage of waste internalized to 71% in 1996 from 62% in 1995 which resulted
in a decrease in third-party disposal costs as a percentage of revenue. Cost of
operations were also affected by a significant increase in municipal solid waste
volumes offset by a decrease in higher priced special waste
S-20
<PAGE> 21
volumes. This change in revenue mix had the effect of increasing the cost of
disposal relative to revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased to
$38.6 million in 1996 compared to $36.7 million in 1995, an increase of 5.2%. As
a percentage of revenues, SG&A decreased to 15.6% in 1996 from 16.9% in 1995.
The increase in SG&A expense resulted from expenses associated with acquired
companies and expenses incurred in connection with Allied's increase in
personnel and other expenses related to the anticipated growth of Allied as it
continues to acquire companies. The decrease in SG&A as a percentage of revenues
can be attributed to an increase in revenue producing assets while corporate
level personnel and other related expenses increased moderately.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization in
1996 was $31.5 million compared to $25.8 million in 1995, an increase of 22.1%.
The increase in depreciation and amortization expense is due to acquisitions and
capital expenditures. Before the Laidlaw Acquisition, fixed assets increased to
$466.0 million at December 31, 1996 from $373.7 million at December 31, 1995 and
goodwill increased to $110.7 million at December 31, 1996 from $98.1 million at
December 31, 1995. As a percentage of revenues, depreciation and amortization
increased to 12.8% in 1996 from 11.9% in 1995. This increase is primarily
because amortization of landfill airspace as a percentage of revenue increased
to 3.2% in 1996 from 2.7% in 1995 resulting from an increase in the rate of
waste internalization.
ACQUISITION RELATED COSTS. In connection with the Laidlaw Acquisition,
Allied incurred approximately $84.6 million in charges primarily associated with
the acquisition, which include $51.5 million of environmental related matters,
$18.4 million of asset impairments and abandonments, and $14.7 million of
acquisition liabilities, of which $2.0 million relates to litigation matters,
$5.4 million relates to relocation and transition costs and bonuses, $3.8
million relates to taxes, claims and assessments and other integration costs,
and $3.5 million relates to acquired accounts receivable considered
uncollectible.
In connection with the Laidlaw Acquisition, Allied engaged an independent
environmental consulting firm to assist in conducting an environmental
assessment of the real property owned by certain subsidiaries acquired from
Laidlaw (the "LWS Subsidiaries") or third-parties, and properties under the
management of the LWS Subsidiaries. Several contaminated landfills and other
properties have been identified that would require those subsidiaries to incur
costs for incremental closure and post-closure measures, remediation activities
and litigation in the future. The costs of performing the investigation, design,
remediation and the allocation of responsibility to the subsidiaries of Allied
vary significantly between sites. Based on information available to Allied,
Allied recorded a provision of $51.5 million for environmental matters,
including closure and post-closure costs, in the 1996 statement of operations
and expects these amounts to be disbursed over the next 30 years.
As a result of the Laidlaw Acquisition, Allied increased its revenue base
by approximately 400% and entered into 14 new markets. In connection with the
significant increase in size and the redirection of its strategic operating
emphasis, Allied determined that certain asset values have become impaired as
they will provide no further benefit to the Company. Included among the asset
impairments are costs of $10.8 million related to over 50 noncompetition
agreements in several markets where the counterparty no longer poses a
significant threat, costs of $4.8 million for discontinued facilities and costs
of $2.8 million for market development activities no longer being pursued.
Costs of $7.1 million 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.
S-21
<PAGE> 22
UNUSUAL ITEMS. In December 1996 Allied recorded $5.7 million in unusual
items including $2.0 million in connection with the ongoing investigation and
remediation of Allied's Norfolk landfill and $3.7 million of other non-recurring
valuation adjustments.
NET INTEREST EXPENSE. Net interest expense was $7.1 million in 1996
compared to $10.6 million in 1995, a decrease of 32.9%. 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 and the refinancing of the 1994 Notes (as defined
herein) on July 31, 1996 resulting in a decrease in the interest rate from 12%
to 7% for the months of August through December 1996. Also, interest capitalized
in 1996 was $13.0 million compared to $11.1 million in 1995.
CONVERSION FEES. A non-cash conversion fee of $2.2 million was incurred in
the fourth quarter of 1995 as a result of an inducement offered by Allied to
holders of certain convertible preferred stock and convertible subordinated
notes to exercise their conversion option to receive Common Stock. The
inducement fee consisted of payment of dividends or interest from the conversion
date through the first call or redemption date of each convertible security.
Approximately 7.8 million shares of Common Stock were issued for conversion and
approximately 285,000 were issued for the conversion fee.
INCOME TAXES. Income taxes reflect a benefit at a 0.6% effective income
tax rate for 1996 which deviates from the federal statutory rate of 35% due
primarily to the treatment of expenses for book purposes that, when recognized
for tax purposes, may produce tax goodwill in excess of book goodwill. Other
items impacting Allied's effective tax rate for both 1996 and 1995 include the
differences in the treatment of goodwill for book and tax purposes, state income
taxes, and other permanent differences. See Note 10 to the Consolidated
Financial Statements, included in Allied's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as amended, filed under the Exchange Act
and incorporated by reference herein.
EXTRAORDINARY LOSS. On July 31, 1996, Allied completed a tender offer (the
"Tender Offer") for substantially all of the 1994 Notes at the redemption price
of $1,157.50 per $1,000 note. An extraordinary charge related to the Tender
Offer of approximately $18.4 million ($11.0 million net of income tax benefit)
was charged to earnings in the third quarter of 1996. In connection with the
Laidlaw Acquisition, Allied refinanced its $300 million senior revolving credit
facility and recognized an extraordinary charge of approximately $4.0 million
($2.4 million net of income tax benefit) that was charged to earnings in the
fourth quarter of 1996.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUES. Revenues in 1995 were $217.5 million compared to $158.4 million
in 1994, an increase of 37.4%. The increase in revenues is due primarily to the
effects of acquisitions as well as price and volume increases attributable to
existing operations. Revenues of $34.4 million in 1995 were generated from
companies acquired subsequent to the prior year, while increases in revenues
attributable to existing operations amounted to $24.7 million. Average price
increases as a percentage of revenue were approximately 5.7%.
COST OF OPERATIONS. Cost of operations in 1995 was $120.7 million compared
to $98.1 million in 1994, an increase of 23.1%. This increase in costs was
attributable primarily to the increase in revenues described above. As a
percentage of revenues, cost of operations decreased to 55.5% in 1995 from 61.9%
in 1994. The resulting increase in margins was due primarily to better
internalization of waste flows in 1995 as compared to 1994 during which
Allied-collected waste disposed at Allied-owned and/or operated landfills, as
measured using disposal costs, was 34.8% of revenue compared to 62.0% for 1995.
Gross profit also increased because of increased operating efficiencies
resulting from improvements made to vehicles and equipment through capital
expenditures made in 1994 and 1995.
S-22
<PAGE> 23
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased to
$36.7 million in 1995 compared to $32.6 million in 1994, an increase of 12.7%.
As a percentage of revenues, SG&A decreased to 16.9% in 1995 from 20.6% in 1994.
The increase in SG&A expenses resulted from expenses associated with acquired
companies and expenses incurred in connection with Allied's increase in
personnel and other expenses related to the anticipated growth of Allied as it
continues to acquire companies. The decrease in SG&A as a percentage of revenues
can be attributed to a significant increase in revenue producing assets while
corporate level personnel and other related expenses increased only moderately.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense in 1995 was $25.8 million compared to $16.9 million in 1994, an increase
of 52.3%. The increase in depreciation and amortization expense is due to
acquisitions and capital expenditures. Fixed assets increased to $373.7 million
at December 31, 1995 from $266.6 million at December 31, 1994 and goodwill
increased to $98.1 million at December 31, 1995 from $84.1 million at December
31, 1994. As a percentage of revenues, depreciation and amortization increased
to 11.9% in 1995 from 10.7% in 1994. This increase is primarily because
amortization of landfill airspace as a percentage of revenue increased to 2.7%
in 1995 from 1.0% in 1994 resulting from an increase in the rate of waste
internalization.
ACQUISITION RELATED COSTS. Costs of $1.5 million were incurred in
September 1995 for transaction and integration costs related to acquisitions
accounted for using the pooling-of-interests method for business combinations.
During 1994, no acquisitions were accounted for using this method.
UNUSUAL ITEMS. In December 1994 Allied recorded a provision of $2.1
million, in excess of the closure and postclosure reserves recorded in the
normal course of business, to recognize the estimated costs of additional
closure, postclosure and remedial measures related to its Norfolk landfill.
NET INTEREST EXPENSE. Net interest expense increased to $10.6 million in
1995 compared to $12.4 million in 1994, a decrease of 13.8%. Interest charges
decreased in 1995 compared to 1994 because of an increase in the amount of
capitalized interest to $11.1 million in the 1995 period compared to $3.5
million in 1994. The amount of interest capitalized increased in 1995 because of
an increase in transfer stations and landfill airspace under development or
under application for development compared to 1994 and the acquisition of
additional landfills subsequent to 1994. The decrease in interest charges was
offset by an increase in the interest rate on the 1994 Notes, from 10.75% in
1994 to 12% in January 1995 and an increase in interest bearing debt to
approximately $223.9 million at December 31, 1995 from approximately $188.0
million at December 31, 1994, due primarily to acquisitions and capital
expenditures.
CONVERSION FEES. A non-cash conversion fee of $2.2 million was incurred in
the fourth quarter of 1995 as a result of an inducement offered by Allied to
holders of certain convertible securities to exercise their conversion option to
receive Common Stock. The inducement fee consisted of payment of dividends or
interest from the conversion date through the first call or redemption date of
each convertible security. Approximately 7.8 million shares of Common Stock were
issued for conversion and approximately 285,000 were issued for the conversion
fee.
INCOME TAXES. Income taxes reflect a 44.1% effective income tax rate in
1995 compared to an income tax benefit reflecting an 18.6% effective rate in
1994. Allied's effective tax rate in 1995 and 1994 deviates from the federal
statutory rates of 35% and 34%, respectively, due to the effects of differences
in the treatment of goodwill for book and tax purposes, state income taxes, and
other permanent differences.
EXTRAORDINARY ITEMS. In connection with the Securities Purchase Agreement
between Allied and the TPG Group dated October 27, 1994, as amended (the "TPG
Agreement"), Allied solicited and obtained consents from a majority of the
holders of the 1994 Notes causing modifications to the indenture agreement and
the execution of a supplemental indenture (the "Supplemental Indenture"). Among
other things, the Supplemental Indenture increased Allied's restricted borrowing
S-23
<PAGE> 24
capacity (with certain limitations) under current and future revolving credit
agreements and lease lines from a total of $35 million to $120 million, deleted
certain borrowing restrictions, changed certain financial ratio covenants and
increased the per annum rate of interest from 10.75% to 12.0%. The execution of
the Supplemental Indenture, which was effective January 1995, was accounted for
as an early extinguishment of debt. Accordingly, capitalized deferred debt
issuance costs related to the original indenture were written off as of December
31, 1994 and an extraordinary charge of $4.6 million ($2.8 million net of income
tax benefit) was recorded. Additionally, in the first quarter of 1994, an
extraordinary charge of $334,000 ($206,000 net of income tax benefit) was
recognized as result of the early extinguishment of various debt instruments
using the proceeds from the 1994 Notes.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Allied has satisfied its acquisition, capital expenditure and
working capital needs primarily through bank financing, public offerings and
private placements of debt and equity securities. Between January 1, 1994 and
June 30, 1997, Allied completed the $900 million Amended Bank Agreement, which
replaced the $1.275 billion 1996 Bank Agreement completed in connection with the
Laidlaw Acquisition (of which $517 million was repaid with proceeds from the
Canadian Sale in March 1997), the private placement of $418 million face amount
of the Allied Notes (resulting in gross proceeds of $240 million), a $525
million private placement of the AWNA Notes, a $100 million public offering of
its Senior Subordinated Notes due 2004 (the "1994 Notes") (substantially all of
which were repurchased pursuant to the Tender Offer in July 1996), a $50 million
private placement of Common Stock, a $300 million senior revolving credit
facility (all debt under which was repaid in December 1996), and a $48 million
public equity offering. Due to the acquisition driven and capital intensive
nature of Allied's business strategy, Allied has used, and believes that it is
reasonably possible that it will continue using, amounts in excess of the cash
generated from operations to fund acquisitions and capital expenditures,
including landfill development. In connection with acquisitions, Allied 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, Allied has periodically had low levels
of working capital or working capital deficits.
S-24
<PAGE> 25
During the years ended December 31, 1994, 1995 and 1996, and the six months
ended June 30, 1996 and 1997, Allied's cash flows from operating, investing and
financing activities were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- -------------------
1994 1995 1996 1996 1997
------ ------ --------- ------ ---------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................ $ (6.0) $ 12.4 $ (79.4) $ 4.2 $ (33.8)
Write off of deferred debt issuance
costs.................................. -- -- -- -- 17.3
Extraordinary loss on early
extinguishments of debt................ 4.9 -- 22.4 -- --
Acquisition related costs................ -- 1.5 91.7 -- --
Unusual items............................ 2.1 -- 5.7 -- --
Non-cash operating expenses(1)........... 16.9 35.9 36.9 16.5 35.9
(Gain) loss on sale of fixed assets,
net.................................... 0.7 0.3 1.9 2.0 (0.5)
Increase (decrease) in operating assets
and liabilities, net................... 3.5 (5.7) (20.3) (22.2) (49.1)
------ ------ --------- ------ ---------
Cash provided by (used in) operating
activities........................ 22.1 44.4 58.9 0.5 (30.2)
------ ------ --------- ------ ---------
INVESTING ACTIVITIES:
Cost of acquisitions, net of cash
acquired............................... (49.2) (18.7) (1,356.6) (3.8) (100.5)
Capital expenditures..................... (48.3) (51.6) (54.5) (15.1) (53.8)
Capitalized interest..................... (3.5) (11.1) (13.0) (6.9) (15.2)
Proceeds from sale of fixed assets....... 1.4 1.1 0.6 0.2 526.8
Other.................................... 2.0 (0.4) -- 0.7 (23.3)
------ ------ --------- ------ ---------
Cash provided by (used for)
investing activities.............. (97.6) (80.7) (1,423.5) (24.9) 334.0
------ ------ --------- ------ ---------
FINANCING ACTIVITIES:
Net proceeds from sale and redemption of
preferred stock, common stock, stock
options and warrants................... 15.0 30.6 48.1 48.3 1.9
Net proceeds from long-term debt......... 126.3 66.6 1,809.7 25.4 876.1
Repayments of long-term debt............. (59.5) (55.8) (445.8) (51.2) (1,174.7)
Repurchase of Warrant.................... -- -- -- -- (49.0)
Other.................................... (4.9) (6.3) (1.3) 0.3 6.4
------ ------ --------- ------ ---------
Cash provided by (used for)
financing activities.............. 76.9 35.1 1,410.7 22.8 (339.3)
------ ------ --------- ------ ---------
Increase (decrease) in cash.............. $ 1.4 $ (1.2) $ 46.1 $ (1.6) $ (35.5)
====== ====== ========= ====== =========
</TABLE>
- ---------------
(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.
As of December 31, 1996 and June 30, 1997, Allied had cash and cash
equivalents of $50.1 million and $14.6 million, respectively. Allied's capital
expenditure and working capital requirements have increased significantly,
reflecting Allied's rapid growth by acquisition and development of revenue
producing assets, and will increase further as Allied continues to pursue its
business strategy. During 1996 Allied completed the Laidlaw Acquisition for
total consideration of approximately $1.5 billion consisting of $1.2 billion
cash, 14.6 million shares of Common Stock, the Laidlaw Warrant and the Allied
Debentures and acquired 21 additional businesses for total
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<PAGE> 26
consideration of approximately $126.5 million of which approximately $73.9
million of such consideration was paid in Common Stock and $3.9 million was paid
in seller notes. Total annualized revenues of the latter businesses are
approximately $78.8 million. From January 1, 1997 to July 31, 1997, Allied has
purchased solid waste operations representing approximately $155.8 million in
annual revenues and sold operations representing approximately $46.5 million in
annual revenues. Net consideration of approximately $156.9 million (including
$10 million for a landfill under development), comprised of cash, notes and
Common Stock, was paid in these transactions. For the calendar year 1997, Allied
expects to spend approximately $172.0 million for capital, closure and
post-closure, and remediation expenditures relating to its landfill operations.
As Allied continues to acquire waste operations in 1997, additional capital
amounts will be required during 1997 for the acquisition of businesses and the
capital expenditure requirements related to those acquired businesses.
On June 30, 1997, Allied's debt structure consisted of: $525 million of the
AWNA Notes; $500 million outstanding under the Term Loan Facility, approximately
$76 million outstanding under the Revolving Credit Facility; $67.7 million of
outstanding letters of credit under the Amended Bank Agreement; approximately
$240 million of the Allied Notes; and approximately $98.7 million of notes
payable and obligations under capital leases. As of June 30, 1997 there is an
aggregate availability under the Revolving Credit Facility of approximately $256
million to be used for working capital, letters of credit, acquisitions and
other general corporate purposes. No more than $175 million of the Revolving
Credit Facility may be used to support the issuance of letters of credit. The
indentures relating to the Allied Notes and the AWNA Notes and the Amended Bank
Agreement contain financial and operating covenants and significant restrictions
on the ability of the Company to complete acquisitions, pay dividends, incur
indebtedness, make investments and take certain other corporate actions. After
giving effect to the Offerings and the application of the net proceeds
therefrom, a substantial portion of the Company's available cash will be
required to be applied to service indebtedness, which is expected to include
approximately $197 million in principal and interest payments on an annualized
basis.
Allied is also required to provide financial assurances to governmental
agencies under applicable environmental regulations relating to its landfill
operations and collection contracts. Allied satisfies these financial assurance
requirements by issuing performance bonds, letters of credit, insurance policies
and trust deposits to secure Allied's obligations as they relate to landfill
closure and post-closure costs and performance under certain collection
contracts. At June 30, 1997, Allied had outstanding approximately $264.6 million
in financial assurance instruments, represented by approximately $183.0 million
of performance bonds, $22.3 million of letters of credit, $53.0 million of
insurance policies and $6.3 million of trust deposits. During calendar year
1997, Allied expects to be required to provide approximately $258 million in
financial assurance obligations relating to its existing landfill operations and
collection contracts. Allied expects that financial assurance obligations will
increase in the future as it acquires and expands its landfill activities and
that a greater percentage of the financial assurance instruments will be
comprised of performance bonds and insurance policies.
Allied 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. In addition to equipment leases
outstanding at December 31, 1996 and June 30, 1997 of $45.2 million and $47.6
million, respectively, Allied had available lease commitments of $11.9 million
and $22.4 million, respectively. Allied has entered into master equipment lease
facilities relating to the financing of the acquisition of trucks and
containers.
On August 12, 1997, Allied was awarded the contract to purchase (or, with
respect to one transfer facility, assume operation of) the active solid waste
disposal system for San Diego County, California, consisting primarily of four
landfills. Pursuant to the terms of the contract, Allied will pay $160 million
to San Diego County at closing which is expected to occur before year-end 1997.
In addition, Allied has agreed to reimburse San Diego County for up to
approximately $7.0 million of
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<PAGE> 27
capital expenditures. When the acquisition is completed, Allied expects to
internalize the disposal of approximately 1,200 tons of waste per day, in
addition to receiving from third parties 4,300 tons of waste per day, and to
establish a vertically integrated operation in San Diego. The completion of this
transaction is subject to certain normal regulatory approvals and certain other
conditions and consents by certain of Allied's existing lenders. Although there
can be no assurance that Allied will receive such approvals, satisfy such
conditions and obtain such consents, Allied expects that it will do so.
In addition, Allied has entered into letters of intent to acquire 12 solid
waste businesses representing an aggregate of approximately $131 million in
annual revenues.
There can be no assurance that the San Diego County transaction or the
Pending Acquisitions will be completed. Consummation of the Offerings is not
conditioned on consummation of the San Diego County transaction or the Pending
Acquisitions, nor is consummation of the San Diego County transaction or the
Pending Acquisitions conditioned on consummation of the Offerings.
Subtitle D and other regulations that apply to the non-hazardous waste
disposal industry have required and will continue to require Allied, as well as
others in the industry, to alter operations and to modify or replace
pre-Subtitle D landfills. Such expenditures have been and will continue to be
substantial. Further regulatory changes could accelerate expenditures for
closure and post-closure monitoring and obligate Allied to spend sums in
addition to those presently reserved for such purposes. These factors, together
with the other factors discussed above, could substantially increase Allied's
operating costs and impair Allied's ability to invest in its facilities.
Allied's ability to meet future capital expenditure and working capital
requirements, to make scheduled payments of principal of, to pay interest on, or
to refinance its indebtedness, and to fund capital amounts required for the
acquisition of businesses and the expansion of existing businesses depends on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors
beyond its control. Based upon the current level of operations and anticipated
growth, management of Allied believes that available cash flow, together with
available borrowing under the Amended Bank Agreement, the Lease Facilities and
other sources of liquidity, will be adequate to meet Allied's anticipated future
requirements for working capital, letters-of-credit, capital expenditures,
scheduled payments of principal of and interest on debt incurred under the
Amended Bank Agreement, interest on the AWNA Notes and, commencing December 1,
2002, on the Allied Notes and capital amounts required for acquisitions and
expansion. However, the principal payments at maturity on the AWNA Notes and the
Allied Notes may require refinancing. Also, there can be no assurance that
Allied's business will generate sufficient cash flow from operations or that
future financings will be available in an amount sufficient to enable Allied to
service its indebtedness or to make necessary capital expenditures, or that any
refinancing would be available on commercially reasonable terms, if at all.
Additionally, depending on the timing, amount and structure of any future
acquisitions and the availability of funds under the Amended Bank Agreement,
Allied may need to raise additional capital to fund the acquisition and
integration of additional solid waste businesses. Allied may raise such funds
through additional bank financings or public or private offerings of its debt
and equity securities. There can be no assurance that Allied will be able to
secure such funding, if necessary, on favorable terms, if at all. If Allied is
not successful in securing such funding, Allied's ability to pursue its business
strategy may be impaired and results of operations for future periods may be
negatively affected.
SIGNIFICANT FINANCING EVENTS
In December 1996, Allied entered into the 1996 Bank Agreement consisting of
(i) a $475 million five and one-half year amortizing senior secured term loan
facility, (ii) three amortizing senior secured term loan facilities in an
aggregate original principal amount of $500 million and with ultimate maturities
which ranged from six and one-half years to eight and one-half years, and (iii)
a
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$300 million five and one-half year senior secured revolving credit facility. In
connection with the closing of the Canadian Sale, an aggregate amount of
approximately $517 million was applied to prepayment of the 1996 Bank Agreement.
In June 1997, Allied entered into the Amended Bank Agreement with Credit
Suisse First Boston, as administrative and collateral agent, Citibank, N.A. as
documentation agent and Goldman Sachs Credit Partners, L.P., as syndication
agent, which replaced the 1996 Bank Agreement. The Amended Bank Agreement
provides a six and one-half year senior secured $500 million Term Loan Facility
and a six and one-half year senior secured $400 million Revolving Credit
Facility. Principal payments on the Term Loan Facility are payable quarterly,
beginning in September 1997 and increase from $10 million to $100 million per
annum through maturity in December 2003. Principal under the Revolving Credit
Facility is due upon maturity.
In addition to the scheduled principal payments above, Allied is also
required to make mandatory prepayments on the Amended Bank Agreement equal to
100% of the net proceeds from certain asset sales, the issuance of new debt
securities and extraordinary amounts, which include tax refunds, pension plan
reversions and certain insurance proceeds, and 50% of the net proceeds from new
equity issuances. Furthermore, Allied is also required to make mandatory
prepayments on the Amended Bank Agreement equal to 50% of Allied's annual excess
Cash Flow (as defined in the Amended Bank Agreement) unless Allied's Senior Debt
Ratio (as defined in the Amended Bank Agreement) for the relevant fiscal year
end is less than 2.0 to 1.0. Mandatory prepayments are applied first to the Term
Loan Facility on a pro rata basis against remaining scheduled principal
payments, and second to the permanent reduction of the Revolving Credit
Facility. In no event, however, shall the Revolving Credit Facility be required
to be reduced to an amount less than $300 million in connection with any such
mandatory prepayment.
Borrowings under the Revolving Credit Facility may be used for
acquisitions, the issuance of letters of credit, working capital and other
general corporate purposes. Of the $400 million available under the Revolving
Credit Facility, no more than $175 million may be used to support the issuance
of letters of credit.
Amounts outstanding under the Amended Bank Agreement bear interest, at
Allied's option, at either (a) a Base Rate, or (b) a Eurodollar Rate (both terms
as defined in the Amended Bank Agreement) plus, in either case, an agreed upon
applicable margin. The applicable margin will be adjusted from time to time
pursuant to a pricing grid based upon Allied's Leverage Ratio (as defined in the
Amended Bank Agreement) and varies between zero percent and 0.75% for Base Rate
loans, and 0.75% and 1.75% for Eurodollar loans. In addition, if at any time
Allied's Senior Debt Ratio is greater than 2.5 to 1.0, the applicable margin for
all loans will be increased by 0.25%.
The Amended Bank Agreement is guaranteed by substantially all of Allied's
present and future subsidiaries. In addition, the Amended Bank Agreement is
secured by substantially all the personal property and a pledge of the stock, of
substantially all of Allied's present and future subsidiaries.
The Amended Bank Agreement contains certain financial covenants including,
but not limited to, a Total Debt to EBITDA Ratio, a Senior Debt to EBITDA Ratio,
a Fixed Charge Coverage Ratio and an Interest Expense Coverage Ratio (all terms
as defined in the Amended Bank Agreement). In addition, the Amended Bank
Agreement also limits Allied's ability to make acquisitions, purchase fixed
assets above certain amounts, pay dividends, incur additional indebtedness and
liens, make optional prepayments on certain subordinated indebtedness, make
investments, loans or advances, enter into certain transactions with affiliates
or enter into a merger, consolidation or sale of all or a substantial portion of
Allied's assets.
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Allied has entered into interest rate protection agreements (the
"Agreements"), with reputable national banks and investment banking institutions
to reduce its exposure to fluctuations in variable interest rates. A summary of
the Agreements outstanding as of June 30, 1997 is as follows:
<TABLE>
<CAPTION>
NOTIONAL AMOUNTS FIXED RATE
- ---------------- ----------
(DOLLARS IN
MILLIONS)
<S> <C>
$ 50 5.76%
50 5.81
130 6.27
</TABLE>
The Agreements effectively change Allied's interest rate paid on $230
million of its floating rate long-term debt ($576 million at June 30, 1997) to a
weighted average fixed rate ceiling of approximately 6.06% plus applicable
margins imposed by the terms of the Amended Bank Agreement at June 30, 1997.
On May 15, 1997, Allied, pursuant to the Laidlaw Securities Purchase
Agreement, repurchased from the Laidlaw Group the Allied Debentures and the
Warrant for an aggregate purchase price of $230 million in cash. Also pursuant
to the Laidlaw Securities Purchase Agreement, the Apollo/ Blackstone Investors
purchased all of the Common Stock of Allied held by Laidlaw.
In connection with the Laidlaw Repurchase, Allied issued $418 million
aggregate face amount of Allied Notes in the Discount Offering on May 15, 1997.
The net proceeds of $230 million realized from the sale of the Discount Offering
were used to pay the cash consideration in the Laidlaw Repurchase. The Allied
Notes are not guaranteed by AWNA or any subsidiaries of AWNA and, therefore, the
Allied Notes are effectively subordinated to the AWNA Notes. The Allied Notes
were issued at a discount of principal amount and, unless certain provisions are
triggered, there will be no periodic cash payments of interest before June 1,
2002. Thereafter, the Allied Notes will accrue cash interest at the rate of
11.30% per annum, payable semi-annually on June 1 and December 1 of each year,
commencing December 1, 2002. As required by the indenture relating to the Allied
Notes, on July 14, 1997, Allied filed with the Securities and Exchange
Commission a registration statement on Form S-4 relating to an offer to exchange
registered Allied Notes for the existing Allied Notes. If Allied fails to effect
an exchange offer, or if the registration statement relating to the exchange
offer shall be withdrawn by Allied before certain dates, Allied will be subject
to penalty interest in varying amounts ranging from 0.25% to 1.0% per annum on
the principal amount thereof as liquidated damages to the holders of the Allied
Discount Notes. The Allied Notes cannot be redeemed until December 1, 2001,
except under certain circumstances. At any time prior to June 1, 2000, up to 33%
of principal amount of Allied Notes will be redeemable, at the option of Allied,
from the proceeds of one or more public offerings of capital stock by Allied at
a redemption price of 111.30% of their accreted value, plus accrued interest.
The Allied Notes contain several covenants, the most restrictive of which limits
Allied and its subsidiaries' and AWNA and its subsidiaries' ability to incur
additional indebtedness without complying with an interest coverage ratio test.
Other covenants contain limitations on payment of dividends except for certain
preferred stock, issuance of redeemable preferred stock, transactions with
affiliates, granting of liens and security interests, sales of assets and the
use of proceeds from sales of assets, mergers and consolidations, and changes of
control. The covenants do permit Allied and AWNA to incur certain indebtedness
including under the Amended Bank Agreement, indebtedness issued and/or assumed
in permitted acquisitions and other indebtedness which is limited to a certain
percentage of AWNA's total assets.
In connection with the Laidlaw Acquisition, AWNA issued the AWNA Notes in a
private offering on December 1, 1996. Net proceeds from the sale of the AWNA
Notes, after the underwriting discount and other expenses, were approximately
$509 million. The net proceeds were used to pay a portion of the cash purchase
price of the Laidlaw Acquisition, repay amounts outstanding under Allied's
previous $300 million credit facility with Credit Suisse First Boston as agent,
fund certain acquisitions and for general corporate purposes. The AWNA Notes
cannot be redeemed until December 1, 2001, except under certain circumstances.
Prior to December 1, 2001, the AWNA
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<PAGE> 30
Notes are subject to redemption, at the option of AWNA, at the greater of (i)
100% of the principal amount or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to
maturity on a semiannual basis at a comparable treasury yield plus 75 basis
points, plus in each case accrued and unpaid interest to the date of redemption.
At any time prior to December 1, 1999, up to 33% of the principal amount of AWNA
Notes will be redeemable, at the option of AWNA, from the proceeds of one or
more public offerings of capital stock by Allied at a redemption price of
110.25% of principal amount, plus accrued interest. The AWNA Notes are
guaranteed by Allied and substantially all of AWNA's subsidiaries, which
guarantees are expressly subordinated to the guarantees of the Amended Bank
Agreement. The AWNA Notes contain several covenants, the most restrictive of
which limits AWNA and its subsidiaries' ability to incur additional indebtedness
without complying with an interest coverage ratio test. Other covenants contain
limitations on payment of dividends except for certain preferred stock, issuance
of redeemable preferred stock, transactions with affiliates, granting of liens
and security interests, sales of assets and the use of proceeds from sales of
assets, mergers and consolidations, and changes of control. The covenants do
permit AWNA to incur certain indebtedness including the Amended Bank Agreement,
indebtedness issued and/or assumed in permitted acquisitions and other
indebtedness which is limited to a certain percentage of AWNA's total assets.
In connection with the Laidlaw Acquisition, Allied issued to the Laidlaw
Group the Laidlaw Warrant and the Allied Debentures, which were repurchased with
the net proceeds of the Discount Offering. For information regarding charges
relating to the Laidlaw Repurchase, see Note 3 of Notes to Pro Forma Combined
Financial Statements.
In January 1994, Allied issued $100 million of 1994 Notes. The net proceeds
from the sale of the 1994 Notes after underwriting discount and other expenses,
were approximately $95 million. In July 1996, Allied completed the Tender Offer
and purchased substantially all of its 1994 Notes at the redemption price of
$1,157.50 per $1,000 principal amount. In connection with the Tender Offer,
Allied recognized an extraordinary charge of $18.4 million ($11.0 million net of
income tax benefit), in the third quarter of 1996. Allied also received a
consent from a majority of the holders of the 1994 Notes to eliminate all
substantive financial covenants associated with the remaining 1994 Notes.
Simultaneously with the Tender Offer in July 1996, Allied completed a new
$300 million revolving credit facility which was extinguished on December 30,
1996 in connection with the financing of the Laidlaw Acquisition. Allied
recognized an extraordinary charge of $4.0 million ($2.4 million net of income
tax benefit) relating thereto in the fourth quarter.
On January 24, 1996, Allied completed a public offering of its Common
Stock. It issued 7.6 million shares for approximately $48 million net of $5.2
million in underwriting discounts, commissions and offering costs. The net
proceeds from the offering were used to repay amounts outstanding under Allied's
outstanding credit agreement and for other general corporate purposes.
During 1995, Allied offered to holders of all of its Series D, 9% and $90
convertible preferred stock and its 6% Convertible Subordinated Notes an
inducement to exercise their conversion option to receive 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, 7,757,056 shares of
Common Stock were issued upon conversion. Substantially all of the Series D
preferred stock and 6% Convertible Subordinated Notes were converted, all but
5,029 shares of the 9% preferred stock was converted and all of the $90
preferred stock was converted. Accordingly, Allied'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 285,000 shares of Common Stock. On July 24,
1997 all of the 9,496 shares of Preferred Stock outstanding as of June 30, 1997
were converted in accordance with their terms into 1,356,571 shares of Common
Stock.
On January 30, 1995, Allied obtained stockholder approval of the issuance
of 11,709,602 shares of Common Stock to the TPG Group and an affiliate, for $50
million (less approximately $5.0 million
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<PAGE> 31
of direct offering costs and other costs related to an amendment to the 1994
Notes). Such shares of Common Stock were purchased by the Apollo/Blackstone
Investors contemporaneously with the Laidlaw Repurchase.
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on Allied's operations.
Consistent with industry practice, most of Allied's contracts provide for a pass
through of certain costs, including increases in landfill tipping fees and, in
some cases, fuel costs. Allied therefore believes it should be able to implement
price increases sufficient to offset most cost increases resulting from
inflation. However, competitive factors may require Allied to absorb cost
increases resulting from inflation. Allied is unable to determine the future
impact of a sustained economic slowdown.
SEASONALITY
Allied 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.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus, including
documents incorporated by reference herein and therein, contain certain
statements that are "Forward Looking Statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Those statements
include, among other things, the discussions of Allied's business strategy and
expectations concerning market position, future operations, margins,
profitability, liquidity and capital resources, as well as statements concerning
the integration of the operations of the Laidlaw Acquired Businesses and
achievement of financial benefits and operational efficiencies in connection
therewith. Forward Looking Statements are included in "Prospectus Supplement
Summary," "Selected Financial Data," "Summary Pro Forma Condensed Combined
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Although Allied believes that the expectations
reflected in Forward Looking Statements are reasonable, they 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 Allied, or projections involving anticipated revenues,
expenses, earnings, levels of capital expenditures, liquidity or indebtedness or
other aspects of operating results or financial position. All phases of the
operations of Allied are subject to a number of uncertainties, risks and other
influences, many of which are outside the control of Allied and any one of
which, or a combination of which, could materially affect the results of
Allied's operations and whether the Forward Looking Statements made by Allied
ultimately prove to be accurate. Important factors that could cause actual
results to differ materially from Allied's expectations include, but are not
limited to, those are disclosed in this section and under "Risk Factors" in this
Prospectus Supplement and under "Risk Factors" in the accompanying Prospectus.
See "Risk Factors -- Risks Associated with Allied's Strategy; Potential
Difficulty in Obtaining Suitable Landfills, Collection Operations, Transfer
Stations and Permits; Ability to Achieve Synergies; Integration of Acquired
Businesses; Limited Operating History in Regard to Significant Assets; Capital
Requirements and Limited Working Capital; Risk of Competition from Other
Companies and Municipalities; Landfill Alternatives; Substantial Leverage;
Ability to Service Debt; Dependence on Distributions from Subsidiaries;
Restrictions Imposed by the Amended Bank Agreement; the Allied Notes and the
AWNA Notes; Reliance on Management; Cost of Compliance with Environmental
Regulations; Risk of Future Litigation; Impact of Adverse Weather Conditions"
set forth in the accompanying Prospectus and "Risk Factors -- Shares Eligible
for Future Sale; Potential Adverse Effect on Stock Price; Registration Rights"
set forth herein.
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<PAGE> 32
BUSINESS AND PROPERTIES
Allied is a vertically integrated, non-hazardous solid waste management
company providing collection, transfer, processing and disposal services. Allied
is the fifth largest non-hazardous solid waste management company in the United
States, as measured by revenues. Allied pursues a vertical integration business
strategy which seeks to bundle collection, transfer, processing and disposal
services in each market in which it operates. Allied serves 1.4 million
customers through operations in 21 states located primarily in the midwest,
northeast, southeast and southwest United States. No single customer accounted
for more than 1% of the Company's revenue in 1996. As of July 31, 1997, Allied
provided its services through a network of 82 collection companies, 39 transfer
stations, 55 landfills, and 22 recycling facilities. Allied had revenues of
$246.7 million for the year ended December 31, 1996 and $119.0 million and
$395.2 million for the six months ended June 30, 1996 and 1997, respectively.
The substantial increase in revenues in the first half of 1997 compared to the
same period in 1996 is primarily attributable to the Laidlaw Acquisition.
INDUSTRY TRENDS
Based on data available from the Environmental Protection Agency (the
"EPA") and industry trade journals, Allied estimates that the 1996 revenues of
the non-hazardous solid waste industry were approximately $35 billion. The
non-hazardous solid waste industry is highly fragmented. Approximately 36%, 33%
and 31% of the revenue is generated by publicly traded companies, municipalities
and privately held companies, respectively. The five largest publicly traded
companies represent substantially all of the publicly traded company revenues.
Allied believes that several factors will lead to continuing acquisitions
and consolidation in the industry. Rising costs, regulatory complexities and
increased capital expenditures will create opportunities for large integrated
public companies that can obtain financing in the capital markets. The following
factors are contributing to consolidation and acquisition opportunities:
(1) Subtitle D ("Subtitle D") of the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA") and similar state regulations
have significantly increased the amount of capital, technical expertise,
operating costs and financial assurance obligations required to own and
operate a landfill. See "-- Environmental and Other Regulations." As a
result, many landfill operators that lack the necessary capital or
expertise are electing to sell their landfills as an alternative to closing
them. Industry data show that, in recent years, the number of landfills in
the United States has been decreasing. In 1988 there were approximately
7,500 landfills; by 1991, the number had dropped to 5,700; and in 1995
there were less than 2,900 landfills.
(2) As an alternative to funding the changes required by Subtitle D,
many municipalities are electing to privatize their municipal solid waste
operations. A survey cited in a 1996 industry trade journal, Waste Age,
indicates that of the 1,600 municipalities surveyed, which together
represent 80% of the United States population, 11%, 35%, 27% and 22% are
considering privatization of solid waste collection services, material
recovery facilities, landfill operations and transfer stations,
respectively.
(3) As a result of heightened sensitivity to environmental conditions
in many communities, it is becoming increasingly desirable for solid waste
management companies to provide waste recycling programs in addition to
conventional collection and disposal services.
These developments, as well as more stringent financial assurance
requirements being imposed on solid waste management companies by various
municipalities, have increased the amount of capital generally required for
solid waste management operations, causing smaller companies that lack the
requisite capital to sell their operations to better-capitalized companies.
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BUSINESS STRATEGY
The major components of Allied's business strategy consist of: (1)
operating vertically integrated non-hazardous solid waste service businesses
with a high rate of waste internalization; (2) managing these businesses locally
with a strong focus on operations; (3) maintaining a high rate of growth through
acquisitions and internal growth in existing and selected new markets; and (4)
maintaining the financial capacity, management capabilities and administrative
systems and controls to support on-going operations and future growth.
VERTICAL INTEGRATION AND INTERNALIZATION. The vertical integration business
model is the key element of Allied's operating philosophy and growth
strategy. The fundamental objective of the vertical integration business
model is to control the waste stream from the point of collection through
disposal and to achieve a high rate of waste internalization. Allied seeks
to build, through acquisitions and other market development initiatives,
market specific, vertically integrated operations typically consisting of
one or more collection companies, transfer stations, processing centers and
landfills. Within its markets, Allied seeks to strengthen its competitive
position and improve its financial returns by acquiring additional operating
assets, typically through "tuck-in" collection company acquisitions. Allied
believes that it can realize competitive advantages and strong future growth
by continuously implementing this strategy across existing and new markets
in the United States. Allied's internalization rate, as measured by
collection volumes, was approximately 57% for the first half of 1997.
FOCUS ON OPERATIONS. Allied's operations-oriented business strategy is
characterized by decentralized operations and local management with
significant experience in operating and growing solid waste businesses.
Allied only recruits operating managers with extensive industry experience,
usually with significant experience in their geographic markets. Allied's
senior executive management, senior operating management and regional vice
presidents currently average approximately 17, 21 and 24 years of industry
experience, respectively. By continuing to hire and retain experienced,
local market-oriented mangers Allied believes that it will be well
positioned to react to changes in its markets and will be able to capitalize
on growth opportunities in existing and new markets.
MAINTAINING HIGH RATE OF GROWTH. Allied seeks to capitalize on the on-going
consolidation of the approximately $35 billion solid waste industry in the
United States. Allied intends to grow primarily by acquiring privately-owned
solid waste companies and through internal growth. Allied also intends to
take selective advantage of opportunities when government entities privatize
the operation of all or part of their solid waste systems. In addition,
Allied seeks to achieve broad geographic and business mix diversification in
its operations and market development activities. Allied's revenue mix for
the first six months of 1997 was approximately 58% collection, 24% disposal,
8% transfer, 4% recycling and 6% other.
MAINTAINING CAPACITY FOR FUTURE GROWTH. Allied implements its business
strategy by maintaining effective internal controls, experienced management
and sufficient financial capacity. While Allied expects internal cash flows
to fund most of its working capital and capital expenditure requirements,
Allied intends to access the public and private capital markets, as
appropriate, to fund its continuing growth and market development
activities.
ORGANIZATION, MARKETING AND SALES
Allied's operations are organized into six regions comprised of Central
States, Great Lakes, Midwest, Northeast, Southeast and West. Each region is
organized into several operating districts and each district is comprised of
specific site operations. In determining these regions and districts, Allied
utilizes its vertical integration strategy to optimize operating efficiencies
within each region.
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Each of its regions and substantially all of its districts include collection,
transfer, processing and disposal services, which facilitates efficient and cost
effective waste handling and allows the districts to maximize the
internalization of waste. In determining the boundaries of regions and
districts, consideration is also given to the aggregate revenues generated in
each region and district and the growth and expansion plans in each geographic
area.
Each region is managed by a regional vice president, who is supported by a
small staff which includes a regional controller. All regional vice presidents
and most regional controllers have significant industry experience (in the case
of regional vice presidents, averaging 24 years of experience). Most regional
offices are located in a district office in order to reduce overhead costs and
to promote a close working relationship between the regional management and
field operations personnel. In addition, Allied generally makes it a practice to
fill management positions from within the organization.
The responsibilities of Allied's field management also follow the vertical
integration model. All regional managers and generally most district managers
have responsibility for all phases of the waste handling process including
collection, transfer, processing and disposal. Regional management also has
responsibility for growing regional revenues through both acquisition and
internal growth initiatives. Allied believes that this approach promotes the
most efficient handling of waste, including increased internalization, and
results in reduced costs and increased profits. In addition to base salary,
regional and district management are compensated through a bonus program and
stock option plan. The compensation payable to each manager pursuant to the
bonus and stock option plans is largely based upon the operating profit in such
manager's geographic area of responsibility.
Each of Allied's districts has a staff responsible for sales and marketing.
Allied's policy is to periodically visit each commercial account to ensure
customer satisfaction and to sell additional services. In addition to calling on
existing customers, each salesperson calls upon potential customers within a
defined area in each market.
In addition to its sales efforts directed at commercial and industrial
customers, Allied has a municipal marketing coordinator in most service areas.
The municipal marketing coordinators are responsible for interfacing with each
municipality or community to which Allied provides residential service to ensure
customer satisfaction. In addition, the municipal coordinators organize and
handle bids for renewal and new municipal contracts in their service area.
COMPETITION
The non-hazardous solid waste collection and disposal industry is highly
competitive. The industry is comprised of four national waste companies in
addition to Allied: Waste Management, Inc.; Browning-Ferris Industries, Inc.
("BFI"); Republic Industries, Inc.; and USA Waste; and local and regional
companies of varying sizes and competitive resources such as Superior Services,
Inc. Allied also competes with those counties and municipalities that maintain
their own waste collection or disposal operations. These counties and
municipalities may have financial advantages through their access to tax
revenues and tax-exempt financing and their ability to mandate the disposal of
waste collected within the jurisdiction at a municipal landfill. Allied may also
experience competition from companies using alternative methods of managing
solid waste streams, such as incineration.
The solid waste collection and disposal industry is currently undergoing
significant consolidation, and Allied encounters competition in its efforts to
acquire landfills and collection operations. Accordingly, it may become
uneconomical for Allied to make further acquisitions or Allied may be unable to
locate or acquire suitable acquisition candidates at price levels and on terms
and conditions that Allied considers appropriate, particularly in markets Allied
does not already serve.
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ENVIRONMENTAL AND OTHER REGULATIONS
Allied is subject to extensive and evolving environmental laws and
regulations. These regulations are administered by the EPA and various other
federal, state and local environmental, zoning, health and safety agencies, many
of which periodically examine Allied's operations to monitor compliance with
such laws and regulations. Allied believes that there will be increased
regulation and legislation related to the waste management industry and Allied
attempts to anticipate such future regulatory requirements to ensure compliance.
Allied's operation of landfills subjects it to certain operational,
monitoring, site maintenance, closure, post-closure and other obligations which
could give rise to increased costs for monitoring and corrective measures.
Governmental authorities have the power to enforce compliance with these
regulations and to obtain injunctions or impose civil or criminal penalties in
case of violations. In connection with Allied's acquisition of existing
landfills, it is often necessary to expend considerable time, effort and money
to obtain permits required to increase the capacity of these landfills. Allied
cannot predict whether or not it will be able to obtain the governmental
approvals necessary to establish new or expand existing landfills and, if it
does, whether or not it will be economically beneficial to do so.
Allied's operations are subject to extensive regulation, principally under
the following federal statutes:
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976, AS AMENDED. RCRA
regulates, among other things, the handling, transportation and disposal of
hazardous and non-hazardous wastes and delegates authority to states to develop
programs to ensure the safe disposal of solid wastes. On October 9, 1991, the
EPA promulgated Solid Waste Disposal Facility Criteria for nonhazardous solid
waste landfills under Subtitle D. Subtitle D includes location standards,
facility design and operating criteria, closure and post-closure requirements,
financial assurance standards and groundwater monitoring as well as corrective
action standards, many of which had not commonly been in place or enforced
previously at landfills. These regulations led to a variety of requirements
applicable to landfill disposal sites, and have increased capital expenditures,
operating costs and financial assurance obligations. Subtitle D applies to all
solid waste landfill cells that received waste after October 9, 1991, and, with
limited exceptions, all landfills were required to meet these requirements by
October 9, 1993. Regulated landfills that were not in compliance with the
requirements of Subtitle D on the applicable date of implementation were
required to close. In addition, landfills that stopped receiving waste before
October 9, 1993 were not required to comply with the final cover provisions of
Subtitle D. Each state must comply with Subtitle D and was required to submit a
permit program designed to implement Subtitle D to the EPA for approval by April
9, 1993. States may impose requirements for landfill units that are more
stringent than the requirements of Subtitle D. Once a state has an approved
program, it must review all existing landfill permits to ensure that they comply
with Subtitle D.
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1972, AS AMENDED (THE "CLEAN
WATER ACT"). This act establishes rules regulating the discharge of pollutants
into streams and other waters of the United States (as defined in the Clean
Water Act) from a variety of sources, including solid waste disposal sites. If
runoff from Allied's landfills or transfer stations may be discharged into
surface waters, the Clean Water Act requires Allied to apply for and obtain
discharge permits, conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in those discharges. The permit
program has been expanded to include stormwater discharges from landfills that
receive, or in the past received, industrial waste. In addition, if development
may alter or affect "wetlands," a permit may have to be obtained and certain
mitigation measures may need to be undertaken before such development may be
commenced. This requirement is likely to affect the construction or expansion of
many solid waste disposal sites, including some owned or being developed by
Allied. The Clean Water Act provides civil, criminal and administrative
penalties for violations of its provisions.
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<PAGE> 36
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF
1980, AS AMENDED ("CERCLA"). CERCLA addresses problems created by the release
or threatened release of hazardous substances into the environment. CERCLA's
primary mechanism for remediating such problems is to impose strict, joint and
several liability for cleanup of disposal sites on current owners and operators
of the site, former site owners and operators at the time of disposal, and waste
generators and parties who arranged for disposal at the facility. The costs of a
CERCLA cleanup can be substantial. Liability under CERCLA is not dependent on
the existence or disposal of "hazardous wastes" (as defined under RCRA), but can
also be founded on the existence of even minute amounts of the more than 700
"hazardous substances" listed by the EPA.
THE CLEAN AIR ACT OF 1970, AS AMENDED (THE "CLEAN AIR ACT"). The Clean Air
Act provides for increased federal, state and local regulation of the emission
of air pollutants. The EPA has construed the Clean Air Act to apply to
landfills. In March 1996, the EPA adopted New Source Performance Standard and
Emission Guidelines (the "Emission Guidelines") for municipal solid waste
landfills. The Emission Guidelines impose limits on air emissions from solid
waste landfills. The Emission Guidelines propose two sets of emissions
standards, one of which is applicable to all solid waste landfills that commence
construction, reconstruction or modification after May 30, 1991 and another
which is applicable to all solid waste landfills that received waste or had the
capacity to receive waste after November 8, 1987. The Emission Guidelines may be
implemented by the states. These guidelines, combined with the new permitting
programs established under the recent Clean Air Act amendments, will likely
subject solid waste landfills to significant new permitting requirements and, in
some instances, require installation of methane gas recovery systems.
THE OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970, AS AMENDED ("OSHA"). OSHA
establishes certain employer responsibilities, including maintenance of a
workplace free of recognized hazards likely to cause death or serious injury,
compliance with standards promulgated by the Occupational Safety and Health
Administration, and various recordkeeping, disclosure and procedural
requirements. Various standards, including standards for notices of hazards,
safety in excavation and demolition work, and the handling of asbestos, may
apply to Allied's operations.
PROPOSED FEDERAL LEGISLATION. In the future, Allied's collection, transfer
and landfill operations may also be affected by legislation proposed in the
United States Congress that would authorize the states to enact legislation
governing interstate shipments of waste. Such federal legislation may allow
individual states to prohibit the disposal of out-of-state waste or to limit the
amount of out-of-state waste that could be imported for disposal and would
require states, under certain circumstances, to reduce the amounts of waste
exported to other states. If this or similar legislation is enacted, states in
which Allied will operate landfills could act to limit or prohibit the
importation of out-of-state waste. Such state actions could adversely affect
landfills within these states that receive a significant portion of waste
originating from out-of-state.
STATE REGULATION. Each state in which Allied operates has laws and
regulations governing solid waste disposal and water and air pollution and
remediation and, in most cases, regulations governing the design, operation,
maintenance and closure of landfills and transfer stations. Management believes
that several states have proposed or have considered adopting legislation that
would seek to regulate the interstate transportation and disposal of waste in
their landfills. Many states have also adopted legislative and regulatory
measures to mandate or encourage waste reduction at the source and waste
recycling.
Allied's collection and landfill operations may be affected by the current
trend toward laws requiring the development of waste reduction and recycling
programs. For example, a number of states have recently enacted laws that will
require counties to adopt comprehensive plans to reduce, through waste planning,
composting and recycling or other programs, the volume of solid waste deposited
in landfills within the next few years.
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<PAGE> 37
A number of states' local authorities have also taken or propose to take
steps to ban or otherwise limit the disposal of certain wastes, such as yard
wastes, beverage containers, newspapers, unshredded tires, lead-acid batteries
and household appliances into landfills.
Allied has implemented and will continue to implement its own environmental
safeguards that comply with or exceed these governmental requirements.
Additionally, Allied's policy will be to obtain an environmental assessment
prepared by an independent environmental consulting firm for all real estate
acquired.
LIABILITY INSURANCE AND BONDING
Allied carries general liability, comprehensive property damage, workers'
compensation, employer's liability, directors' and officers' liability and other
coverages it believes are customary to the industry. Allied also has
environmental impairment liability insurance for all of its operating landfills
except one owned and four operated sites. The environmental impairment liability
insurance is in the amount of up to $5 million for the policy term in excess of
a $1 million deductible per claim. Except as discussed in "-- Legal Proceedings"
below, management does not expect the impact of any known environmental or other
contingencies to be material to Allied's consolidated liquidity, financial
position or results of operations.
Allied is required to provide certain financial assurances to governmental
agencies under applicable environmental regulations relating to its landfill and
collection operations. These financial assurances include performance bonds,
letters-of-credit, insurance contracts and trust deposits required principally
to secure Allied's estimated landfill closure and post-closure obligations and
collection contracts. Allied expects to be required to provide approximately
$258 million in financial assurance obligations relating to its existing
landfill operations and collection contracts by the end of 1997. Allied expects
that financial assurances will increase in the future as Allied acquires and
expands its activities and that a greater percentage of the financial assurances
will be comprised, directly and indirectly, of letters-of-credit.
EMPLOYEES
As of June 30, 1997, Allied employed approximately 5,000 persons. Certain
employees of Allied are covered by collective bargaining agreements. Allied
believes relations with its employees are satisfactory.
PROPERTIES
Allied's principal executive offices are located at 15880 Greenway-Hayden
Loop, Suite 100, Scottsdale, Arizona 85260 where it currently leases
approximately 33,000 square feet of office space. Allied also maintains regional
administrative offices in Arizona, Illinois, Missouri, North Carolina and Ohio.
The principal property and equipment of Allied consists of land (primarily
landfill sites, transfer stations, and bases for collection operations),
buildings, and vehicles and equipment. At July 31, 1997, Allied owned and/or
operated 82 collection companies and 55 solid waste landfills aggregating
approximately 16,500 total acres, including approximately 6,300 permitted acres.
In addition, Allied owned and/or operated 39 transfer stations and 22 recycling
facilities.
LEGAL PROCEEDINGS
Allied is currently involved in certain routine litigation. Allied believes
that all such litigation arose in the ordinary course of business and that costs
of settlements or judgments arising from such suits will not have a materially
adverse effect on Allied's consolidated liquidity, financial position or results
of operations.
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<PAGE> 38
The business of Allied is regulated by federal, state and local provisions
that relate to the protection of the environment. The nature of Allied's
business results in it frequently becoming a party to judicial or administrative
proceedings involving governmental authorities and other interested parties. At
June 30, 1997, Allied was not involved in any such proceedings where management
believes sanctions imposed by governmental authorities may exceed $100,000. From
time to time Allied may also be subject to actions brought by citizens' groups,
adjacent landowners or others in connection with the permitting and licensing of
its landfills or transfer stations, or alleging personal injury, environmental
damage or violations of the permits and licenses pursuant to which Allied
operates.
In connection with the Laidlaw Acquisition, Allied engaged an independent
environmental consulting firm to assist in conducting an environmental
assessment of the real property owned by the LWS Subsidiaries or third-parties,
and properties under the management of the LWS Subsidiaries. Several
contaminated landfills and other properties have been identified that would
require those subsidiaries to incur costs for incremental closure and
post-closure measures, remediation activities and litigation costs in the
future. The costs of performing the investigation, design, remediation and
allocation of responsibility to the subsidiaries of Allied vary significantly
between sites. Based on information available to Allied, Allied recorded a
provision of $51.5 million for environmental matters, including closure and
postclosure costs, in the 1996 statement of operations and expects these amounts
to be disbursed over the next 30 years.
Allied has been notified that it is considered a potentially responsible
party at a number of locations under CERCLA or other environmental laws. Allied
continually reviews its status with respect to each location, taking into
account the alleged connection to the location and the extent of the
contribution to the volume of waste at the location, the available evidence
connecting the entity to that location and the numbers and financial soundness
of other potentially responsible parties at the location. The ultimate amounts
for environmental liabilities at sites regarding which Allied may be a
potentially responsible party cannot be determined and estimates of such
liabilities made by Allied, after consultation with its independent
environmental engineers, require assumptions about future events due to a number
of uncertainties including the extent of the contamination, the appropriate
remedy, the financial viability of other potentially responsible parties and the
final apportionment of responsibility among the potentially responsible parties.
Where Allied has concluded that its estimated share of potential liabilities is
probable, a provision has been made in the consolidated financial statements.
Since the ultimate outcome of these matters may differ from the estimates used
in Allied's assessment to date, the recorded liabilities will be periodically
evaluated as additional information becomes available to ascertain that the
accrued liabilities are adequate. Allied has determined that the recorded
liability for all contingent environmental matters as of June 30, 1997 of
approximately $154.7 million (including the $51.5 million charged to the 1996
consolidated statement of operations) represents the most probable outcome of
these matters. Allied does not expect that adjustments to estimates, which are
reasonably possible in the near term and that may result in changes to recorded
amounts, will have a material effect on Allied's consolidated liquidity,
financial position or results of operations.
The consolidated federal income tax returns for the fiscal years ended
August 31, 1986, 1987 and 1988 of certain subsidiaries of Allied that were
acquired from Laidlaw in December 1996 have been under audit by the Internal
Revenue Service. In March 1994, the LWS Subsidiaries received a Statutory Notice
of Deficiency proposing that the LWS Subsidiaries pay additional taxes relating
to disallowed deductions in those income tax returns (the "Tax Controversy").
The consolidated tax group of the LWS Subsidiaries has also received notice that
fiscal years 1992, 1993 and 1994 will be examined regarding the Tax Controversy.
The LWS Subsidiaries could be directly liable for a substantial portion of any
tax and interest assessed if the disallowance of the deduction is sustained. In
addition, under Treasury Regulations promulgated under Section 1502 of the
Internal Revenue Code ("IRC"), each member of the consolidated tax group
including each LWS Subsidiary, is or could be severally liable for federal
income tax liabilities of the entire consolidated tax
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<PAGE> 39
group, including any taxes due on the deemed sale of assets by the LWS
Subsidiaries pursuant to Section 338 of the IRC and all amounts at issue in the
Tax Controversy which are ultimately determined to be owed.
Any amounts at issue in the Tax Controversy and for which any LWS
Subsidiary may ultimately be found liable, are included in and covered by the
indemnification of Allied by Laidlaw set forth in the acquisition agreement
relating to the Laidlaw Acquisition (the "Laidlaw Acquisition Agreement"). The
obligation of Laidlaw to indemnify Allied in respect of amounts at issue in the
Tax Controversy is a general, unsecured obligation of Laidlaw. The ability of
Laidlaw to pay and fulfill such indemnification obligation will depend on the
financial condition of Laidlaw at the time of any required performance of such
obligation.
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<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
All of Allied's Directors and executive officers are listed in the
following table:
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITIONS HELD AGE SINCE
- ----------------------------------- ---------------------------------------- --- --------
<S> <C> <C> <C>
Roger A. Ramsey.................... Chairman of the Board of Directors 59 1989
Thomas H. Van Weelden.............. President, Chief Executive Officer,
Director 42 1992
Henry L. Hirvela................... Vice President, Chief Financial Officer 45 --
Michael G. Hannon.................. Vice President of Corporate Development 43 --
Peter S. Hathaway.................. Vice President, Chief Accounting Officer 41 --
Steven M. Helm..................... Vice President -- Legal and Secretary 49 --
Larry D. Henk...................... Vice President of Operations 37 --
James S. Eng....................... Controller 46 --
G. Thomas Rochford, Jr. ........... Treasurer 49 --
Nolan Lehmann...................... Director 53 1990
Alan B. Shepard.................... Director 73 1994
Brian A. O'Leary................... Director 58 1997
Michael F. Gross................... Director 35 1997
David B. Kaplan.................... Director 30 1997
Antony P. Ressler.................. Director 36 1997
Howard A. Lipson................... Director 33 1997
Dennis Hendrix..................... Director 57 1997
Warren B. Rudman................... Director 67 1997
Vincent Tese....................... Director 54 1997
</TABLE>
Roger A. Ramsey has served as Chairman of the Board of Allied since October
1989. He also served as Chief Executive Officer of Allied from October 1989 to
July 1997 and President of Allied from May 1992 to December 1992. Mr. Ramsey
devotes substantially all of his time to Allied's business. Since August 1986,
Mr. Ramsey has served as a general partner of Houston Partners ("HP"), a venture
capital firm located in Houston, Texas, which through its affiliates is a
stockholder of Allied. In 1968, Mr. Ramsey co-founded BFI and served as its Vice
President and Chief Financial Officer until 1976. Mr. Ramsey is also a member of
the Board of Trustees of Texas Christian University.
Thomas H. Van Weelden has served as a Director of Allied since March 1992
and was named Chief Executive Officer in July 1997 and President in December
1992. He also served as Chief Operating Officer of Allied from December 1992 to
July 1997 and as Vice President -- Development from January 1992 to December
1992. Mr. Van Weelden served as President and Chief Executive Officer of R.18,
Inc. ("R.18"), a solid waste disposal company in East Moline, Illinois, from
1991 until its acquisition by Allied in January 1992 and as President of Van
Weelden Brothers Waste and Vermillion Waste from 1975 until their acquisition by
Allied in July 1992.
Henry L. Hirvela has served as Vice President and Chief Financial Officer
of Allied since May 1996. From September 1995 through February 1996 he served as
Chief Financial Officer for Power Computing Corporation ("Power Computing"), a
privately owned manufacturer of Macintosh operating system personal computers.
Prior to joining Power Computing, Mr. Hirvela was employed by BFI since 1988 as
Vice President-Treasurer with responsibility for BFI's finance and cash
management functions. From 1981 until 1988 Mr. Hirvela worked for Texas Eastern
Corporation, a diversified international energy company, in a number of
management positions including Assistant
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<PAGE> 41
Treasurer and Manager-Corporate Development. Prior to joining Texas Eastern
Corporation Mr. Hirvela worked for Bank of America as an operations officer in
San Diego, California.
Michael G. Hannon has served as Vice President of Corporate Development of
Allied since April 1994. From 1975 to 1993, Mr. Hannon was employed by Laidlaw
where he held a variety of management positions. His most recent position at
Laidlaw was that of Regional Vice President, with overall responsibility for
Laidlaw's 24 midwestern waste service operations having annual revenues in
excess of $100 million. Prior to holding that position, Mr. Hannon held
positions in Mergers & Acquisitions and served as Controller.
Peter S. Hathaway has served as Vice President and Chief Accounting Officer
of Allied since February 1995. From September 1991 through 1994 he was employed
by BFI as Controller and Finance Director for certain Italian operations holding
responsibilities for the acquisitions, reorganization and integration,
controllership, and financing functions of a $100 million joint venture. From
1979 through September 1991, Mr. Hathaway served in the audit division of Arthur
Andersen LLP in Colorado, Italy and Connecticut, most recently in the position
of Senior Manager.
Steven M. Helm has served as Vice President -- Legal and Secretary of
Allied since May 1996. Prior to joining Allied, Mr. Helm was an attorney in
private practice in Illinois.
Larry D. Henk has served as Vice President of Operations of Allied since
June 1994. Mr. Henk joined Allied in January 1992, as General Manager of R.18,
when it was acquired by Allied. Prior to joining Allied, Mr. Henk served as
General Manager of R.18 since 1991 and General Manager of Environmental
Development Corporation from 1987 until its acquisition by Allied in July 1992.
James S. Eng has served as Controller since March 1997. Prior to joining
Allied, Mr. Eng served as the Controller of USA Waste from September 1996 to
March 1997. From November 1992 to September 1996, he served as Vice President,
Controller and Chief Accounting Officer for Sanifill, Inc. ("Sanifill"), a large
solid waste management company. Before joining Sanifill, Mr. Eng served in
various financial positions with BFI.
G. Thomas Rochford, Jr. has served as Treasurer since April 1997. From July
1984 to April 1997, Mr. Rochford served in a number of management positions with
Sysco Corporation ("Sysco"), including Manager of Tax and Fixed Assets, Director
of Treasury Operations, and, most recently, Assistant Treasurer, with
responsibilities for finance, cash management, risk management and benefits.
Prior to joining Sysco, Mr. Rochford served with Hydril, Inc. ("Hydril"), a
leading producer of oil well equipment, in several financial management
positions from April 1982 to July 1984. Before his employment with Hydril, Mr.
Rochford served in various audit capacities with the Indiana State Revenue
Department.
Nolan Lehmann has served as a Director of Allied since October 1990. Since
1983, Mr. Lehmann has served as President and a Director of Equus Capital
Management Corporation, a registered investment advisor, and Equus II
Incorporated, a registered public investment company whose stock is traded on
the American Stock Exchange. Mr. Lehmann also serves as a Director of Drypers
Corporation, Champion Healthcare Corporation, and Garden Ridge Corporation.
Alan B. Shepard has served as a Director since April 1994. Mr. Shepard is a
retired Rear Admiral of the United States Navy and a former astronaut with NASA,
retiring from the United States Navy and NASA in August 1974. Mr. Shepard is
currently the President of Seven Fourteen Enterprises, a Houston-based
investment company, and a limited partner of HP. He also serves as President of
the Mercury Seven Foundation, a non-profit organization that awards scholarships
to college students and as a Director of American Capital Bond Fund, American
Capital Convertible Securities Fund and Kwik-Kopy Corporation.
Brian A. O'Leary has served as a director of Allied since January 1997. Mr.
O'Leary founded Container Corporation of Carolina, a solid waste management
operation headquartered in Charlotte, North Carolina in 1970 and served as its
President and Chief Executive Officer until its acquisition by Allied in 1996.
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<PAGE> 42
Michael F. Gross has served as a director of Allied since May 1997. In
1990, Mr. Gross was one of the founding principals of Apollo Advisors, L.P.
("Apollo"), which together with an affiliate, serves as managing general partner
of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo Investment Fund III,
L.P., private securities investment funds, and Lion Advisors, L.P. ("Lion"),
which acts as financial advisor to and representative for certain institutional
investors with respect to securities investments. Mr. Gross is also a director
of Furniture Brands International, Inc., Converse, Inc., The Florsheim Group,
Inc., UroHealth, Inc., and Proffitts, Inc.
David B. Kaplan has served as a director of Allied since May 1997. Since
1991, Mr. Kaplan has been associated with and has been a limited partner of
Apollo and Lion. Mr. Kaplan is also a director of BDK Holdings, Inc., WMC
Finance Co., Dominick's Supermarkets, Inc., PRI Holdings, Inc. and Family
Restaurants, Inc.
Antony P. Ressler has served as a director of Allied since May 1997. In
1990, Mr. Ressler was one of the founding principals of Apollo and Lion. Mr.
Ressler is also a director of Dominick's Supermarkets, Inc., Family Restaurants,
Inc., PRI Holdings, Inc., United International Holdings, Inc. and Vail Resorts,
Inc. Mr. Ressler is also the Vice Chairman of LEARN (the Los Angeles Educational
Alliance for Reform Now), the largest public school reform movement in the
United States and a member of the Executive Committee of the Board of Directors
of the Jonsson Comprehensive Cancer Center at the UCLA Medical Center.
Howard A. Lipson has served as a director of Allied since May 1997. Mr.
Lipson is a member of Blackstone Group Holdings L.L.C. Mr. Lipson was a Managing
Director from 1994 to 1995, was a Vice President from 1991 to 1994 and joined
The Blackstone Group L.P. in 1988. Mr. Lipson is a director of Volume Services,
Inc., Prime Succession Inc., Ritvik Holdings, Inc., AMF Group, Inc. and Rose
Hills, Inc.
Dennis Hendrix has served as a director of Allied since July 1997. Mr.
Hendrix serves as a director of Duke Energy Corporation ("Duke Energy"), a large
energy services company. From November 1990 until April 1997, he served as
Chairman of the Board of Directors of Pan Energy Corp. (a predecessor to Duke
Energy) and as Pan Energy Corp.'s Chief Executive Officer from November 1990
until April 1995. Prior to joining Pan Energy Corp., Mr. Hendrix was President
and Chief Executive Officer of Texas Eastern Corporation from 1986 to 1989. He
is also Chairman of the Board of Directors of TEPPCO Partners, LP and a director
of Texas Commerce Bancshares.
Warren B. Rudman has served as a director of Allied since July 1997. Mr.
Rudman has been a partner in the law firm of Paul, Weiss, Rifkind, Wharton and
Garrison since 1992. From 1980 until 1992, Mr. Rudman served as a United States
Senator from New Hampshire. While in the Senate, Mr. Rudman was Chairman and
Vice Chairman of the Ethics Committee and also served on the Appropriations
Committee, the Intelligence Committee, the Governmental Affairs Committee and
the Permanent Subcommittee on Investigations. He also serves on the board of
directors of the Chubb Corporation, Collins & Aikman, Prime Succession and the
Raytheon Company. Mr. Rudman currently serves as Vice Chairman of the
President's Foreign Intelligence Advisory Board and on the board of trustees of
Boston College, Valley Forge Military Academy, the Council on Foreign Relations
and the Brookings Institution.
Vincent Tese has served as a director of Allied since July 1997. Mr. Tese
is on the board of directors of The Bear Stearns Companies, Inc. ("Bear
Stearns"), a national investment bank and brokerage company, which he joined in
December 1994. Prior to joining Bear Stearns, he served the government of New
York state from 1983 to December 1994 in several positions, including Director
of Economic Development, Chairman and Chief Executive Officer of the Urban
Development Corporation, and Commissioner of the Department of Economic
Development. Mr. Tese has also served as a Commissioner of the Port Authority of
New York and New Jersey. In 1976, Mr. Tese co-founded Cross Country Cable TV,
Inc. and has also served as Chairman of the Board of Directors of Cross County
Wireless, Inc., which was sold to Pacific Telesis in 1995. He is currently the
Chairman of the Board of Directors of Wireless Cable International, Inc.
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<PAGE> 43
SHARES ELIGIBLE FOR FUTURE SALE
Based on the number of outstanding shares of Common Stock as of July 31,
1997, upon consummation of the Offerings, Allied will have outstanding a total
of 96,008,391shares of Common Stock, including the 16,200,000 shares offered in
the Offerings and approximately 254,455 shares of Common Stock subject to
outstanding convertible debt securities, 858,942 shares of Common Stock subject
to outstanding warrants and 6,966,992 shares of Common Stock subject to stock
options granted under Allied's stock option plans. See Note 8 of Notes to
Allied's Consolidated Financial Statements, included in Allied's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, as amended, filed
under the Exchange Act and incorporated by reference herein. Of such shares,
approximately 61,401,365 shares of Common Stock, including the 16,200,000 shares
of Common Stock being sold in the Offerings (together with any shares of Common
Stock sold upon exercise of the Underwriters' over-allotment options), and
approximately 254,455 shares of Common Stock issuable upon conversion of
convertible debt securities, 616,827 shares of Common Stock issuable upon
exercise of warrants held by non-affiliates of Allied and 1,547,861 shares of
Common Stock issuable upon exercise of vested stock options held by
non-affiliates of Allied will be transferable without restriction or further
registration under the Securities Act, except for any shares acquired by an
affiliate of Allied (within the meaning of the Securities Act), which will be
subject to the resale limitations of Rule 144 promulgated under the Securities
Act. All of the 26,376,765 shares of Common Stock owned by the Apollo/Blackstone
Investors are "restricted" securities within the meaning of Rule 144 and may not
be sold in the absence of registration other than through Rule 144 described
below or another exemption from registration under the Securities Act.
In general, under Rule 144, as currently in effect, a stockholder who
(together with predecessor holders who were not "affiliates" of Allied (as such
term is defined in Rule 144 under the Securities Act, "Affiliates")) has
beneficially owned shares of Common Stock which are treated as "restricted
securities" (as defined in Rule 144) for at least one year from the date such
restricted securities were acquired from Allied or an Affiliate, is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of 1% of Allied's Common Stock then outstanding or the average weekly
trading volume in Allied's Common Stock during the four calendar weeks preceding
the date on which notice of such sale was filed under Rule 144. Sales under Rule
144 are also subject to certain provisions relating to the manner and notice of
sale and availability of current public information about Allied. In addition,
Affiliates of Allied must comply with the restrictions and requirements of Rule
144 (other than the one-year holding period requirements) in order to sell
shares of Common Stock that are not restricted securities (such as shares of
Common Stock acquired by Affiliates in market transactions). Furthermore, if a
period of at least two years has elapsed from the date restricted securities
were acquired from Allied or an Affiliate, a holder of such restricted
securities who is not an Affiliate at the time of the sale and has not been an
Affiliate for at least three months prior to such sale would be entitled to sell
the shares immediately without regard to the volume limitations and other
conditions described above.
In connection with the Laidlaw Repurchase and the acquisition of the
Laidlaw Shares by the Apollo/Blackstone Investors, Allied and the
Apollo/Blackstone Investors entered into a registration rights agreement which
provides that the Apollo/Blackstone Investors may require Allied to register
their shares of Common Stock at any time after May 15, 1999. In addition,
holders of 129,250 shares of Common Stock and holders of warrants to purchase
647,827 shares of Common Stock currently may require Allied to register their
shares of Common Stock.
Allied and its directors, executive officers and regional vice presidents
have agreed that during the period beginning from the date of this Prospectus
Supplement and continuing to and including the date 90 days after the date of
this Prospectus Supplement, not to sell, contract to sell or otherwise dispose
of any shares of Common Stock or any securities of Allied that are substantially
similar to the shares of Common Stock, or any other security convertible into or
exchangeable for, or that represent the right to receive, shares of Common Stock
or any such similar securities, except for shares of Common Stock issuable
pursuant to convertible debt securities, warrants and stock options outstanding
on the date of this Prospectus Supplement and shares of Common Stock (or
securities convertible or exchangeable into shares of Common Stock) to be issued
solely in connection with acquisitions, without the prior written consent of the
Underwriters, except for the shares of Common Stock offered in the Offerings.
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<PAGE> 44
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Allied's Common Stock at July 31, 1997 by: (i) each person who is
known by Allied to own beneficially more than five percent of the outstanding
shares of Common Stock, (ii) each director and named executive officer and (iii)
all directors and named executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------------
NAME OF PERSON OR IDENTITY OF GROUP(1) NUMBER PERCENT OF CLASS
- --------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
Roger A. Ramsey................................................ 1,202,514(2) 1.5%
Thomas H. Van Weelden.......................................... 1,495,860(3) 1.9%
Henry L. Hirvela............................................... 33,333(4) *
Larry D. Henk.................................................. 288,020(5) *
Steven M. Helm................................................. 15,137(6) *
Peter S. Hathaway.............................................. 27,472(7) *
Apollo Investment Fund III, L.P.
Apollo Overseas Partners III, L.P.
Apollo (U.K.) Partners III, L.P.
c/o Apollo Advisors II, L.P.(8).............................. 17,144,897(8) 21.5%
2 Manhattanville Road
Purchase, New York 10577
Blackstone Capital Partners II Merchant Banking Fund L.P.
Blackstone Offshore Capital Partners II L.P.
Blackstone Family Investment Partnership II L.P.
c/o Blackstone Management Associates II L.L.C.(9)............ 9,231,868(9) 11.6%
345 Park Avenue
New York, New York 10154
Nolan Lehmann.................................................. 1,426,958(10) 1.8%
Brian A. O'Leary............................................... 4,715,241(11) 5.9%
Alan B. Shepard................................................ 85,971(12) *
Michael Gross.................................................. 17,169,897(13) 21.5%
David B. Kaplan................................................ 17,169,897(13) 21.5%
Antony P. Ressler.............................................. 17,169,897(13) 21.5%
Howard A. Lipson............................................... 9,256,868(14) 11.6%
Dennis Hendrix................................................. 25,000(15) *
Warren B. Rudman............................................... 25,000(15) *
Vincent Tese................................................... 25,000(15) *
All directors and officers as a group (19
persons)(2)-(7),(10)-(16).................................... 35,864,138 43.8%
</TABLE>
- ---------------
* Does not exceed one percent.
(1) Unless otherwise indicated, the address of each person or group listed
below is 15880 N. Greenway Hayden Loop, Suite 100, Scottsdale, Arizona
85260.
(2) Includes (i) 75,694 shares of Common Stock that are beneficially owned by
an affiliate of Mr. Ramsey, and (ii) 776,341 shares of Common Stock that
may be acquired on the exercise of options.
(3) Includes 588,841 shares of Common Stock that may be acquired on the
exercise of options and 10,000 shares of Common Stock that may be acquired
on the exercise of warrants.
(4) Represents shares of Common Stock that may be acquired on the exercise of
options.
(5) Includes 243,133 shares of Common Stock that may be acquired on the
exercise of options.
(6) Includes 12,637 shares of Common Stock that may be acquired on the exercise
of options.
(7) Includes 26,222 shares of Common Stock that may be acquired on the exercise
of options.
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<PAGE> 45
(8) Apollo Advisors II, L.P. ("Apollo Advisors") serves as general partner for
each of Apollo Investment Fund III, L.P., Apollo Overseas Partners III,
L.P. and Apollo (UK) Partners III (collectively, the "Apollo Investors"),
which directly own 15,632,717, 934,397 and 577,783 shares of Common Stock,
respectively, representing 19.6%, 1.2% and 0.7% of the outstanding Common
Stock, respectively. Messrs. Gross, Kaplan and Ressler are principals of
Apollo Advisors and each expressly disclaim beneficial ownership of the
indicated shares. See "Management." Pursuant to the Shareholders Agreement
among Allied and the Apollo/Blackstone Investors (the "Apollo/Blackstone
Shareholders Agreement") and certain other agreements among the Apollo/
Blackstone Investors, Apollo Advisors and/or the Apollo Investors may be
deemed to beneficially own the shares of Common Stock owned by the
Blackstone Investors (as defined below). However, Apollo Advisors and the
Apollo Investors each disclaim any pecuniary interest in such shares.
(9) Blackstone Management Associates II L.L.C. ("Blackstone Associates") serves
as general partner for each of Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P. and
Blackstone Family Investment Partnership II L.P. (collectively, the
"Blackstone Investors"), which directly own 6,611,545, 1,962,385 and
657,938 shares of the outstanding Common Stock, respectively, representing
8.3%, 2.5% and 0.8% of the outstanding Common Stock, respectively. Mr.
Lipson is Senior Managing Director of Blackstone Associates and expressly
disclaims beneficial ownership of the indicated shares. Pursuant to the
Apollo/Blackstone Shareholders Agreement and certain other agreements among
the Apollo/Blackstone Investors, Blackstone Associates and/or the
Blackstone Investors may be deemed to beneficially own shares of Common
Stock owned by the Apollo Investors. However, Blackstone Associates and the
Blackstone Investors each disclaim any pecuniary interest in such shares.
(10) Includes (i) 1,234,634 shares of Common Stock that are beneficially owned
by an affiliate of Mr. Lehmann, (ii) 125,000 shares of Common Stock that
may be acquired on the exercise of warrants beneficially owned by an
affiliate of Mr. Lehmann and (iii) 55,000 shares of Common Stock that may
be acquired on the exercise of options.
(11) Includes 10,000 shares of Common Stock that may be acquired on the exercise
of options.
(12) Includes 55,000 shares of Common Stock that may be acquired on the exercise
of options.
(13) Includes 17,144,897 shares beneficially owned by the Apollo Investors. Each
of Messrs. Gross, Kaplan and Ressler expressly disclaims beneficial
ownership of such shares. Also includes 25,000 shares that may be acquired
on the exercise of options.
(14) Includes 9,231,868 shares beneficially owned by the Blackstone Investors.
Mr. Lipson expressly disclaims beneficial ownership of such shares. Also
includes 25,000 shares that may be acquired on the exercise of options.
(15) Represents shares of Common Stock that may be acquired on the exercise of
options.
(16) Includes 21,867 shares of Common Stock that may be acquired on the exercise
of options.
APOLLO/BLACKSTONE TRANSACTION
On May 15, 1997, each of the TPG Group (which owned 11,776,765 shares of
Common Stock) and the Laidlaw Group (which owned 14,600,000 shares of Common
Stock) sold all of its shares to Apollo Investment Fund III, L.P., Apollo
Overseas Partners III, L.P, Apollo (U.K.) Partners III, L.P., Blackstone Capital
Partners II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II
L.P. and Blackstone Family Investment Partnership II L.P. As a result of the
consummation of these sales, the Apollo/Blackstone Investors own an aggregate of
26,376,765 shares of Common Stock, representing approximately 33.1% of the
shares of Common Stock outstanding as of July 31, 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In connection with the consummation of these transactions, four Board
members designated by the TPG Group and two Board members designated by the
Laidlaw Group resigned and four
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persons designated by the Apollo/Blackstone Investors (Messrs. Gross, Kaplan,
Ressler and Lipson) were appointed in their place. See "Management."
Certain agreements, including a Shareholders Agreement and a Registration
Rights Agreement, between Allied and the Apollo/Blackstone Investors became
effective upon the Apollo/Blackstone Investors acquiring the shares of Common
Stock owned by the Laidlaw Group. The Shareholders Agreement, among other
things, grants the Apollo/Blackstone Investors certain rights to representation
on Allied's Board of Directors and imposes certain restrictions on the
acquisition and disposition of shares of Common Stock by the Apollo/Blackstone
Investors and on the conduct of the Apollo/Blackstone Investors with respect to
Allied. The Registration Rights Agreement grants the Apollo/Blackstone Investors
certain rights to require Allied to register the shares of Common Stock they own
under the Securities Act at any time after May 15, 1999.
The following is a summary of certain provisions of the Shareholders
Agreement.
STANDSTILL. Until the earliest to occur of (A) the sixth anniversary of
the date on which the Apollo/Blackstone Investors acquired the shares of Common
Stock owned by the Laidlaw Group (the "Laidlaw Closing Date"), (B) the date on
which Apollo/Blackstone Investors own, collectively, voting securities of Allied
("Voting Securities") which would represent (i) less than 10% of the total
voting power, on a fully diluted basis, of all voting securities and (ii) less
than 10% of the total voting power of then outstanding voting securities and (C)
the occurrence of one of certain specified early termination events (such
period, the "Standstill Period"), each Apollo/Blackstone Investor will not, and
will cause each of its affiliates not to, with certain exceptions: (i) acquire,
offer to acquire, or agree to acquire, by purchase or otherwise, any Voting
Securities or voting rights or direct or indirect rights or options to acquire
any Voting Securities of Allied or any of its affiliates; (ii) make or cause to
be made any proposal for (x) any merger, consolidation, recapitalization,
liquidation or other business combination transaction involving Allied; (y) any
tender offer or exchange offer for any securities of Allied; or (z) any sale or
other disposition of assets of Allied or any of its subsidiaries in a single
transaction or in a series of related transactions in each of the foregoing
cases constituting individually or in the aggregate 10% or more of the assets or
voting securities (as applicable) of Allied (a "Reorganization Transaction");
(iii) form, join or in any way participate in a group (as such term is used in
Section 13(d)(3) of the Exchange Act) with respect to any securities of Allied
or its affiliates, other than with other Apollo/Blackstone Investors or
affiliates of any Apollo/Blackstone Investor; provided that in the case of
securities other than voting securities, the Apollo/Blackstone Investors may
participate in a group with respect thereto with the prior approval of a
majority of the entire Board of Directors (which approval is requested in a
manner which does not require disclosure publicly or to any third party); (iv)
make, or in any way cause or participate in, any "solicitation" of "proxies" to
vote (as those terms are defined in Regulation 14A under the Exchange Act) with
respect to Allied or its affiliates, or communicate with, seek to advise,
encourage or influence any person, in any manner, with respect to the voting of,
securities of Allied or its affiliates, or become a "participant" in any
"election contest" (as those terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to Allied or its affiliates (other than non-public
communications with other Apollo/Blackstone Investors or affiliates of any
Apollo/Blackstone Investor which would not require public disclosure by any
person); (v) initiate, propose or, except with the prior approval of a majority
of the entire Board of Directors (which approval is requested in a manner which
does not require disclosure publicly or to any third parties), otherwise solicit
stockholders for the approval of one or more stockholder proposals with respect
to Allied or its affiliates or induce or attempt to induce any other person to
initiate any stockholder proposal or seek election to or seek to place a
representative on the Board of Directors of Allied (except pursuant to the
provisions of the Shareholders Agreement relating to the right of the
Apollo/Blackstone Investors to have designees on the Board of Directors) or its
affiliates or seek the removal of any member of the Board of Directors of Allied
or its affiliates (for this purpose, the actions of the designees of the
Apollo/Blackstone Investors to the Board of Directors (the "Shareholder
Designees") in communicating (without public disclosure or disclosure to third
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<PAGE> 47
parties) with the Board of Directors in their capacity as directors of Allied,
and non-public communication by an Apollo/Blackstone Investor with other
Apollo/Blackstone Investors or affiliates of any Apollo/Blackstone Investor
which would not require public disclosure by any person, shall not be deemed to
be in contravention of this clause (v)); (vi) in any manner, agree, attempt,
seek or propose (other than making any request for permission with respect
thereto which would not require disclosure publicly or to any third party) to
deposit any securities of Allied or its affiliates in any voting trust or
similar arrangement or to subject any securities of Allied or its affiliates to
any other voting or proxy agreement, arrangement or understanding (other than
any such agreements or understandings with other Apollo/Blackstone Investors or
affiliates of any Apollo/Blackstone Investor); (vii) offer, sell or transfer any
Common Stock or rights to receive Common Stock except for dispositions in
accordance with the Shareholders Agreement; (viii) disclose any intention, plan
or arrangement, or make any public announcement (or request permission to make
any such announcement other than making any request for permission which would
not require disclosure publicly or to any third party), or induce any other
person to take any action, inconsistent with the foregoing; (ix) enter into any
negotiations, arrangements or understandings with any third party with respect
to any of the foregoing; (x) advise, assist or encourage or finance (or assist
or arrange financing to or for) any other person in connection with any of the
foregoing; (xi) otherwise act in concert with others to seek to control or
influence the management, Board of Directors or policies of Allied or its
affiliates (for this purpose, the actions of the Shareholder Designees in their
capacity as directors of Allied shall not be deemed to be in contravention of
this clause (xi)); or (xii) request a waiver of any of the provisions of any of
clauses (i) through (xi) (except any request which would not require disclosure
publicly or to any third party); provided, that these restrictions shall not
restrict or inhibit the rights of an Apollo/Blackstone Investor to exercise its
voting rights as a stockholder of Allied (subject to the agreements of the
Apollo/Blackstone Investors regarding voting in the Shareholders Agreement). The
obligations of the Apollo/Blackstone Investors under the Standstill Period
described above terminate early upon the occurrence of specified Company
defaults or insolvency-related events.
BOARD REPRESENTATION. As of the Laidlaw Closing Date and until the earlier
to occur of the sixth anniversary of the Laidlaw Closing Date and the date on
which the Apollo/Blackstone Investors own, collectively, less than 20% of the
shares (the "Shares") of Common Stock acquired from the TPG Group and Laidlaw
Transportation (the "Shareholder Designee Period"), the Board of Directors shall
consist of no more than 12 directors (11 directors if Mr. O'Leary ceases to
serve as a director). For so long as the Apollo/ Blackstone Investors are
entitled to at least two Shareholder Designees, the Apollo/Blackstone Investors
shall be entitled to have one Shareholder Designee serve on each committee of
the Board of Directors other than any committee formed for the purpose of
considering matters relating to the Apollo/Blackstone Investors and as set forth
below with respect to Allied's Nominating Committee (as defined below). At all
times during the Shareholder Designee Period, Allied agrees to support the
nomination of, and the Nominating Committee shall recommend to the Board of
Directors the inclusion in the slate of nominees recommended by the Board of
Directors to shareholders for election as directors at each annual meeting of
shareholders of Allied: (i) no more than two persons who are executive officers
of Allied ("Management Directors"), (ii)(A) four Shareholder Designees, so long
as the Apollo/Blackstone Investors beneficially own 75% or more of the Shares,
(B) three Shareholder Designees, so long as the Apollo/Blackstone Investors
beneficially own 50% or more but less than 75% of the Shares, (C) two
Shareholder Designees, so long as the Apollo/Blackstone Investors beneficially
own 25% or more but less than 50% of the Shares and (D) one Shareholder
Designee, so long as the Apollo/Blackstone Investors beneficially own 20% or
more but less than 25% of the Shares (each a "Beneficial Ownership Threshold"),
provided that if at any time as a result of Allied's issuance of voting
securities the Apollo/Blackstone Investors beneficially own 9% or less of the
total voting power of voting securities then outstanding (the "Actual Voting
Power Threshold"), the Apollo/Blackstone Investors shall be entitled to no more
than one Shareholder Designee, and (iii) such other persons, each of whom is (A)
recommended by the Nominating Committee and (B) not
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<PAGE> 48
an employee or officer of or outside counsel to Allied or a partner, employee,
director, officer, affiliate or associate (as defined in Rule 12b-2 under the
Exchange Act) of any Apollo/Blackstone Investor or any affiliate of an
Apollo/Blackstone Investor or as to which the Apollo/Blackstone Investors or
their affiliates own at least ten percent of the voting equity securities
("Unaffiliated Directors"). At all times during the Shareholder Designee Period,
Unaffiliated Directors shall be designated exclusively by a majority of a
nominating committee (the "Nominating Committee"), which shall at all times
during the Shareholder Designee Period consist of not more than four persons,
two of whom shall be Shareholder Designees (or such lesser number of Shareholder
Designees as then serves on the Board of Directors) and two of whom shall be
either Management Directors or Unaffiliated Directors. If the Nominating
Committee is unable to recommend one or more persons to serve as Unaffiliated
Directors (except with respect to any vacancy created by an Unaffiliated
Director ceasing to serve as such), then the Board of Directors shall nominate
and recommend for election by stockholders an Unaffiliated Director then serving
on the Board of Directors. If the Apollo/Blackstone Investors beneficially own
less than 50% of the shares of Common Stock acquired from the TPG Group and the
Laidlaw Group, the Nominating Committee shall be comprised of individuals only
one of whom is a Shareholder Designee.
VOTING. Each Apollo/Blackstone Investor has agreed that during the
Standstill Period: (i) in connection with the election of directors of Allied,
such Apollo/Blackstone Investor and their affiliates shall vote or cause to be
voted all Voting Securities beneficially owned by such Apollo/Blackstone
Investor to elect those individuals nominated in accordance with the provisions
of the Shareholders Agreement; (ii) in connection with any proposal for a
Reorganization Transaction, such Apollo/Blackstone Investor and their affiliates
shall vote or cause to be voted, or consent with respect to, all Voting
Securities beneficially owned by such Apollo/Blackstone Investor and their
affiliates in the manner recommended by a majority of the entire Board of
Directors; and (iii) in connection with other proposals submitted to
shareholders of Allied, such Apollo/Blackstone Investor and their affiliates
shall be free to vote or cause to be voted, or consent with respect to, all
voting securities beneficially owned by such persons in their discretion.
RESTRICTIONS ON DISPOSITIONS. Each Apollo/Blackstone Investor has agreed
not to dispose of any voting securities prior to the second anniversary of the
Laidlaw Closing Date, except to its affiliates, another Apollo/Blackstone
Investor or pursuant to a merger transaction or tender offer approved by a
majority of the entire Board. Thereafter and during the Standstill Period,
dispositions may be effected generally to any Person that would, following such
sale, beneficially own no more than 9% of the voting power of all voting
securities on a fully diluted basis.
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<PAGE> 49
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Allied
has agreed to sell to each of the International Underwriters named below, and
each of such International Underwriters, for whom Goldman Sachs International,
Credit Suisse First Boston (Europe) Limited, Donaldson, Lufkin & Jenrette
International, Merrill Lynch International and Morgan Stanley & Co.
International Limited are acting as representatives, has severally agreed to
purchase from Allied, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
--------------------------------------------------------- ----------------
<S> <C>
Goldman Sachs International..............................
Credit Suisse First Boston (Europe) Limited..............
Donaldson, Lufkin & Jenrette International...............
Merrill Lynch International..............................
Morgan Stanley & Co. International Limited...............
----------------
Total..........................................
=================
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take all of the shares of Common
Stock offered hereby, if any are taken.
The International Underwriters propose to offer the Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain securities
dealers at such price less a concession of $ per share. The
International Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain brokers and dealers. After the
shares of Common Stock are released for sale to the public, the offering price
and other selling terms may from time to time be varied by the representatives.
The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 12,960,000 shares
of Common Stock in the United States. The offering price and aggregate
underwriting discounts and commissions per share for the two Offerings are
identical. The closing of the offering made hereby is a condition to the closing
of the U.S. Offering, and vice versa. The representatives acting on behalf of
the U.S. Underwriters are Goldman, Sachs & Co., Credit Suisse First Boston
Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of the
U.S. Underwriters has agreed that, as a part of the distribution of the shares
offered hereby and subject to certain exceptions, it will offer, sell or deliver
the shares of Common Stock, directly or indirectly, only in the United States of
America (including the States and District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction (the "United States")
and to U.S. persons, which term shall mean, for purposes of this paragraph: (a)
any individual who is a resident of the United States or (b) any corporation,
partnership or other entity organized in or under the laws of the United States
or any political subdivision thereof and whose office most directly involved
with the purchase is located in the United States. Each of the International
Underwriters named herein has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the International
Offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any
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<PAGE> 50
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
Allied has granted the International Underwriters an option exercisable for
30 days after the date of this Prospectus Supplement to purchase up to an
aggregate of 486,000 additional shares of
Common Stock solely to cover over-allotments, if any. If the International
Underwriters exercise their over-allotment option, the International
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof which the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
3,240,000 shares of Common Stock offered hereby. The Company has granted the
U.S. Underwriters a similar option to purchase up to an aggregate of 1,944,000
additional shares of Common Stock.
Allied and its directors, executive officers and regional vice presidents
have agreed that during the period beginning from the date of this Prospectus
Supplement and continuing to and including the date 90 days after the date of
this Prospectus Supplement, not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities of Allied that are
substantially similar to the shares of Common Stock, or any other security
convertible into or exchangeable for, or that represent the right to receive,
shares of Common Stock or any such similar securities, except for shares of
Common Stock issuable pursuant to convertible debt securities, warrants and
stock options outstanding on the date of this Prospectus Supplement and shares
of Common Stock (or securities convertible or exchangeable into Common Stock) to
be issued solely in connection with acquisitions, without the prior written
consent of the Underwriters, except for the shares of Common Stock offered in
the Offerings.
Each International Underwriter has also agreed that (a) it has not offered
or sold and prior to the date six months after the date of issue of the shares
of Common Stock will not offer or sell any shares of Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the shares of Common Stock in, from or otherwise involving the
United Kingdom, and (c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issuance of the shares of Common Stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the initial public offering price.
In connection with the Offerings, the Underwriters may purchase and sell
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions in
connection with the Offerings. Stabilizing transactions consist of certain bids
or purchases for the purpose of preventing or retarding a decline in the market
price of the Common Stock; and syndicate short positions involve the sale by the
Underwriters of a greater number of shares of Common Stock than they are
required to purchase from the Company in the Offerings. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the shares of Common Stock sold in
the Offerings for their account, may be reclaimed by the syndicate if such
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<PAGE> 51
shares of Common Stock are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on Nasdaq or otherwise.
As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the Common Stock may make bids for or purchases of the Common Stock in Nasdaq
until such time, if any, when a stabilizing bid for such securities has been
made. Rule 103 generally provides that (1) a passive market maker's net daily
purchases of the Common Stock may not exceed 30% of its average daily trading
volume in such securities for the two full consecutive calendar months (or any
60 consecutive days ending within the 10 days) immediately preceding the date of
this Prospectus Supplement, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for the Common Stock by persons who are not passive
market makers and (3) bids made by passive market makers must be identified as
such.
Goldman, Sachs & Co. and Goldman Sachs International are affiliates of
Goldman Sachs Credit Partners, L.P. and Credit Suisse First Boston Corporation
and Credit Suisse First Boston (Europe) Limited are affiliates of Credit Suisse
First Boston. Goldman Sachs Credit Partners, L.P. and Credit Suisse First Boston
are lenders under the Amended Bank Agreement. In addition, Goldman, Sachs & Co.
acted as financial advisor to Allied in connection with the Laidlaw Acquisition
and the Laidlaw Repurchase.
Allied expects to use more than 10% of the net proceeds of the Offerings to
repay indebtedness owed by it to Goldman Sachs Credit Partners, L.P. and Credit
Suisse First Boston under the Amended Bank Agreement. Accordingly, the Offerings
are being made in compliance with the requirements of Rule 2710(c)(8) of the
National Association of Securities Dealers, Inc.
Allied has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock
applicable to Non-U.S. Holders of such Common Stock. A "Non-U.S. Holder" is a
person other than (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state (other than any partnership
treated as foreign under U.S. Treasury regulations), or (iii) an estate or trust
whose income is includable in gross income for United States federal income tax
purposes regardless of source.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States for at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to tax as if they were U.S. citizens.
This discussion does not consider specific facts and circumstances that may
be relevant to a particular Non-U.S. Holder's tax position (including the fact
that in the case of a Non-U.S. Holder that is a partnership, the U.S. tax
consequences of holding and disposing of shares of Common Stock may be affected
by certain determinations made at the partner level) and does not consider U.S.
state and local or non-U.S. tax consequences. This discussion also does not
consider the tax consequences for any person who is a shareholder, partner or
beneficiary of a holder of the Common Stock. Further, it does not consider
Non-U.S. Holders subject to special tax treatment under the federal tax laws
(including
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<PAGE> 52
banks and insurance companies, dealers in securities and holders of securities
held as part of a "straddle," "hedge," or "conversion transaction"). The
following discussion is based on provisions of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), the applicable Treasury regulations promulgated
and proposed thereunder, and administrative and judicial interpretations as of
the date hereof, all of which are subject to change either retroactively or
prospectively. The following summary is included herein for general information.
Accordingly, each prospective Non-U.S. Holder is urged to consult a tax advisor
with respect to the U.S. federal tax consequences of holding and disposing of
Common Stock, as well as any tax consequences that may arise under the laws of
any U.S. state, local or other U.S. or non-U.S. taxing jurisdiction.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder of Common Stock will be
subject to withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty. Shareholders,
partners or other beneficiaries of holders of Common Stock that are treated as
"hybrid entities" under recently enacted legislation should consult their tax
advisors as to the applicability of any relevant income tax treaty. For this
purpose, a hybrid entity is generally an entity treated as a partnership for
U.S. federal income tax purposes but treated as a corporation for purposes of
the tax laws of a treaty partner (or conversely, as a corporation for U.S.
purposes and a partnership for foreign purposes). Dividends that are effectively
connected with such holder's conduct of a trade or business in the United States
or, if an income tax treaty applies, attributable to a permanent establishment,
or, in the case of an individual, a "fixed base," in the United States ("U.S.
trade or business income") are generally subject to U.S. federal income tax on a
net income basis at regular graduated rates, but are not generally subject to
the 30% withholding tax if the Non-U.S. Holder files the appropriate U.S.
Internal Revenue Service ("IRS") form with the payor. Any U.S. trade or business
income received by a Non-U.S. Holder that is a corporation may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or such lower rate as may be applicable under an income tax treaty.
Under current U.S. Treasury regulations, dividends paid to an address in a
foreign country are presumed (absent actual knowledge to the contrary) to be
paid to a resident of such country for purposes of the withholding discussed
above and for purposes of determining the applicability of a tax treaty rate.
Under proposed U.S. Treasury regulations not currently in effect ("Proposed
Regulations"), however, a Non-U.S. Holder of Common Stock who wishes to claim
the benefit of an applicable treaty rate generally would be required to satisfy
applicable certification and other requirements. In addition, under the Proposed
Regulations, in the case of Common Stock held by a foreign partnership, (x) the
certification requirement would generally be applied to the partners of the
partnership and (y) the partnership would be required to provide certain
information, including a United States taxpayer identification number. The
Proposed Regulations also provide look-through rules for tiered partnerships. It
is not certain whether, or in what form, the Proposed Regulations will be
adopted as final regulations.
A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for a refund with the
IRS.
DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock unless: (i) the
gain is U.S. trade or business income (in which case, the branch profits tax
described above may also apply to a corporate Non-U.S. Holder), (ii) the
Non-U.S. Holder is an individual who holds the Common Stock as a capital asset
within the meaning of Section 1221 of the Code, is present in the United States
for 183 or more days in the taxable year of the disposition and meets certain
other requirements, (iii) the Non-U.S. Holder is subject to tax pursuant to the
provision of the U.S. tax law applicable to certain United
S-52
<PAGE> 53
States expatriates or (iv) the Company is or has been a "U.S. real property
holding corporation" for federal income tax purposes at any time during the
five-year period ending on the date of disposition or such shorter period that
the Common Stock was held. The tax with respect to stock in a "U.S. real
property holding corporation" does not apply to a Non-U.S. Holder whose
holdings, direct and indirect, at all times during the applicable period,
constitute 5% or less of the Common Stock, provided that the Common Stock is
regularly traded on an established securities market. Generally, a corporation
is a "U.S. real property holding corporation" if the fair market value of its
"U.S. real property interests" equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests plus its other assets used
or held for use in a trade or business. Whether or not the Company will be a
U.S. real property holding corporation will depend on the facts and
circumstances during the applicable period.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise. Such individual's estate may be subject to U.S. federal
estate tax on the property includable in the gross estate for U.S. federal
estate tax purposes.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, the IRS requires "information reporting" and
"backup withholding" at a rate of 31% with respect to certain payments on Common
Stock. Non-U.S. Holders of Common Stock generally would be exempt from IRS
reporting requirements and U.S. backup withholding with respect to dividends
payable on Common Stock. Under the Proposed Regulations, however, a Non-U.S.
Holder of Common Stock that fails to certify its Non-U.S. Holder status in
accordance with the requirements of the Proposed Regulations, would under
certain circumstances be subject to U.S. backup withholding at a rate of 31% on
payments of dividends. The application for exemption is available by providing a
properly completed IRS Form W-8. See the discussion above with respect to the
rules applicable to foreign partnerships under the Proposed Regulations.
The payment of the proceeds of the disposition of Common Stock by a holder
to or through the U.S. office of a broker or through a non-U.S. branch of a U.S.
broker generally will be subject to information reporting and backup withholding
at a rate of 31% unless the holder either certifies its status as a Non-U.S.
Holder under penalties of perjury or otherwise establishes an exemption. The
payment of the proceeds of the disposition by a Non-U.S. Holder of Common Stock
to or through a non-U.S. office of a non-U.S. broker will not be subject to
backup withholding or information reporting unless the non-U.S. broker has
certain U.S. relationships. In the case of the payment of proceeds from the
disposition of Common Stock effected by a foreign office of a broker that is a
U.S. person or a "U.S. related person," existing regulations require information
reporting on the payment unless the broker receives a statement from the owner,
signed under penalty of perjury, certifying its non-U.S. status or the broker
has documentary evidence in its files as to the Non-U.S. Holder's foreign status
and the broker has no actual knowledge to the contrary. For this purpose, a
"U.S. related person" is (i) a "controlled foreign corporation" for U.S. federal
income tax purposes or (ii) a foreign person 50% or more of whose gross income
from all sources for the three-year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the broker has
been in existence) is derived from activities that are effectively connected
with the conduct of a U.S. trade or business.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded (or credited against the holder's U.S. federal
income tax liability, if any) provided that the required information is
furnished to the IRS.
S-53
<PAGE> 54
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for Allied by Fried, Frank, Harris, Shriver & Jacobson (a partnership which
includes professional corporations), New York, New York, and for the
Underwriters by Sullivan & Cromwell, New York, New York.
S-54
<PAGE> 55
INDEX TO PRO FORMA COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Combined Financial Statements
Pro Forma Combined Balance Sheet -- June 30, 1997 (unaudited)...................... F-3
Pro Forma Combined Statement of Operations for the Six Months Ended June 30, 1997
(unaudited)..................................................................... F-4
Notes to Pro Forma Combined Financial Statements (unaudited)....................... F-5
</TABLE>
F-1
<PAGE> 56
PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined balance sheet as of June 30, 1997 gives
effect to the Offerings as if they had occurred on June 30, 1997. The unaudited
pro forma combined statement of operations for the six months ended June 30,
1997 gives effect to the Offerings and the application of the net proceeds
therefrom as described under "Use of Proceeds" and to the Discount Offering, the
Laidlaw Repurchase and the execution of the Amended Bank Agreement, as if each
had occurred on January 1, 1996.
These statements do not purport to be indicative of the combined financial
position or combined results of operations of Allied that might have occurred,
nor are they indicative of future financial position or results of operations.
The unaudited pro forma combined financial statements should be read in
conjunction with the Notes to Pro Forma Combined Financial Statements and the
historical consolidated financial statements of Allied and the notes thereto.
See "Disclosure Regarding Forward Looking Statements."
F-2
<PAGE> 57
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
(NOTE 1) (NOTE 2) PRO FORMA
---------- ------------------ ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents....................... $ 14,641 $ 251,100(a) $ 14,641
(238,549)(b)
(12,551)(c)
Other current assets............................ 153,011 -- 153,011
---------- ------- ---------
Total current assets.................. 167,652 -- 167,652
Property and equipment, net..................... 897,086 -- 897,086
Goodwill, net................................... 854,491 854,491
Other assets.................................... 89,608 (1,645)(d) 87,963
---------- ------- ---------
Total assets.......................... $2,008,837 $ (1,645) $2,007,192
========== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt............... $ 50,486 $ (13,120)(b) $ 37,366
Other current liabilities....................... 152,764 -- 152,764
---------- ------- ---------
Total current liabilities............. 203,250 (13,120) 190,130
Long-term debt, net of current portion.......... 1,389,206 (225,429)(b) 1,163,777
Other long-term liabilities..................... 208,169 (658)(e) 207,511
Stockholders' equity............................ 208,212 251,100(a) 445,774
(12,551)(c)
(1,645)(d)
658(e)
---------- ------- ---------
Total liabilities and stockholders'
equity.............................. $2,008,837 $ (1,645) $2,007,192
========== ======= =========
</TABLE>
The accompanying notes are an integral part of this pro forma combined balance
sheet.
F-3
<PAGE> 58
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
(NOTE 1) (NOTE 2) PRO FORMA
----------- ---------------------- -----------
<S> <C> <C> <C>
Revenues................................... $ 395,184 $ -- $ 395,184
Cost of operations......................... 218,282 -- 218,282
Selling, general and administrative
expenses................................. 46,512 -- 46,512
Depreciation and amortization expense...... 52,161 -- 52,161
-------- ------- --------
Operating income........................... 78,229 -- 78,229
Interest income............................ (1,104) -- (1,104)
Interest expense........................... 46,707 726(a) 40,796
(35,562)(b)
28,925(c)
-------- ------- --------
Net income before income taxes............. 32,626 5,911 38,537
Income tax expense......................... 14,029 2,542 16,571
-------- ------- --------
Net income before extraordinary loss....... 18,597 3,369 21,966
Dividends on preferred stock............... (337) -- (337)
-------- ------- --------
Net income to common shareholders before
extraordinary loss....................... $ 18,260 $ 3,369 $ 21,629
======== ======= ========
Net income per common share before
extraordinary loss....................... $ 0.21 $ 0.22
======== ========
Weighted average common and common
equivalent shares........................ 88,375,927 96,644,260
======== ========
</TABLE>
The accompanying notes are an integral part of this pro forma combined financial
statement.
F-4
<PAGE> 59
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. HISTORICAL
The historical balances represent the unaudited financial position and
results of operations of Allied for each of the indicated dates and periods as
reported in Allied's historical consolidated financial statements included in
Allied's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as
amended, filed under the Exchange Act and incorporated by reference herein. The
historical consolidated financial statements have been restated to reflect
acquisitions accounted for as poolings-of-interests.
2. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following:
Pro Forma Combined Balance Sheet
(a) To reflect the completion of the Offerings of 16,200,000 shares of
Common Stock at $15.50 per share.
(b) To reflect the repayment of debt with the proceeds from the Offerings.
(c) To reflect the payment of underwriting fees and other costs related to
the Offerings.
(d) To reflect the write off of debt issuance costs related to the Amended
Bank Agreement.
(e) To reflect the income tax benefit for the write off of certain Amended
Bank Agreement debt issuance costs related to the Offerings.
Pro Forma Combined Statement of Operations
(a) To reflect amortization of commitment fees related to the Allied Notes
and the Amended Bank Agreement from January 1, 1997 through the date of
the transaction.
(b) To reflect the reduction of interest expense resulting from the
repayment of certain indebtedness with the proceeds from the Amended
Bank Agreement and the Allied Notes, calculated as follows (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
1996 Bank Agreement, interest at LIBOR plus 2.5%-3.25% for
the period from January 1, 1997 through June 5, 1997
and related debt issuance cost amortization............ $(20,556)
Amended Bank Agreement, $238,549 repaid in connection with
the Offerings, interest at 7.6% for 6 months during
1997 and related debt issuance cost amortization....... (9,192)
Zero Coupon Debenture, implicit interest at 14% for
the period from January 1, 1997 through May 15, 1997... (1,742)
7% Debenture, implicit interest at 14% for the period
from January 1, 1997 through May 15, 1997.............. (4,072)
--------
Total pro forma interest savings..................... $(35,562)
========
</TABLE>
F-5
<PAGE> 60
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(c) To reflect interest expense related to the Amended Bank Agreement and
the Allied Notes, calculated as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
Amended Bank Agreement, $525 million outstanding
for the period from January 1, 1997 through
June 5, 1997, interest at 7.6%................ $ 17,179
Allied Notes, interest accretion on $240 million
at 11.3% for the period from May 15, 1997
through June 30, 1997......................... (3,390)
Allied Notes, interest accretion on $268 million
at 11.3% for the period from January 1, 1997
through June 30, 1997......................... 15,136
--------
Total pro forma interest expense............ $ 28,925
========
</TABLE>
An increase in the interest rate of one-eighth of a percent on the
Amended Bank Agreement would not have a material impact for the six
months ended June 30, 1997.
The pro forma combined statement of operations does not include the
historical and pro forma extraordinary charges, net of income tax benefit,
related to the early extinguishments of debt in 1997 and contemplated in
connection with the repayment of debt under the Amended Bank Agreement of
approximately $52 million and $1 million, respectively.
3. NET INCOME PER COMMON SHARE
Pro forma net income per common share is calculated by dividing pro forma
net income to common shareholders less dividend requirements on 7% preferred
stock by the pro forma weighted average common and common equivalent shares
outstanding during the period. Pro forma weighted average common and common
equivalent shares have been computed as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1997
--------------
<S> <C>
Historical weighted average common shares............................... 76,933,433
Common stock equivalents --
Stock options and warrants............................................ 11,279,994
Convertible debt assumed converted.................................... 162,500
Pro forma effect of repurchasing the Laidlaw Warrant.................... (7,931,667)
Pro forma effect of issuing common shares related to the Offerings...... 16,200,000
----------
96,644,260
==========
</TABLE>
F-6
<PAGE> 61
PROSPECTUS
[ALLIED WASTE LOGO] ALLIED WASTE INDUSTRIES, INC.
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES AND WARRANTS
ALLIED WASTE NORTH AMERICA, INC.
DEBT SECURITIES
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
UNCONDITIONALLY GUARANTEED BY
ALLIED WASTE INDUSTRIES, INC. AND SUBSIDIARY GUARANTORS
------------------------
Allied Waste Industries, Inc. ("Allied") may offer, from time to time,
together or separately, (i) shares of its common stock, $.01 par value (the
"Common Stock"), (ii) shares of its preferred stock, $.10 par value (the
"Preferred Stock"), (iii) debt securities (the "Allied Debt Securities"), which
may be either senior debt securities ("Senior Allied Debt Securities") or senior
subordinated debt securities ("Senior Subordinated Allied Debt Securities"),
consisting of debentures, notes and other secured or unsecured evidences of
indebtedness in one or more series, and (iv) warrants to purchase Common Stock,
Preferred Stock or Debt Securities of Allied as shall be designated by Allied at
the time of the offering (the "Warrants"), in each case, in amounts, at prices
and on the terms to be determined at the time of the offering.
Allied holds substantially all of its assets and conducts substantially all
of its operations through its wholly owned subsidiary Allied Waste North
America, Inc. ("AWNA") and AWNA's subsidiaries. AWNA may offer, from time to
time, debt securities (the "AWNA Debt Securities", and together with the Allied
Debt Securities, the "Debt Securities"), which may be either senior debt
securities ("Senior AWNA Debt Securities" and, together with the Senior Allied
Debt Securities, the "Senior Debt Securities") or senior subordinated debt
securities ("Senior Subordinated AWNA Debt Securities" and, together with the
Senior Subordinated Allied Debt Securities, the "Senior Subordinated Debt
Securities"), consisting of debentures, notes and other secured or unsecured
evidences of indebtedness in one or more series and which will be
unconditionally guaranteed, jointly and severally, in the case of Senior AWNA
Debt Securities, on a senior basis (the "Senior Guarantees"), and, in the case
of Senior Subordinated AWNA Debt Securities, on a senior subordinated basis (the
"Senior Subordinated Guarantees") as to payment of principal, premium, if any,
and interest by Allied and all Restricted Subsidiaries (as defined herein) of
AWNA, other than Reliant Insurance Company (the "Subsidiary Guarantors", and
together with Allied in its capacity as guarantor, the "Guarantors") in the
amounts, at prices and on the terms to be determined at the time of the
offering. The Subsidiary Guarantors' obligations under the Senior Guarantees and
Senior Subordinated Guarantees will be unconditionally guaranteed on a senior
and senior subordinated basis, respectively, by Allied (the "Allied Senior
Guarantee" and the "Allied Senior Subordinated Guarantee", respectively, and,
together with the Senior Guarantees and the Senior Subordinated Guarantees, the
"Guarantees"). The Common Stock, Preferred Stock, Debt Securities and Warrants
are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will have an aggregate public offering price of up
to $800,000,000 (or the equivalent thereof, based on the applicable exchange
rate at the time of sale, in one or more foreign currencies, currency units or
composite currencies as shall be designated by Allied or AWNA, as the case may
be). Certain specific terms of the particular Securities in respect of which
this Prospectus is being delivered are set forth in the accompanying Prospectus
Supplement (the "Prospectus Supplement"), including, where applicable, (i) in
the case of Common Stock, the aggregate number of shares offered, the public
offering price and other terms of the offering and sale thereof, (ii) in the
case of Preferred Stock, the specific title, the aggregate number of shares
offered, any dividend (including the method of calculating payment of
dividends), liquidation, redemption, voting and other rights, any terms for any
conversion or exchange into securities and the public offering price and other
terms of the offering and sale thereof, (iii) in the case of Debt Securities,
the specific title, the aggregate principal amount, aggregate offering price,
the denomination, the maturity, the premium, if any, the interest rate (which
may be fixed, floating or adjustable), if any, the time and method of
calculating payment of interest, if any, the place or places where principal of,
premium, if any, and interest, if any, on such Debt Securities will be payable,
the currency in which principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable, whether such Debt Securities are Senior
Debt Securities or Senior Subordinated Debt Securities, whether such Debt
Securities are secured or unsecured, and, if secured, the security and
<PAGE> 62
related terms in connection therewith, any terms of redemption at the option of
Allied or AWNA, as the case may be, or repayment at the option of the holder,
any sinking fund provisions, the terms for any conversion or exchange into
Common Stock or Preferred Stock or any other special terms, and the public
offering price and the other terms of the offering and sale thereof, and (iv) in
the case of Warrants, the number and terms thereof, the duration, the purchase
price, the exercise price and a description of the securities for which each
Warrant is exercisable.
Unless otherwise specified in a Prospectus Supplement, (i) the Senior Debt
Securities, when issued, will rank pari passu in right of payment with all other
unsubordinated obligations of Allied or AWNA, as the case may be, and will rank
senior in right of payment to all subordinated obligations of Allied or AWNA, as
the case may be, (ii) the Senior Guarantees and the Allied Senior Guarantee,
when issued, will rank pari passu in right of payment with all other
unsubordinated obligations of the Guarantors and Allied, respectively, and will
rank senior in right of payment to all subordinated obligations of the
Guarantors and Allied, respectively, (iii) the Senior Subordinated Debt
Securities, when issued, will be subordinate in right of payment to the prior
payment in full of all Senior Debt (as defined herein) of Allied or AWNA, as the
case may be, including all Senior Debt Securities of Allied or AWNA, as the case
may be, and will rank pari passu in right of payment with all other senior
subordinated obligations of Allied or AWNA, as the case may be, and (iv) the
Senior Subordinated Guarantees and the Allied Senior Subordinated Guarantee,
when issued, will be subordinate in right of payment to the prior payment in
full of all Senior Debt of the Guarantors and Allied, respectively, including,
in the case of Allied, all Senior Allied Debt Securities, and will rank pari
passu in right of payment with all other senior subordinated obligations of the
Guarantors and Allied, respectively. Holders of secured obligations of Allied,
AWNA and the Guarantors, including secured Allied Debt Securities, secured AWNA
Debt Securities and secured Guarantees, respectively, will, however, have claims
that are prior to the claims of holders of unsecured Allied Debt Securities,
AWNA Debt Securities and Guarantees, respectively, with respect to the assets
securing such secured obligations. Allied conducts its operations through AWNA,
which is subject, under certain of its debt instruments, to certain restrictions
on its ability to pay funds to Allied. All Allied Debt Securities and Guarantees
of Allied will effectively be subordinate in right of payment to the prior
payment in full of all indebtedness of Allied's subsidiaries, and all other
obligations and other liabilities, including trade payables, of Allied's
subsidiaries, including all AWNA Debt Securities.
The Common Stock is listed on the Nasdaq National Market tier of the Nasdaq
Stock Market under the trading symbol "AWIN." Any Common Stock sold pursuant to
a Prospectus Supplement will be listed on the Nasdaq National Market tier of the
Nasdaq Stock Market, subject to official notice of issuance.
Debt Securities of a series may be issued in registered form, in a form
registered as to principal only, or in bearer form (with or without coupons
attached), or any combination of such forms. In addition, all or a portion of
the Debt Securities may be issued in temporary or definitive global form. Debt
Securities in bearer form are offered only outside the United States to
non-United States persons and to offices located outside the United States of
certain United States financial institutions and other exempt persons.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Securities may be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of Allied or AWNA, as the case may be, or any dealers or
underwriters are involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers or underwriters
will be set forth in, and any applicable commissions or discounts will be set
forth in or may be calculated from, the Prospectus Supplement with respect to
such Securities.
------------------------
The date of this Prospectus is August 21, 1997.
<PAGE> 63
AVAILABLE INFORMATION
Allied is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). AWNA is also subject to the informational
requirements of the Exchange Act, but is not required to file separate reports,
proxy statements or other information with the Commission as long as certain
information regarding AWNA is contained in Allied's reports on Form 10-K and
10-Q. Such information is contained in Allied's Annual Report on Form 10-K and
Quarterly Report on Form 10-Q. Information as of particular dates concerning its
directors and officers and any material interest of such persons in transactions
with Allied is disclosed in proxy statements distributed to stockholders and
filed with the Commission. Such reports, proxy statements and other information
can be inspected and copied at the offices of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
regional offices located at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661 and Suite 1300, 7 World Trade Center, New York,
New York 10048. Copies of such materials can also be obtained from the Public
Reference Section of the Commission at its principal office in Washington, D.C.
at prescribed rates. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and other information statements and other
information regarding registrants that file electronically with the Commission.
The Common Stock is listed on the National Market tier of the Nasdaq Stock
Market ("Nasdaq"). Reports, proxy material and other information concerning
securities of Allied can also be inspected at the offices of Nasdaq at 1735 K
Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") filed by Allied, AWNA and the Subsidiary Guarantors
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus and the accompanying Prospectus Supplement
omit certain of the information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. For further
information with respect to Allied, AWNA, the Subsidiary Guarantors and the
Securities, reference is made to the Registration Statement, including the
schedules and exhibits filed therewith. Statements contained in this Prospectus
as to the contents of certain documents are not necessarily complete, and, with
respect to each such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission, reference is made to the copy of the
document so filed. Each such statement is qualified in its entirety by such
reference.
2
<PAGE> 64
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents of
Allied heretofore filed by it with the Commission:
1. Annual Report on Form 10-K for the year ended December 31, 1996, as
amended by Form 10-K/A-1 filed with the Commission on April 30, 1997, Form
10K/A-2 filed with the Commission on August 8, 1997 and Form 10K/A-3 filed
with the Commission on August 21, 1997;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
as amended by Form 10-Q/A-1 filed with the Commission on August 18, 1997.
4. Current Reports on Form 8-K filed with the Commission on January 9,
1997, January 30, 1997 (as amended by Form 8-K/A-1 filed with the
Commission on February 14, 1997), February 19, 1997 and May 2, 1997 and
Amendment to Current Report on Form 8-K/A-4 filed with the Commission on
February 19, 1997.
5. The description of Allied's Common Stock contained in Allied's
Registration Statement on Form S-1 (No. 33-99886), including any amendments
or reports filed for the purpose of updating such description.
6. Proxy Statement dated June 10, 1997.
All documents filed by Allied pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus or any Prospectus
Supplement and prior to the termination of the offering of the Securities are
incorporated herein by reference and such documents shall be deemed to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus or
any Prospectus Supplement to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or any Prospectus
Supplement.
Allied will provide without charge to each person to whom this Prospectus
or any Prospectus Supplement is delivered, on the request of any such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(not including exhibits to the information that is incorporated by reference
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus or any Prospectus Supplement incorporates).
Requests for copies of such documents should be directed to Allied Waste
Industries, Inc., 15880 North Greenway-Hayden Loop, Suite 100, Scottsdale,
Arizona 85260, telephone (602) 423-2946, Attention: Investor Relations.
USE OF PROCEEDS
Except as may be otherwise stated in any Prospectus Supplement, Allied
and/or AWNA intend to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include, among other things, strategic
acquisitions, refinancing of indebtedness, working capital, capital expenditures
and repurchases and redemptions of securities. Allied and AWNA have not
allocated a specific portion of the net proceeds for any particular use at this
time. Specific information concerning the use of proceeds from any sale of
Securities will be included in the Prospectus Supplement relating to such
Securities.
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RISK FACTORS
In addition to the other information in this Prospectus and any applicable
Prospectus Supplement, the following factors and the factors set forth in the
applicable Prospectus Supplement should be considered carefully in evaluating an
investment in the Securities. To the extent that any risk factor contained in
any Prospectus Supplement conflicts with or supercedes any risk factor contained
in this Prospectus, the risk factor in such Prospectus Supplement shall control.
RISKS ASSOCIATED WITH ALLIED'S STRATEGY; POTENTIAL DIFFICULTY IN OBTAINING
SUITABLE LANDFILLS, COLLECTION OPERATIONS, TRANSFER STATIONS AND PERMITS
Allied's strategy depends on its ability to identify and acquire
appropriate landfills, collection operations and transfer stations. There can be
no assurance that Allied will be able to locate appropriate acquisition
candidates, that any identified candidates will be acquired or that acquired
operations will be integrated effectively or prove profitable. Completion of an
acquisition requires the expenditure of sizable amounts of capital and the
competition among companies pursuing an acquisition strategy may increase
capital requirements. Allied could be forced to alter its strategy in the future
if such candidates become unavailable or too costly. In addition, obtaining
permits to operate non-hazardous solid waste landfills has become increasingly
difficult and expensive, often taking a number of years to obtain, requiring
numerous hearings and compliance with zoning, environmental and other regulatory
measures, and often being subject to resistance from citizen or other groups.
There can be no assurance that Allied will be successful in obtaining the
permits it requires, and an inability to receive such permits could have an
adverse effect on Allied's future results of operations. In some areas, suitable
land may be unavailable for new landfill sites. There can be no assurance that
Allied will be successful in obtaining new landfill sites or expanding the
permitted capacity of its current landfills once its landfill capacity has been
consumed. In such event, Allied could be forced to dispose of collected waste at
landfills operated by its competitors, which could have an adverse effect on
Allied's landfill revenues and collection expenses.
LIMITED OPERATING HISTORY IN REGARD TO ACQUIRED BUSINESSES
Allied has a limited operating history with regard to a significant portion
of its operations. During 1996, Allied acquired 21 companies, excluding the
Laidlaw Acquired Businesses (as defined below), which collectively comprised
approximately $78.8 million or 31.9% of Allied's revenue in 1996. In December
1996, Allied acquired (the "Laidlaw Acquisition") substantially all of the non-
hazardous solid waste management businesses conducted by Laidlaw Inc.
("Laidlaw") in the United States and Canada. The businesses acquired from
Laidlaw (on a pro forma basis after giving effect to the sale by Allied of all
of the Canadian solid waste business acquired in the Laidlaw Acquisition, the
"Laidlaw Acquired Businesses") generated revenues for the twelve months ended
November 30, 1996 of approximately $494.5 million. The revenues for the year
ended December 31, 1996 generated by the operations of Allied excluding such
Laidlaw Acquired Businesses were approximately $246.7 million.
Allied expects to continue to acquire appropriate landfills, collection
operations and transfer stations in the future. The financial position and
results of operations of Allied will depend to a large extent on Allied's
ability to integrate acquired operations effectively and to realize expected
financial benefits and operational efficiencies. There can be no assurance that
Allied's efforts to integrate acquired operations will be effective, or that
expected financial benefits and operational efficiencies will be realized.
Failure to effectively integrate acquired operations could have an adverse
effect on Allied's future results of operations. As Allied continues to pursue
its acquisitions strategy in the future, its financial position and results of
operations may fluctuate significantly from period to period.
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CAPITAL REQUIREMENTS AND LIMITED WORKING CAPITAL
Allied intends to fund its cash needs through cash flow from operations and
borrowings under the Amended and Restated Bank Agreement dated June 5, 1997
among Allied, AWNA, Credit Suisse First Boston, Citibank, N.A., Goldman Sachs
Credit Partners, L.P. and the other bank lenders named therein (the "Amended
Bank Agreement") and its equipment lease facilities and offerings of the
Securities from time to time. Because of the capital intensive nature of the
solid waste industry, Allied may use amounts in excess of the cash generated
from operations to retire and service debt and fund acquisitions, landfill
development and capital expenditures. A substantial portion of Allied's
available cash will be required to be applied to service indebtedness, which is
expected to include approximately $203.6 million in annual principal and
interest payments. During 1997, Allied also expects to spend approximately $172
million for capital, closure and post-closure, and remediation expenditures and
has provided approximately $264.6 million in financial assurance obligations
related to its landfill operations. Amounts expended on capital expenditures and
financial assurance obligations will increase as a result of any acquisitions or
expansions of Allied's operations. As a result of these capital requirements,
Allied may periodically have low levels of working capital or be required to
finance working capital deficits.
Further regulatory action by federal, state and local governments could
accelerate expenditures for closure and post-closure monitoring and obligate
Allied to spend sums in addition to those presently reserved for such purposes.
These factors, together with the other factors discussed above, could
substantially increase Allied's operating costs and impair Allied's ability to
invest in its facilities.
Allied's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness depends on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors beyond its control. Based
upon the current level of operations and anticipated growth, management of
Allied believes that available cash flow, together with available borrowing
under the Amended Bank Agreement, and other sources of liquidity, will be
adequate to meet Allied's anticipated future requirements for working capital,
letters-of-credit, capital expenditures and scheduled payments of principal of,
and interest on debt incurred under the Amended Bank Agreement, and interest on
AWNA's 10 1/4% Senior Subordinated Notes due 2006 (the "AWNA Notes") and,
commencing December 1, 2002, on Allied's 11.30% Senior Discount Notes due 2007
(the "Allied Notes"). However, the principal payments at maturity on the AWNA
Notes and the Allied Notes may require refinancing. There can be no assurance
that Allied's business will generate sufficient cash flow from operations or
that future financings will be available in an amount sufficient to enable
Allied or AWNA to service its indebtedness or to make necessary capital
expenditures, or that any refinancing would be available on commercially
reasonable terms or at all. Additionally, depending on the timing, amount and
structure of any future acquisitions and the availability of funds under the
Amended Bank Agreement, Allied may need to raise additional capital to fund the
acquisition and integration of additional solid waste businesses. There can be
no assurance that Allied will be able to secure such additional funding on
favorable terms, if at all.
RISK OF COMPETITION FROM OTHER COMPANIES AND MUNICIPALITIES; LANDFILL
ALTERNATIVES
The non-hazardous solid waste industry is led by five large national waste
management companies, one of which is Allied, and includes numerous regional and
local companies, all of which contribute to the high level of competition that
characterizes the industry. Some of these companies have considerably greater
financial and operational resources than Allied. In addition, cities and
counties that operate their own waste collection and disposal facilities often
enjoy the benefits of tax-exempt financing and may control the disposal of waste
collected within their jurisdictions.
Alternatives to landfill disposal, such as recycling and composting, are
increasingly being used, and incineration continues to be utilized in some
markets in which Allied operates. There has also
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been an increasing trend at the state and local levels to mandate waste
reduction at the source and to prohibit the disposal of certain types of wastes,
such as yard wastes, at landfills. This trend may result in a reduction in the
volume of waste going to landfills in certain areas, which may affect Allied's
ability to operate its landfills at their full capacity and/or affect the prices
that can be charged for landfill disposal services. In addition, most of the
states in which Allied operates landfills have adopted plans or requirements
that set goals for specified percentages of certain solid waste items to be
recycled. These recycling goals will be phased in over the next few years.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT; DEPENDENCE ON DISTRIBUTIONS FROM
SUBSIDIARIES
Allied has substantial indebtedness with significant debt service
requirements and is highly leveraged. At June 30, 1997, Allied's consolidated
debt was approximately $1,439.7 million and stockholders' equity was
approximately $208.2 million. The degree to which Allied is leveraged has
important consequences, including the following: (i) the ability of Allied to
obtain additional financing in the future, whether for working capital, capital
expenditures, acquisitions or other purposes, may be impaired, (ii) a
substantial portion of Allied's cash flow from operations is required to be
dedicated to the payment of principal and interest on its debt, thereby reducing
funds available to Allied for other purposes, (iii) Allied's flexibility in
planning for or reacting to changes in market conditions may be limited, (iv)
Allied may be more vulnerable in the event of a downturn in its business and (v)
to the extent of Allied's outstanding debt under its Amended Bank Agreement at
variable rates that have not been hedged, Allied will be vulnerable to increases
in interest rates.
The ability of Allied to meet its debt service obligations will depend on
the future operating performance and financial results of Allied, which will be
subject in part to factors beyond the control of Allied. Although Allied
believes that its cash flow will be adequate to meet its interest payments,
there can be no assurance that Allied will continue to generate earnings in the
future sufficient to cover its fixed charges. If Allied is unable to generate
earnings in the future sufficient to cover its fixed charges and is unable to
borrow sufficient funds under either the Amended Bank Agreement or from other
sources, it may be required to refinance all or a portion of its existing debt
or to sell all or a portion of its assets. There can be no assurance that a
refinancing would be possible, nor can there be any assurance as to the timing
of any asset sales or the proceeds which Allied could realize therefrom. In
addition, the terms of certain of its debt restrict Allied's ability to sell
assets and Allied's use of the proceeds therefrom.
Allied holds all of its assets and conducts all of its operations through
its subsidiary AWNA and AWNA's subsidiaries. Allied thus derives all of its
operating income and cash flow from AWNA and must rely upon distributions from
AWNA to generate the funds necessary to meet its obligations. If for any reason,
including a shortfall in anticipated operating results or proceeds from asset
sales, AWNA were unable to meet its debt service obligations, it would be in
default under the terms of certain of its debt. In the event of such a default,
the holders of such debt could elect to declare all of such debt immediately due
and payable, including accrued and unpaid interest, and to terminate their
commitments (if any) with respect to funding obligations under such debt. In
addition, such holders could proceed against any collateral which, in the case
of certain debt, consists of the capital stock of AWNA and its subsidiaries and
substantially all of the assets of AWNA and its subsidiaries. Any default with
respect to any of AWNA's debt could result in a default under other debt or
result in the bankruptcy of AWNA.
RESTRICTIONS IMPOSED BY THE AMENDED BANK AGREEMENT, THE ALLIED NOTES AND THE
AWNA NOTES
The Amended Bank Agreement and the indentures relating to the Allied Notes
and the AWNA Notes contain a number of significant covenants that, among other
things, will restrict the ability of Allied and its subsidiaries to dispose of
assets, incur additional indebtedness, incur liens on property or assets, repay
other indebtedness, pay dividends, enter into certain investments or
transactions, repurchase or redeem capital stock, engage in mergers or
consolidations, or engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities. There can be
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no assurance that such restrictions will not adversely affect Allied's ability
to finance its future operations or capital needs or engage in other business
activities that may be in the interest of Allied. In addition, the Amended Bank
Agreement also requires Allied to maintain compliance with certain financial
ratios. The ability of Allied to comply with such ratios may be affected by
events beyond Allied's control. A breach of any of these covenants or the
inability of Allied to comply with the required financial ratios could result in
a default under the Amended Bank Agreement or either or both of the indentures
relating to the Allied Notes and the AWNA Notes. In the event of any such
default under the Amended Bank Agreement, the lenders under the Amended Bank
Agreement could elect to declare all borrowings outstanding under the Amended
Bank Agreement, together with accrued interest and other fees, to be due and
payable, to require Allied to apply all of its available cash to repay such
borrowings or to prevent Allied from making debt service payments on any
indebtedness of Allied. If Allied were unable to repay any such borrowings when
due, the lenders could proceed against their collateral. In the event of a
default under the indenture relating to the Allied Notes or the AWNA Notes, the
holders of such notes could elect to declare such notes to be due and payable.
If the indebtedness under the Amended Bank Agreement, the Allied Notes or the
AWNA Notes were to be accelerated, the assets of Allied and/or AWNA might be
insufficient to pay amounts due on other debt securities then outstanding.
RELIANCE ON MANAGEMENT
Allied relies and will continue to rely significantly on the services of
its senior management team. Allied could be adversely affected if any member of
the senior management team were unwilling or unable to continue in Allied's
employ. There can be no assurance that Allied will be successful in hiring or
retaining qualified personnel to meet this demand.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS; RISK OF FUTURE LITIGATION
The scope and stringency of laws and regulations designed to protect the
environment have increased dramatically. Compliance with the evolving and
expanding regulatory requirements, including the adoption in October 1991 of
Subtitle D regulations ("Subtitle D") pursuant to the U.S. Resource Conservation
and Recovery Act of 1976, as amended ("RCRA"), has been and will continue to be
costly. Rigorous regulatory standards require waste management companies to
enhance or replace equipment and to modify landfill operations or, in some
cases, to close landfills. There can be no assurance that Allied will be able to
implement price increases sufficient to offset the cost of complying with these
standards. In addition, environmental regulatory changes could accelerate
expenditures for closure and post-closure monitoring at solid waste facilities
and obligate Allied to spend sums in addition to those presently accrued for
such purposes. These factors could increase substantially Allied's operating
costs as well as the possibility of the impairment of Allied's investment in its
facilities.
In addition to the costs of complying with environmental regulations,
Allied will continue to be involved in legal proceedings in the ordinary course
of business. Government agencies may seek to impose fines on Allied for alleged
failure to comply with laws and regulations or to revoke or to deny the renewal
of, Allied's permits and licenses. In addition, governmental agencies, as well
as surrounding landowners, may assert claims against Allied alleging
environmental damage or violations of permits and licenses pursuant to which
Allied operates. Citizens' groups have become increasingly active in challenging
the grant or renewal of permits and licenses, and responding to such challenges
has further increased the costs associated with permitting new facilities or
expanding current facilities. A significant judgment against Allied, the loss of
a significant permit or license or the imposition of a significant fine could
have a material adverse affect on Allied's financial condition.
Certain of Allied's waste disposal operations traverse state boundaries.
Such operations could be adversely affected if the federal government or a state
in which a landfill is located limits or
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prohibits, imposes discriminatory fees on, or otherwise seeks to discourage
disposal, within state boundaries, of waste collected outside of the state.
As a condition to the Laidlaw Acquisition, Allied engaged Emcon
Environmental Services, Inc. ("Emcon"), an independent environmental consultant,
to conduct environmental assessments of the Acquired Subsidiaries and to prepare
a report reflecting its findings (the "Emcon Environmental Report").
In the Emcon Environmental Report, Emcon identified several contaminated
landfills and other locations owned by the Laidlaw Acquired Businesses, that
could pose significant sources of liability to the Laidlaw Acquired Businesses.
The costs of performing the investigation, design, remediation and allocation of
responsibility to the subsidiaries of Allied vary significantly between sites.
Based on information available to Allied, Allied recorded a provision of $51.5
million for environmental matters, including closure and post-closure costs, in
the 1996 consolidated statement of operations and expects these amounts to be
disbursed over the next 30 years. The actual liability at these sites cannot
currently be determined due to a number of uncertainties including the extent of
the contamination, the appropriate remedy, the financial viability of other
potentially responsible parties and the ultimate apportionment of responsibility
among such potentially responsible parties.
The representations made by the Laidlaw sellers in the Stock Purchase
Agreement, dated September 17, 1996, among Allied, Laidlaw and the other sellers
named therein (the "Laidlaw Sellers") relating to the Laidlaw Acquisition (the
"Laidlaw Acquisition Agreement") with respect to the environmental matters (i)
terminated on the closing of the Laidlaw Acquisition as to all matters disclosed
in writing to Allied at least five business days prior to the closing or
disclosed with specificity in the Emcon Environmental Report and (ii) will
terminate on the third anniversary of the closing of the Laidlaw Acquisition as
to all matters other than those described in clause (i) and which are known to
Laidlaw or the Laidlaw Sellers on the closing date. The Laidlaw Acquisition
Agreement further provided that Laidlaw and the Laidlaw Sellers' indemnification
obligations with respect to environmental matters would be limited to the amount
by which the aggregate of all such damages exceeded a $1.0 million basket,
without giving effect to any materiality qualifications. At the closing of the
Laidlaw Acquisition, Allied and the Laidlaw Sellers entered into a Special
Environmental Indemnity, which provided that the indemnity in respect of
properties located at Etobicoke, Ontario, Delafield, Wisconsin and Gary Lagoons,
Indiana would not be subject to the three-year limitation or any basket. Allied
and Laidlaw have further agreed that the indemnity for damages arising out of
the Etobicoke, Ontario and Delafield, Wisconsin sites will be limited to a
three-year period from the closing of the Laidlaw Acquisition and to an amount
in excess of $25.0 million with the $25.0 million basket to be reduced by any
damages to which the basket in the Laidlaw Acquisition Agreement applies.
HAZARDOUS SUBSTANCES LIABILITY
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), has been interpreted to impose joint and several
liability on current and former owners or operators of facilities at which there
has been a release or a threatened release of a "hazardous substance" and on
persons who generate, transport or arrange for the disposal of such substances
at the facility. Hundreds of substances are defined as "hazardous" under CERCLA
and their presence, even in minute amounts, can result in substantial liability.
The statute provides for the remediation of contaminated facilities and imposes
costs on the responsible parties. The expense of conducting such a cleanup can
be significant. Notwithstanding its efforts to comply with applicable
regulations and to avoid transporting and receiving hazardous substances, such
substances may be present in waste collected by Allied or disposed of in its
landfills, or in waste collected, transported or disposed of in the past by
acquired companies. Cleanup liability may also arise under various state laws
similar to CERCLA and other corrective action procedures. As used in this
Prospectus, "non-hazardous waste" means substances, including asbestos, that are
not defined as hazardous waste under federal regulations.
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POTENTIAL UNDISCLOSED LIABILITIES ASSOCIATED WITH ACQUISITIONS
In connection with any transaction made by Allied there may be liabilities
that Allied fails or is unable to discover, including liabilities arising from
non-compliance with environmental laws by prior owners, and for which Allied, as
a successor owner, may be responsible.
POTENTIAL UNINSURED OR UNDERINSURED ENVIRONMENTAL LIABILITIES
As is typically the case in the solid waste industry, Allied is able to
obtain only very limited environmental impairment insurance regarding its
landfills. An uninsured or underinsured claim of sufficient magnitude would
require Allied to fund such claim from cash flow generated by operations or
borrowings under the Amended Bank Agreement or other sources of liquidity. There
can be no assurance that Allied would be able to fund any such claim from
operations, the Amended Bank Agreement or elsewhere.
LAIDLAW TAX INDEMNIFICATION
Laidlaw has disclosed to Allied the existence of a tax controversy (the
"Tax Controversy") in the amount of more than $385 million with the United
States Internal Revenue Service (the "IRS") involving the consolidated U.S.
federal income tax liability for the fiscal years 1986 through 1991 of the
members of an affiliated group of corporations (the "Laidlaw Transportation U.S.
Consolidated Tax Group") within the meaning of Section 1504(c) of the Internal
Revenue Code ("IRC"), of which Laidlaw Transportation is the common parent
corporation (which includes Laidlaw Transportation, Inc. ("Laidlaw
Transportation"), those Laidlaw Acquired Businesses which are incorporated in
the U.S. (the "LSW U.S. Subsidiaries"), and other U.S. subsidiaries of Laidlaw
Transportation which were not acquired in the Laidlaw Acquisition). The Laidlaw
Transportation U.S. Consolidated Tax Group has also received notice that fiscal
years 1992, 1993 and 1994 will be examined regarding this issue. Under Treasury
Regulations promulgated under Section 1502 of the IRC, each member of the
Laidlaw Transportation U.S. Consolidated Tax Group including each LSW U.S.
Subsidiary, is or could be severally liable for United States federal income tax
liabilities of the entire Laidlaw Transportation U.S. Consolidated Tax Group,
including all amounts at issue in the Tax Controversy which are ultimately
determined to be owed.
Allied has obtained an indemnity from Laidlaw and Laidlaw Transportation
which covers the amounts at issue in the Tax Controversy for which any LSW U.S.
Subsidiary may ultimately be found liable. The obligation of Laidlaw and Laidlaw
Transportation to indemnify Allied in respect of amounts at issue in the Tax
Controversy is a general, unsecured obligation of Laidlaw and Laidlaw
Transportation. The ability of Laidlaw and Laidlaw Transportation to pay and
fulfill such indemnification obligation will depend on the financial condition
of Laidlaw and Laidlaw Transportation at the time of any required performance of
such obligation, as to which Allied has no assurance.
IMPACT OF ADVERSE WEATHER CONDITIONS
The collection and landfill operations of Allied could be adversely
affected by protracted periods of inclement weather which delay the development
of landfill capacity, the transfer of waste or reduce the volume of waste
generated. There can be no assurance that protracted periods of inclement
weather will not have a material adverse effect on Allied's future results of
operations.
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RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth Allied's ratios of earnings to fixed charges
and earnings to fixed charges and preferred stock dividends for the periods
indicated:
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
----- ----- ---- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges................. 1.5x 1.4x (1) 1.5x (2) 1.3x
Ratio of earnings to fixed charges and preferred
stock dividends.................................. 1.3x 1.2x (1) 1.1x (2) 1.3x
</TABLE>
- ---------------
(1) Earnings were insufficient to cover fixed charges and fixed charges and
preferred stock dividends by $8,049,000 and $12,687,000, respectively.
(2) Earnings were insufficient to cover fixed charges and fixed charges and
preferred stock dividends by $79,384,000 and $80,463,000, respectively.
For purposes of calculating the ratio of earnings to fixed charges and the
ratio of earnings to fixed charges and preferred stock dividends, earnings
consist of income before taxes and fixed charges (exclusive of preferred stock
dividends). For purposes of calculating both ratios, fixed charges include
interest expense and capitalized interest.
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DESCRIPTION OF CAPITAL STOCK
Pursuant to Allied's Restated Certificate of Incorporation (the
"Certificate"), the authorized capital stock of Allied consists of 200,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock. The following
description of certain of Allied's capital stock is a summary, does not purport
to be complete or to give effect to applicable statutory or common law and is
subject in all respects to the applicable provisions of the Certificate and the
information herein is qualified in its entirety by this reference.
COMMON STOCK
At June 30, 1997, Allied had outstanding 77,689,646 shares of Common Stock.
Holders of Common Stock are entitled to one vote per share in the election of
directors and on all other matters on which the stockholders are entitled or
permitted to vote. Holders of Common Stock are not entitled to cumulative voting
rights. Therefore, holders of a majority of the shares voting for the election
of directors can elect all the directors. Subject to the terms of any
outstanding series of preferred stock, the holders of Common Stock are entitled
to dividends in such amounts and at such times as may be declared by Allied's
Board of Directors out of funds legally available therefor. On liquidation or
dissolution, holders of Common Stock are entitled to share ratably in all net
assets available for distribution to stockholders after payment of any
liquidation preferences to holders of Preferred Stock. Holders of Common Stock
have no redemption, conversion or preemptive rights. The Common Stock is listed
on the Nasdaq National Market tier of Nasdaq under the symbol "AWIN."
PREFERRED STOCK
The particular terms of any series of Preferred Stock offered hereby will
be set forth in the Prospectus Supplement relating thereto. The rights,
preferences, privileges and restrictions, including dividend rights, voting
rights, terms of redemption, retirement and sinking fund provisions and
liquidation preferences, if any, of the Preferred Stock of each series will be
fixed or designated pursuant to a certificate of designation adopted by the
Board of Directors or a duly authorized committee thereof. The terms, if any, on
which shares of any series of Preferred Stock are convertible or exchangeable
into Common Stock will also be set forth in the Prospectus Supplement relating
thereto. Such terms may include provisions for conversion or exchange, either
mandatory, at the option of the holder, or at the option of Allied, in which
case the number of shares of Common Stock to be received by the holders of
Preferred Stock would be calculated as of a time and in the manner stated in the
applicable Prospectus Supplement. The description of the terms of a particular
series of Preferred Stock that will be set forth in the applicable Prospectus
Supplement does not purport to be complete and is qualified in its entirety by
reference to the certificate of designation relating to such series.
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SPECIAL PROVISIONS OF THE CERTIFICATE AND DELAWARE LAW
The provisions of the Certificate and Allied's Bylaws, as amended (the
"Bylaws"), summarized in the succeeding paragraphs may be deemed to have an
anti-takeover effect or may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in such stockholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by a stockholder.
Pursuant to the Certificate, the Board of Directors may by resolution
establish one or more series of preferred stock, having such number of shares,
designation, relative voting rights, dividend rates, liquidation or other
rights, preferences and limitations as may be fixed by the Board of Directors
without any further stockholder approval. Such rights, preferences, privileges
and limitations as may be established could have the effect of impeding or
discouraging the acquisition of control of Allied.
The Bylaws provide that stockholders' nominations for the Board of
Directors and proposals for other business to be transacted at stockholders'
meetings must be timely received by Allied and must comply with specified form
and content requirements. The Bylaws also provide that special meetings of
stockholders may be called only by the Board or by a specifically authorized
committee of the Board. The Certificate and the Bylaws provide that the Bylaws
may be altered, amended or repealed by the Board of Directors.
Limitation of Director Liability. Section 102(b)(7) of the Delaware
General Corporation Law ("Section 102(b)") authorizes corporations to limit or
to eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. Although Section 102(b) does not change directors' duty of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Certificate limits the liability of directors to
Allied or its stockholders to the fullest extent permitted by Section 102(b).
Specifically, directors of Allied will not be personally liable for monetary
damages for breach of a director's fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Allied or its
stockholders, (ii) for acts or omissions not in good faith, or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
Indemnification. To the maximum extent permitted by law, the Certificate
and the Bylaws provide for mandatory indemnification of directors, officers,
employees and agents of Allied against all expenses, liabilities and losses to
which they may become subject or which they may incur as a result of being or
having been a director, officer, employee or agent of Allied. In addition,
Allied must advance or reimburse directors and officers and may advance or
reimburse employees and agents for expenses incurred by them in connection with
indemnifiable claims.
Insofar as indemnification for liabilities arising out of the Securities
Act may be permitted to directors, officers and controlling persons of Allied
pursuant to the foregoing provisions, Allied has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Delaware Anti-Takeover Law. Section 203 of the Delaware General
Corporation Law ("Section 203") generally provides that a stockholder, and the
affiliates and associates of such stockholder, acquiring more than 15% of the
outstanding voting stock of a corporation subject to the statute (an "Interested
Stockholder") but less than 85% of such stock may not engage in certain Business
Combinations (as defined in Section 203) in the corporation for a period of
three years after the date on which the stockholder became an Interested
Stockholder unless (i) prior to such date, the corporation's board of directors
approved either the Business Combination or the transaction in which the
stockholder became an Interested Stockholder or (ii) the Business
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Combination is approved by the corporation's board of directors and authorized
at a stockholders' meeting by a vote of at least two-thirds of the corporation's
outstanding voting stock not owned by the Interested Stockholder. Under Section
203, these restrictions will not apply to certain Business Combinations proposed
by an Interested Stockholder following the earlier of the announcement or
notification of one of certain extraordinary transactions involving the
corporation and a person who was not an Interested Stockholder during the
previous three years or who became an Interested Stockholder with the approval
of the corporation's board of directors, if such extraordinary transaction is
approved or not opposed by a majority of the directors who were directors prior
to such person becoming an Interested Stockholder during the previous three
years or were recommended for election or elected to succeed such directors by a
majority of such directors.
Section 203 defines the term Business Combination to encompass a wide
variety of transactions with or caused by an Interested Stockholder, including
transactions in which the Interested Stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, such as mergers,
certain asset sales, certain issuances of additional shares to the Interested
Stockholder, transactions with the corporation which increase the proportionate
interest in the corporation directly or indirectly owned by the Interested
Stockholder or transactions in which the Interested Stockholder receives certain
other benefits.
The provisions of Section 203, coupled with the Board's authority to issue
preferred stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or a change in control of Allied. The provisions
also could discourage, impede or prevent a merger, tender offer or proxy
contest, even if such event would be favorable to the interests of stockholders.
Allied's stockholders, by adopting an amendment to the Certificate, may elect
not to be governed by Section 203 effective 12 months after such adoption.
Neither the Certificate nor the Bylaws exclude Allied from the restrictions
imposed by Section 203.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
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DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following description of the terms of Allied Debt Securities and the
terms of the AWNA Debt Securities sets forth certain general terms and
provisions of such Debt Securities. To the extent any terms described below
apply specifically (i) to the Allied Debt Securities or the AWNA Debt
Securities, specific references to "Allied Debt Securities" or "AWNA Debt
Securities" will be made, otherwise references to "Debt Securities" shall be
deemed to apply to both the Allied Debt Securities and the AWNA Debt Securities,
(ii) to the Senior Allied Debt Securities or the Senior AWNA Debt Securities,
specific references to "Senior Allied Debt Securities" or "Senior AWNA Debt
Securities" will be made, otherwise references to "Senior Debt Securities" shall
be deemed to apply to both the Senior Allied Debt Securities and the Senior AWNA
Debt Securities and (iii) to the Senior Subordinated Allied Debt Securities or
the Senior Subordinated AWNA Debt Securities, specific references to "Senior
Subordinated Allied Debt Securities" or "Senior Subordinated AWNA Debt
Securities" will be made, otherwise references to "Senior Subordinated Debt
Securities" shall be deemed to apply to both the Senior Subordinated Allied Debt
Securities and the Senior Subordinated AWNA Debt Securities. The extent, if any,
to which such general provisions do not apply to the Debt Securities offered by
any Prospectus Supplement will be described in such Prospectus Supplement.
The Senior Allied Debt Securities offered hereby are to be issued in one or
more series under an Indenture (as amended or supplemented from time to time,
the "Senior Allied Indenture") to be entered into between Allied and First Trust
National Association, as trustee (the "Senior Allied Trustee"). The Senior
Subordinated Allied Debt Securities offered hereby are to be issued in one or
more series under an Indenture (as amended or supplemented, the "Senior
Subordinated Allied Indenture) to be entered into between Allied and First Trust
National Association, as trustee (the "Senior Subordinated Allied Trustee"). The
Senior AWNA Debt Securities offered hereby are to be issued in one or more
series under an Indenture (as amended or supplemented, the "Senior AWNA
Indenture" and, together with the Senior Allied Indenture, the "Senior
Indentures") to be entered into between AWNA, Allied, as guarantor, the
Subsidiary Guarantors and First Trust National Association, as trustee (the
"Senior AWNA Trustee" and, together with the Senior Allied Trustee, the Senior
Trustees"). The Senior Subordinated AWNA Debt Securities offered hereby are to
be issued in one or more series under an Indenture (as amended or supplemented,
the "Senior Subordinated AWNA Indenture" and, together with the Senior
Subordinated Allied Indenture, the "Senior Subordinated Indentures") to be
entered into between AWNA, Allied, as guarantor, the Subsidiary Guarantors and
First Trust National Association, as trustee (the "Senior Subordinated AWNA
Trustee" and, together with the Senior Subordinated Allied Trustee, the "Senior
Subordinated Trustees"). The Senior Indentures and the Senior Subordinated
Indentures are referred to collectively herein as the "Indentures" and the
Senior Trustees and the Senior Subordinated Trustees are referred to
collectively herein as the "Trustees." Copies of the Indentures have been filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
The Indentures will be executed by the Company and the Trustees on or prior to
the issuance of any Debt Securities thereunder.
The terms of the Debt Securities include those stated in the applicable
Indenture and those made a part of the applicable Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "TIA"). The Debt Securities are
subject to all such terms and the holders of Debt Securities are referred to the
applicable Indenture and the TIA for a statement of such terms.
The following summaries of certain provisions of each Indenture and the
Debt Securities are not complete and are qualified in their entirety by
reference to the provisions of each Indenture, including the definitions of
capitalized terms used herein without definition. Numerical references in
parentheses are to sections in the applicable Indenture and unless otherwise
indicated capitalized terms have the meanings given them in the applicable
Indenture.
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GENERAL
Unless otherwise specified in a Prospectus Supplement, (i) the Senior Debt
Securities, when issued, will rank pari passu in right of payment with all other
unsubordinated obligations of Allied or AWNA, as the case may be, and will rank
senior in right of payment to all subordinated obligations of Allied or AWNA, as
the case may be, (ii) the Senior Guarantees and the Allied Senior Guarantee,
when issued, will rank pari passu in right of payment with all other
unsubordinated obligations of the Guarantors and Allied, respectively, and will
rank senior in right of payment to all subordinated obligations of the
Guarantors, (iii) the Senior Subordinated Debt Securities, when issued, will be
subordinate in right of payment to the prior payment in full of all Senior Debt
(as defined herein) of Allied or AWNA, as the case may be, including all Senior
Debt Securities of Allied or AWNA, as the case may be, and will rank pari passu
in right of payment with all other senior subordinated obligations of Allied or
AWNA, as the case may be, and (iv) the Senior Subordinated Guarantees and the
Allied Senior Subordinated Guarantee, when issued, will be subordinate in right
of payment to the prior payment in full of all Senior Debt of the Guarantors and
Allied, respectively, including, in the case of Allied, all Senior Allied Debt
Securities, and will rank pari passu in right of payment with all other senior
subordinated obligations of the Guarantors and Allied, respectively. Holders of
secured obligations of Allied, AWNA and the Guarantors, including secured Allied
Debt Securities, secured AWNA Debt Securities and secured Guarantees,
respectively, will, however, have claims that are prior to the claims of holders
of unsecured Allied Debt Securities, AWNA Debt Securities and Guarantees,
respectively with respect to the assets securing such secured obligations.
Allied conducts its operations through AWNA, which is subject, under certain of
its debt instruments, to certain restrictions on its ability to pay funds to
Allied. All Allied Debt Securities and Guarantees of Allied will effectively be
subordinate in right of payment to the prior payment in full of all indebtedness
of Allied's subsidiaries and all other obligations and other liabilities,
including trade payables, of Allied's subsidiaries, including all AWNA Debt
Securities.
The Indentures do not limit the aggregate amount of Debt Securities which
may be issued thereunder. Except as otherwise provided in the applicable
Prospectus Supplement, the Indentures, as they apply to any series of Debt
Securities, do not limit the incurrence or issuance of other secured or
unsecured debt of Allied or AWNA, as the case may be, whether under any of the
Indentures, or any other indenture that Allied or AWNA, as the case may be, may
enter into in the future or otherwise. See "-- Subordination under the Senior
Subordinated Indentures" and the Prospectus Supplement relating to any offering
of Senior Subordinated Securities.
The Debt Securities will be issuable in one or more series pursuant to an
indenture supplement to the applicable Indenture, a certificate of officers of
Allied or AWNA, as the case may be, or a resolution of Allied's, or AWNA's, as
the case may be, Board of Directors or a committee thereof. Section 2.1 of each
Indenture.
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including: (1) the title of such Debt
Securities; (2) any limit upon the aggregate principal amount of such Debt
Securities; (3) the date or dates on which the principal of and premium, if any,
on such Debt Securities is payable or the method or methods of determining such
date or dates; (4) the rate or rates (which may be fixed or variable) at which
such Debt Securities will bear interest, if any, and the method of calculating
such rate or rates; (5) the date or dates from which interest, if any, will
accrue or the method by which such date or dates will be determined; (6) the
date or dates on which interest, if any, will be payable and the record date or
dates therefor; (7) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable or at which Debt
Securities may be surrendered for registration of transfer or exchange; (8) the
period or periods within which, the price or prices at which, the currency or
currencies (including currency unit or units) in which, and the other terms and
conditions upon which, such Debt Securities may be redeemed, in whole or in
part, at the option of Allied or AWNA, as the case may be, (9) the obligation,
if any, of Allied or AWNA, as the case may be, to redeem or purchase such Debt
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Securities pursuant to any sinking fund or analogous provisions or upon the
happening of a specified event or at the option of a holder thereof and the
period or periods within which, the price or prices at which, the currency or
currencies (including currency unit or units) in which, and the other terms and
conditions upon which, such Debt Securities shall be redeemed or purchased, in
whole or in part, pursuant to such obligation; (10) the denominations in which
such Debt Securities are authorized to be issued; (11) the currency or currency
unit, if other than in United States dollars, in which Debt Securities may be
denominated and/or the currency or currencies, if other than in United States
dollars, (including currency unit or units) in which principal of, premium, if
any, and interest, if any, on such Debt Securities will be payable and whether
Allied or AWNA, as the case may be, or the holders of any such Debt Securities
may elect to receive payments in respect of such Debt Securities in a currency
or currencies (including currency unit or units) other than that in which such
Debt Securities are stated to be payable; (12) if the amount of principal of, or
any premium or interest on, any of such Debt Securities shall be determined with
reference to an index, formula or other method, the index, formula or other
method by which such amounts will be determined; (13) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon declaration of the acceleration of the
maturity thereof or the method by which such portion shall be determined; (14)
provisions, if any, granting special rights to the holders of Debt Securities
upon the occurrence of such events as may be specified; (15) any addition to, or
modification or deletion of, any Event of Default or any covenant of Allied,
AWNA or any Guarantor, as the case may be, specified in the applicable Indenture
with respect to such Debt Securities; (16) the circumstances under which Allied,
AWNA or any Guarantor, as the case may be, will pay additional amounts on the
Debt Securities held by non-U.S. persons in respect of taxes, assessments or
similar charges; (17) whether the Debt Securities will be issued in registered
or bearer form or both; (18) the applicability, if any, of such means of
defeasance or covenant defeasance as may be specified for such Debt Securities;
(19) whether such Debt Securities are to be issued in whole or in part in the
form of one or more temporary or permanent global securities and, if so, the
identity of the depositary or its nominee, if any, for such global security or
securities and whether beneficial owners of interests in the global security may
exchange such interests for certificated Debt Securities to be registered in the
names of or to be held by such beneficial owners or their nominees; (20) whether
such Debt Securities are secured or unsecured and, if secured, the security and
related terms in connection therewith; (21) the terms and conditions, if any,
upon which such Debt Securities may be converted or exchanged into or for Common
Stock or Preferred Stock of Allied; (22) any restrictions on the registration,
transfer or exchange of the Debt Securities; (23) the forms of the Debt
Securities and interest coupons, if any; (24) the identity (if other than the
Trustee) of the Registrar and any Paying Agent; and (25) any other terms
pertaining to such Debt Securities. Subject to any controlling provision of the
TIA, in the event of any inconsistency between the terms of the applicable
Indenture and the terms applicable to a series of Debt Securities established by
an indenture supplement, officers' certificate or board resolution, the terms
established by the indenture supplement, officers' certificate or board
resolution shall prevail. (Section 3.1 of each Indenture) Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities will not
be listed on any securities exchange.
The number of shares of Common Stock or Preferred Stock that will be
issuable upon the conversion or exchange of any Debt Securities issued with
conversion or exchange provisions will be adjusted to prevent dilution resulting
from stock splits, stock dividends or similar transactions, and the nature and
amount of the securities, assets or other property to be received upon the
conversion or exchange of such Debt Securities will be changed as necessary in
the event of any consolidation, merger, combination or similar transaction. The
specific provisions will be set forth in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities in registered form will be issued in denominations of U.S.$1,000 or
any integral multiples of U.S.$1,000 and Debt Securities in bearer form will be
issued in denominations of U.S.$5,000 or any integral multiples of U.S.$5,000.
(Section 3.2 of each Indenture) Where Debt Securities of any series are
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issued in bearer form, the special restrictions and considerations, including
special offering restrictions and material U.S. federal income tax
considerations, applicable to any such Debt Securities and to payments in
respect of and transfers and exchanges of such Debt Securities will be described
in the applicable Prospectus Supplement. Debt Securities in bearer form will be
transferable by delivery. (Section 3.5 of each Indenture)
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Material U.S. federal income tax consequences
and special considerations applicable to any such Debt Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, material U.S. federal income tax considerations and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest, if any, on any series of Debt Securities, material
U.S. federal income tax, accounting and other considerations applicable thereto
will be described in the applicable Prospectus Supplement.
The general provisions of the Indentures do not afford holders of the Debt
Securities protection in the event of a highly leveraged transaction,
restructuring, change in control, merger or similar transaction involving Allied
that may adversely affect holders of the Debt Securities.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement, payments
in respect of the Debt Securities will be made in the designated currency at
such office or agency of Allied or AWNA, as the case may be, maintained for that
purpose as Allied or AWNA, as the case may be, may designate from time to time,
except that, at the option of Allied or AWNA, as the case may be, interest
payments, if any, on Debt Securities in registered form may be made (i) by
checks mailed to the holders of Debt Securities entitled thereto at their
registered addresses or (ii) by wire transfer to an account maintained by the
holders of the Debt Securities entitled thereto as specified in the Register.
(Sections 3.7(a) and 9.2 of each Indenture) Each payment in respect of the Debt
Securities shall be considered to have been made on the date such payment is due
if there shall have been sent to the Trustee or paying agent by wire transfer
(received by no later than the close of business on such due date), or the
Trustee or paying agent otherwise holds, on such due date sufficient funds
designated therefor to make such payment. (Section 9.1 of each Indenture) Unless
otherwise indicated in an applicable Prospectus Supplement, scheduled payments
of any installment of interest on Debt Securities in registered form will be
made to the person in whose name such Debt Security is registered at the close
of business on the Regular Record Date for such interest. (Section 3.7(a) of
each Indenture)
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the United
States as Allied or AWNA, as the case may be, may appoint from time to time. The
paying agents outside the United States, if any, initially appointed by Allied
or AWNA, as the case may be, for a series of Debt Securities will be named in
the Prospectus Supplement. Unless otherwise provided in the applicable
Prospectus Supplement, Allied or AWNA, as the case may be, may at any time
designate additional paying agents or rescind the designation of any paying
agents, except that, if Debt Securities of a series are issuable in registered
form, Allied or AWNA, as the case may be, will be required to maintain at least
one office or agency where such Debt Securities may be presented or surrendered
for payment in each Place of Payment for such
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series and if Debt Securities of a series are issuable in bearer form, Allied or
AWNA, as the case may be, will be required to maintain at least one office or
agency in a Place of Payment outside the United States where Debt Securities of
such series and any coupons appertaining thereto may be presented and
surrendered for payment. (Section 9.2 of each Indenture)
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the office
or agency of Allied or AWNA, as the case may be, maintained for such purpose by
Allied or AWNA, as the case may be. (Sections 3.5 and 9.2 of each Indenture)
Debt Securities may be transferred or exchanged without service charge, although
Allied or AWNA, as the case may be, may require a holder to pay any tax or other
governmental charge imposed in connection therewith. (Section 3.5 of each
Indenture)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security"). Each Registered Global Security will be registered in the name of a
depositary (the "Depositary") or a nominee for the Depositary identified in the
applicable Prospectus Supplement, will be deposited with such Depositary or
nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof and any such
other matters as may be provided for pursuant to the applicable Indenture. In
such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. (Section 3.3 of each
Indenture) Unless and until it is exchanged in whole or in part for Debt
Securities in certificated form, a Registered Global Security may not be
transferred or exchanged except as a whole by the Depositary for such Registered
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor Depositary for such series or a
nominee of such successor Depositary, or except in the circumstances described
in the applicable Prospectus Supplement. (Section 3.5 of each Indenture)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement.
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depositary for such
Registered Global Security, the Depositary will credit on its book-entry
registration and transfer system the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("Participants") that have accounts with the Depositary. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution of such Debt Securities or by Allied or AWNA, as
the case may be, if such Debt Securities are offered and sold directly by Allied
or AWNA, as the case may be. Ownership of beneficial interests in a Registered
Global Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in a
Registered Global Security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the Depositary for such
Registered Global Security or by its nominee. Ownership of beneficial interests
in such Registered Global Security by persons who hold through Participants will
be shown on, and the transfer of such beneficial interests within such
Participants will be effected only through, records maintained by such
Participants.
So long as the Depositary for a Registered Global Security, or its nominee,
is the owner of such Registered Global Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Security represented by such Registered Global Security for all purposes
under each Indenture. (Section 3.8 of each Indenture) Accordingly, each
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person owning a beneficial interest in such Registered Global Security must rely
on the procedures of the Depositary and, if such person is not a Participant, on
the procedures of the Participant through which such person owns its interest,
to exercise any rights of a holder under such Indenture. Each of Allied and AWNA
understands that under existing industry practices, if it requests any action of
holders or if an owner of a beneficial interest in a Registered Global Security
desires to give or take any instruction or action which a holder is entitled to
give or take under the Indenture, the Depositary would authorize the
Participants holding the relevant beneficial interests to give or take such
instruction or action, and such Participants would authorize beneficial owners
owning through such Participants to give or take such instruction or action or
would otherwise act upon the instructions of beneficial owners holding through
them.
Unless otherwise specified in the Prospectus Supplement, payments with
respect to principal, premium, if any, and interest, if any, on the Debt
Securities represented by a Registered Global Security registered in the name of
the Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security.
Each of Allied and AWNA expects that the Depositary for any Debt Securities
represented by a Registered Global Security, upon receipt of any payment of
principal or interest in respect of such Registered Global Security, will credit
immediately Participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the Registered Global Security as shown
on the records of the Depositary. Each of Allied and AWNA also expects that
payments by Participants to owners of beneficial interests in such Registered
Global Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities in
bearer form held for the accounts of customers or registered in "street name,"
and will be the responsibility of such Participants. None of Allied, AWNA, any
Guarantor, the respective Trustees or any agent of Allied, AWNA, any Guarantor
or the respective Trustees shall have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in any Registered Global Security, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. (Section 3.8 of each Indenture)
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary of such Registered
Global Security or becomes ineligible to act as such and a successor depositary
is not appointed by Allied or AWNA, as the case may be, prior to the resignation
of the Depositary and, in any event, within 90 days after receiving notice or
becoming aware of such ineligibility, Allied or AWNA, as the case may be, will
issue Debt Securities in certificated form in exchange for such Registered
Global Security. In addition, Allied or AWNA, as the case may be, in its sole
discretion may at any time determine not to have any of the Debt Securities of a
series represented by one or more Registered Global Securities and, in such
event, will issue Debt Securities of such series in certificated form in
exchange for all of the Registered Global Securities representing such series of
Debt Securities. (Section 3.5 of each Indenture)
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depositary, or with a nominee for such depositary,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Securities may be issued in temporary or permanent form. (Section 3.4 of each
Indenture) The specific terms and procedures, including the specific terms of
the depositary arrangement, with respect to any portion of a series of Debt
Securities to be represented by one or more Bearer Global Securities will be
described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER OR SALE OF ASSETS
Allied or AWNA, as the case may be, (i) may not, and may not permit any
Restricted Subsidiary to, consolidate with or merge into any Person, in the case
of a Restricted Subsidiary, in a transaction in which such Restricted Subsidiary
remains a Restricted Subsidiary, unless such Restricted Subsidiary consolidates
with or merges into a Wholly Owned Restricted Subsidiary; (ii) may not permit
any Person other than a Wholly Owned Restricted Subsidiary to consolidate with
or merge
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into Allied or AWNA, as the case may be, or any Restricted Subsidiary (in a
transaction in which such Restricted Subsidiary remains a Restricted
Subsidiary); (iii) may not, directly or indirectly, in one or a series of
transactions, transfer, convey, sell, lease or otherwise dispose of all or
substantially all of the properties and assets of Allied or AWNA, as the case
may be, and its Subsidiaries on a consolidated basis; (iv) may not, and may not
permit any Restricted Subsidiary of Allied or AWNA, as the case may be, to,
acquire Capital Stock of or other ownership interests in any other Person such
that such other Person becomes a Restricted Subsidiary unless, in each case (i),
(ii), (iii) and (iv) above:
(i) in a transaction (or series) in which Allied or AWNA, as the case
may be, does not survive or in which Allied or AWNA, as the case may be,
transfers, conveys, sells, leases or otherwise disposes of all or
substantially all of its properties and assets, the successor entity is a
corporation, partnership, limited liability company or trust and is
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and expressly
assumes, by a supplemental indenture executed and delivered to the
applicable Trustee in form satisfactory to the Trustee, all of Allied's or
AWNA's, as the case may be, obligations under the applicable Indenture;
(ii) immediately after giving effect to such consolidation, merger, sale,
transfer or lease, no Default or Event of Default under the applicable
Indenture exists and (iii) with respect to any series of Debt Securities,
Allied, AWNA or such Guarantor, as the case may be, satisfies such other
conditions, if any, established with respect to such series of Debt
Securities pursuant to and in accordance with Section 3.1 of the applicable
Indenture. (Section 7.1 of each Indenture) Nothing contained in the Senior
AWNA Indenture or the Senior AWNA Debt Securities or in the Senior
Subordinated AWNA Indenture or the Senior Subordinated AWNA Debt Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or
into AWNA or a Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to Allied or a Guarantor. (Section 15.3 of the AWNA Senior
Indenture and Section 16.3 of the AWNA Senior Subordinated Indenture).
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Except as otherwise provided in a Prospectus Supplement relating to the
Debt Securities of a particular series, Events of Default with respect to Debt
Securities of any series are defined in each Indenture as (a) default in the
payment of any interest on any Debt Security of that series or any interest
coupon appertaining thereto, and the continuance of such default for a period of
30 days; (b) default in the payment of any installment of the principal of or
any premium on any Debt Security of that series when due, whether at maturity,
upon redemption, by declaration or otherwise or in the payment of a mandatory
sinking fund payment when and as due by the forms of the Debt Securities of that
series; (c) default in the deposit of any sinking fund payment, when as and if
due by the terms of a Debt Security of that series; (d) failure to perform any
other covenant or warranty of Allied, AWNA or any Guarantor, as the case may be,
in the applicable Indenture or the applicable Debt Securities, continued for 60
days after written notice from Holders of at least 10% in principal amount of
the outstanding applicable Debt Securities as provided in the applicable
Indenture; (e) a default or defaults under any bonds, debentures, notes or other
evidences of, or obligations constituting, Debt of Allied or any Restricted
Subsidiary of Allied, AWNA or any Guarantor or any Restricted Subsidiary of
AWNA, as the case may be, or under any mortgages, indentures, instruments or
agreements under which there may be issued or existing or by which there may be
secured or evidenced any Debt of Allied or any Restricted Subsidiary of Allied,
AWNA or any Guarantor or any Restricted Subsidiary of AWNA, as the case may be,
in each case with a principal or similar amount then outstanding, individually
or in the aggregate, in excess of $25 million, whether such Debt now exists or
is hereafter created, which default or defaults constitute a failure to pay any
portion of the principal or similar amount of such Debt when due and payable
after the expiration of any applicable grace period with respect thereto or
results in such Debt becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable;
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(f) the rendering of a final judgment or judgments (not subject to appeal)
against Allied or any of the Restricted Subsidiaries of Allied, AWNA or any
Guarantor or any Restricted Subsidiary of AWNA, as the case may be, in an
aggregate amount in excess of $25 million which remains or remain unstayed,
undischarged or unbonded for a period of 60 days thereafter; and (g) certain
events of bankruptcy, insolvency and reorganization of Allied, AWNA or any
Guarantor, as the case may be. (Section 5.1 of each Indenture) Events of Default
with respect to a specified series of Debt Securities may be deleted from or
added to the Indenture or may be modified and, if so deleted, added or modified,
will be described in the applicable Prospectus Supplement. (Sections 3.1 and 5.1
of each Indenture)
Each Indenture provides that the relevant Trustee will, within 90 days
after the occurrence of a Default that is continuing with respect to the Debt
Securities of any series, give to the holders of the Debt Securities of that
series notice of all Defaults known to it unless such Default shall have been
cured or waived; provided that except in the case of a Default in payment of
principal, premium, if any, or interest on the Debt Securities of that series,
such Trustee shall be protected in withholding such notice if it in good faith
determines that withholding such notice is in the interests of holders of the
Debt Securities of that series. (Section 6.2 of each Indenture) "Default" means
any event which is, or after notice or passage of time, or both, would be, an
Event of Default. (Section 1.1 of each Indenture)
Each Indenture provides that, if an Event of Default specified therein
(other than an Event of Default of the type described in clause (g) of the
second preceding paragraph) occurs with respect to the Debt Securities of any
series and is continuing, the Trustee for such series or the holders of 25% in
aggregate principal amount of all outstanding Debt Securities of that series
(calculated as provided for in each Indenture) may declare the principal of (or,
if the Debt Securities of that series are Original Issue Discount Securities or
Indexed Securities, such portion of the principal amount specified in the
Prospectus Supplement) and accrued interest, if any, on all the Debt Securities
of that series to be due and payable and upon such declaration, such principal
(or, in the case of Original Issue Discount Securities or Indexed Securities,
such portion of the principal amount specified in the Prospectus Supplement) and
interest, if any, shall be immediately due and payable. If an Event of Default
of the type described in clause (g) of the second preceding paragraph occurs
with respect to the Debt Securities of any series and is continuing, then the
principal of (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, the applicable portion of such
principal amount) and accrued interest, if any, on all the Debt Securities of
that series shall be immediately due and payable without any declaration or act
on the part of the Trustee for such series or any holder of such Debt
Securities. If the principal of and interest on Senior Subordinated Securities
is accelerated as described in this paragraph, the payment of such principal and
interest shall remain subordinated to the extent provided in Article 15 of the
Senior Subordinated Indentures. (Section 5.2 of each Indenture)
Each Indenture provides that the holders of not less than a majority in
aggregate principal amount of any series of Debt Securities by written notice to
the Trustee for such series may waive, on behalf of the holders of all Debt
Securities of such series, any past Default or Event of Default with respect to
that series and its consequences except a Default or Event of Default in the
payment of the principal of, premium, if any, or interest, if any, on any Debt
Security or with respect to a covenant or provision that cannot be amended or
modified without consent of each holder of such series of Debt Securities
affected. (Section 5.7 of each Indenture)
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities that are Original Issue Discount Securities for the particular
provisions relating to acceleration of the maturity of a portion of the
principal amount of such Original Issue Discount Securities upon the occurrence
of an Event of Default and the continuation thereof.
Each Indenture provides that, if a Default or an Event of Default shall
have occurred and be continuing, the holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series affected (with
each such series voting as a class) may, subject to certain
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limited conditions, direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee for such series, or
exercising any trust or power conferred on such Trustee. (Section 5.8 of each
Indenture)
Each Indenture includes a covenant that Allied, or AWNA, as the case may
be, will file annually with the relevant Trustee a certificate as to the
presence or absence of certain defaults under the terms of such Indenture.
(Section 9.5 of each Indenture)
MODIFICATION AND WAIVER
Each Indenture contains provisions permitting Allied, AWNA and the
Guarantors, as the case may be, and the relevant Trustee to enter into one or
more supplemental indentures without the consent of the holders of any of the
Debt Securities in order (i) to evidence the succession of another entity to
Allied, AWNA or any Guarantor, as the case may be, and the assumption of the
covenants and obligations of Allied, AWNA or any Guarantor, as the case may be,
under the Debt Securities and such Indenture by such successor to Allied, AWNA
or any Guarantor, as the case may be; (ii) to add to the covenants of Allied,
AWNA or any Guarantor, as the case may be, for the benefit of the holders of all
or any series of Debt Securities or surrender any right or power conferred on
Allied, AWNA or any Guarantor, as the case may be, by such Indenture; (iii) to
add additional Events of Default with respect to all or any series of Debt
Securities; (iv) to add to or change any provisions to such extent as necessary
to facilitate the issuance or administration of Debt Securities in bearer form
or to facilitate the issuance or administration of Debt Securities in global
form; (v) to change or eliminate any provision affecting only Debt Securities
not yet issued; (vi) to secure any series of Debt Securities; (vii) to establish
the form or terms of Debt Securities of any series; (viii) to evidence and
provide for successor Trustees or to add or change any provisions of such
Indenture to such extent as necessary to permit or facilitate the appointment of
a separate Trustee or Trustees for specific series of Debt Securities; (ix) to
permit payment in respect of Debt Securities in bearer form in the United States
to the extent allowed by law; (x) to cure any ambiguity, to correct or
supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under such Indenture which shall not be
inconsistent with the provisions of such Indenture, provided that any such
action does not adversely affect in any material respect the interests of any
holder of Debt Securities of any series then outstanding; (xi) to make provision
with respect to any conversion or exchange rights of holders not adverse to the
holders of any Debt Securities of any series then outstanding with such
conversion or exchange rights, including providing for the conversion or
exchange of Debt Securities into Common Stock or Preferred Stock of Allied; or
(xii) to effect the qualification of such Indenture under the TIA or to add
provisions expressly required under the TIA. (Section 8.1 of each Indenture)
Each Indenture also contains provisions permitting Allied, or AWNA and the
Guarantors, as the case may be, and the relevant Trustee, with the consent of
the holders of a majority in aggregate principal amount of the outstanding Debt
Securities of each series affected by such supplemental indenture, to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of such Indenture or any supplemental indenture or modifying
the rights of the holders of Debt Securities of such series, except that,
without the consent of the holder of each Debt Security so affected, no such
supplemental indenture may: (i) change the time for payment of principal or
premium, if any, or interest on any Debt Security; (ii) reduce the principal on
any Debt Security, or change the manner in which the amount of principal or
premium, if any, or interest thereon is determined; (iii) reduce the interest
rate, or reduce the amount of premium, if any, payable upon the redemption of
any Debt Security or change the manner in which the amount of the premium, if
any, or interest is determined; (iv) reduce the amount of principal payable upon
declaration of acceleration of the maturity of any Original Issue Discount
Security or Indexed Security; (v) change the currency or currency unit in which
any Debt Security or any premium or interest thereon is payable; (vi) impair the
right to institute suit for the enforcement of any payment on or with respect to
any Debt Security after such payment has become due (or, in the case of
redemption, on or after the Redemption Date); (vii) reduce the percentage in
principal amount of
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the Outstanding Debt Securities of any series, the consent of whose holders is
required for modification or amendment of such Indenture or for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults thereunder, or reduce the quorum or voting requirements applicable to
meetings of holders of Debt Securities; (viii) change the obligation of Allied
or AWNA, as the case may be, to maintain an office or agency in the places and
for the purposes specified in such Indenture; (ix) in the case of the Senior
Subordinated Indenture, modify the subordination provisions thereof in a manner
adverse to the holders of Senior Subordinated Securities of any series then
outstanding; (x) modify the provisions that set forth the provisions in each
Indenture that may not be changed without the consent of the holder of each Debt
Security affected thereby or (xi) make any change adversely affecting any rights
of the holders to convert or exchange convertible or exchangeable Debt
Securities. (Section 8.2 of each Indenture)
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may waive compliance by Allied, or AWNA or any
Guarantor, as the case may be, with certain restrictive provisions of the
applicable Indenture (Section 9.6 of each Indenture). The Holders of a majority
in aggregate principal amount of the Outstanding Debt Securities of any series
may waive any past default under the applicable Indenture, except a default in
the payment of principal, premium or interest and certain covenants and
provisions of the applicable Indenture which cannot be amended or modified
without the consent of the Holder of each Outstanding Debt Security of such
series affected. (Section 5.7 of each Indenture)
SUBORDINATION UNDER THE SENIOR SUBORDINATED INDENTURES
The payment of the principal of (and premium, if any) and interest on the
Senior Subordinated Debt Securities will, in certain circumstances as set forth
in the applicable Senior Subordinated Indenture, be subordinated in right of
payment to the prior payment in full of all Senior Debt of Allied or AWNA, as
the case may be. Upon any payment or distribution of assets of Allied or AWNA,
as the case may be, to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshalling of assets
and liabilities or any bankruptcy, insolvency or similar proceedings of Allied
or AWNA, as the case may be, the holders of Senior Debt of Allied or AWNA, as
the case may be, will be entitled to receive payment in full of the principal of
(and premium, if any) and interest on such Senior Debt, including all amounts
due or to become due on all such Senior Debt, or provision will be made for
payment in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of such Senior Debt, before the holders of Senior Subordinated Debt
Securities of Allied or AWNA, as the case may be, are entitled to receive any
Securities Payments. "Securities Payment" means any payment or distribution of
any kind, whether in cash, property or securities (including any payment or
distribution deliverable by reason of the payment of any other Debt subordinated
to the Senior Subordinated Debt Securities) on account of the principal of (and
premium, if any) or interest on the Senior Subordinated Debt Securities or on
account of the purchase or redemption or other acquisition of Senior
Subordinated Debt Securities by Allied, AWNA or any subsidiary of Allied. In the
event that, notwithstanding the foregoing, the applicable Senior Subordinated
Trustee or the holder of any Senior Subordinated Debt Securities receives any
Securities Payment before all Senior Debt of Allied, or AWNA, as the case may
be, is paid in full or payment thereof is provided for in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of such Senior
Debt, then and in such event such Debt Securities Payment will be required to be
paid over or delivered forthwith to the holders of Senior Debt for application
to the payment of all Senior Debt of Allied or AWNA, as the case may be,
remaining unpaid, to the extent necessary to pay such Senior Debt in full.
(Sections 15.1 and 15.2 of the Senior Subordinated Allied Indenture and the
Senior Subordinated AWNA Indenture)
Allied or AWNA, as the case may be, may not make any Securities Payments if
there has occurred and is continuing a default in the payment of the principal
of (or premium, if any) or interest on Senior Debt of Allied or AWNA, as the
case may be, or if there has occurred and is continuing any event of default
with respect to Senior Debt of Allied or AWNA, as the case may be,
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which has resulted in such Senior Debt becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable (a "Senior Payment Default"). In addition, if any default (other than a
Senior Payment Default), with respect to any Senior Debt of Allied or AWNA, as
the case may be, permitting after notice or lapse of time (or both) one or more
holders thereof (or a trustee or agent on behalf thereof) to accelerate the
maturity thereof (a "Senior Nonmonetary Default") has occurred and is continuing
and Allied or AWNA, as the case may be, and the applicable Senior Subordinated
Trustee have received written notice thereof from any holder or holders of
Senior Debt of AWNA with a principal amount in excess of $50 million, then
Allied may not make any Securities Payments for a period (a "blockage period")
commencing on the date Allied or AWNA, as the case may be, and the applicable
Senior Subordinated Trustee receive such written notice and ending on the
earlier of (x) the 179th day after such date and (y) the date if any, on which
the Senior Debt of Allied or AWNA, as the case may be, to which such default
relates is discharged or such default is waived or otherwise cured and any
acceleration of Senior Debt of the Company shall have been rescinded or
annulled. (Section 15.3 of the Senior Subordinated Allied Indenture and the
Senior Subordinated AWNA Indenture)
In any event, not more than one blockage period with respect to any Senior
Subordinated Debt Securities may be commenced during any period of 360
consecutive days. No Senior Payment Default or Senior Nonmonetary Default that
existed or was continuing on the date of commencement of any blockage period
with respect to the Senior Debt of Allied or AWNA, as the case may be, will be,
or can be, made the basis for the commencement of a subsequent blockage period,
unless such default has been cured for a period of not less than 90 consecutive
days. In the event that, notwithstanding the foregoing, Allied or AWNA, as the
case may be, makes any Securities Payment to the applicable Senior Subordinated
Trustee or any holder of the applicable Senior Subordinated Debt Securities
prohibited by the subordination provisions, then and in such event such Debt
Securities Payment will be required to be paid over and delivered forthwith to
the holders of the Senior Debt of Allied or AWNA, as the case may be. (Section
15.3 of the Senior Subordinated Allied Indenture and the Senior Subordinated
AWNA Indenture)
By reason of such subordination, in the event of insolvency, creditors of
Allied or AWNA, as the case may be, who are not holders of Senior Debt of Allied
or AWNA, as the case may be, or of the applicable Senior Subordinated Debt
Securities may recover less, ratably, than holders of such Senior Debt and may
recover more, ratably, than the holders of the applicable Senior Subordinated
Debt Securities.
"Senior Debt" means, except as otherwise provided in a Prospectus
Supplement relating to any series of Debt Securities, (i) with respect to AWNA,
Debt created pursuant to the Amended Bank Agreement, (ii) with respect to Allied
or AWNA, as the case may be, any Restricted Subsidiary of Allied or AWNA, as the
case may be, or, in the case of the Senior Subordinated AWNA Indenture, any
Guarantor, (a) every obligation of such Person for money borrowed, (b) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (c) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (d) every Capital Lease
Obligation of such Person and (e) every net payment obligation of such Person
under interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements at the time of determination, whether Incurred on
or prior to the date of the applicable Indenture or thereafter Incurred, (iii)
with respect to Allied or AWNA, as the case may be, any Restricted Subsidiary of
Allied or AWNA, as the case may be, or, in the case of the Senior Subordinated
AWNA Indenture, any Guarantor, guarantees by such person of Senior Debt, and in
the case of Allied or any Restricted Subsidiary of Allied, any guarantees by
such person of AWNA's obligations under the Amended Bank Agreement, and (iv)
amendments, modifications, renewals, extensions, refinancings and refundings of
any such Debt; provided, however, the following shall not constitute Senior
Debt: (A) any Debt owed to a Person when such Person is a Subsidiary of Allied
or AWNA, as the case
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may be, (B) any Debt which by the terms of the instrument creating or evidencing
the same is pari passu or subordinate in right of payment to the applicable
Senior Subordinated Debt Securities, (C) any Debt incurred in violation of the
applicable Indenture or (D) any Debt which is subordinate in right of payment in
any respect to any other Debt of Allied or AWNA, as the case may be. For
purposes of this definition, "Debt" includes any obligation to pay principal,
premium (if any), interest, penalties, reimbursement or indemnity amounts, fees
and expenses (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to Allied or AWNA, as the case may
be, whether or not a claim for post-petition interest is allowed in such
proceeding).
"Restricted Subsidiary" means, with respect to any series of Debt
Securities, any Subsidiary of Allied or AWNA, as the case may be, which is not
an Unrestricted Subsidiary (as defined in any Prospectus Supplement relating to
any series of Debt Securities) with respect to such series of Debt Securities
upon the issuance of such series of Debt Securities.
The subordination provisions described above will cease to be applicable to
the applicable Senior Subordinated Debt Securities upon any defeasance or
covenant defeasance of such Senior Subordinated Debt Securities as described
under "-- Defeasance and Covenant Defeasance."
The Senior Subordinated Indentures place no limitation on the amount of
additional Senior Debt that may be incurred by Allied or AWNA, as the case may
be. Allied and AWNA expect from time to time to incur additional indebtedness
constituting Senior Debt.
GUARANTEES
Allied and the Subsidiary Guarantors will, jointly and severally, on a
senior basis, unconditionally guarantee (the "Senior Guarantees") the due and
punctual payment of principal of (and premium, if any) and interest on the
Senior AWNA Debt Securities. Allied and the Subsidiary Guarantors will, jointly
and severally, on a senior subordinated basis, unconditionally guarantee (the
"Senior Subordinated Guarantees") the due and punctual payment of principal of
(and premium, if any) and interest on the Senior Subordinated AWNA Debt
Securities, when and as the same shall become due and payable, whether at the
maturity date, by declaration of acceleration, call for redemption or otherwise.
The Subsidiary Guarantors' obligations under the Senior Guarantees and the
Senior Subordinated Guarantees will be unconditionally guaranteed on a senior
and senior subordinated basis, respectively, by Allied (the "Allied Senior
Guarantee" and "Allied Senior Subordinated Guarantee," respectively, and,
together with the Senior Guarantees and the Senior Subordinated Guarantees, the
"Guarantees"). As of the date of this Prospectus, the Subsidiary Guarantors
constitute all of the direct and indirect subsidiaries of AWNA.
The Senior Guarantees and the Allied Senior Guarantee, when issued, will
rank pari passu in right of payment with all other unsubordinated obligations of
the Guarantors and Allied, respectively, and will rank senior in right of
payment to all subordinated obligations of the Guarantors and Allied,
respectively. The Senior Subordinated Guarantees and the Allied Senior
Subordinated Guarantee, when issued, will be subordinate in right of payment to
the prior payment in full of all Senior Debt of the Guarantors and Allied,
respectively, including, in the case of Allied, all Senior Allied Debt
Securities, and will rank pari passu in right of payment with all other senior
subordinated obligations of the Guarantors and Allied, respectively. No payment
will be made by any Guarantor under its Senior Subordinated Guarantee or by
Allied on its Allied Senior Subordinated Guarantee in respect of the Senior
Subordinated AWNA Debt Securities during any period that payments by AWNA on the
Senior Subordinated AWNA Debt Securities are suspended by the subordination
provisions of the Senior Subordinated AWNA Indenture. (Sections 15.1, 15.2 and
15.3 of the Allied Senior Subordinated Indenture and Sections 16.1, 16.2 and
16.3 of the AWNA Senior Subordinated Indenture.)
The Guarantees will remain in effect with respect to each Guarantor until
the entire principal of, premium, if any, and interest on the applicable AWNA
Debt Securities shall have been paid in full or otherwise discharged in
accordance with the provisions of the applicable Indenture; provided,
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however, that (i) with respect to each Guarantor, if the applicable AWNA Debt
Securities are defeased and discharged as described under "-- Defeasance and
Discharge," or (ii) with respect to each Subsidiary Guarantor, such Subsidiary
Guarantor (x) ceases to be a Restricted Subsidiary or (y) all or substantially
all of the assets of such Subsidiary Guarantor or all of the capital stock of
such Subsidiary Guarantor is sold (including by issuance, merger, consolidation
or otherwise) by the Company or any of its Subsidiaries in a transaction in
accordance with the Indenture, then in each case of (i) and (ii) above, such
Guarantor or the corporation acquiring such assets (in the event of a sale or
other disposition of all or substantially all of the assets of such Subsidiary
Guarantor) shall be released and discharged from the applicable Guarantee
obligations.
Subject to payment in full of all Senior Debt of any Guarantor, the rights
of the holders of the Senior Subordinated AWNA Debt Securities under the related
Senior Subordinated Guarantees of such Guarantor and Allied Senior Subordinated
Guarantee of Allied will be subrogated to the rights of the holders of such
Senior Debt to receive payments or distributions of cash, property or securities
of the Guarantor or Allied, as the case may be, applicable to Senior Debt of
such Guarantor or Allied, as the case may be.
Because Allied is a holding company, the rights of its creditors, including
the Holders of the AWNA Debt Securities in the event the Guarantees are
enforced, to share in the distribution of the assets of any subsidiary upon the
subsidiary's liquidation or recapitalization will be subject to the prior claims
of the subsidiary's creditors, except to the extent Allied may itself be a
creditor with recognized claims against the subsidiary. See "-- General" above.
DEFEASANCE AND COVENANT DEFEASANCE
Defeasance and Discharge. Unless otherwise provided in the applicable
Prospectus Supplement relating to the Debt Securities of a particular series,
Allied or AWNA, as the case may be, will be discharged from any and all
obligations in respect of the Debt Securities of, or within, any series (except
for certain obligations to register the transfer or exchange of Debt Securities,
to replace stolen, lost or mutilated Debt Securities, to convert or exchange
Debt Securities, to maintain paying agencies and to hold monies for payment in
trust) upon the deposit with the relevant Trustee, in trust, of money and/or
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay (x) the principal of, premium, if any, and each installment of
interest on such Debt Securities at the maturity of such payments and (y) any
mandatory sinking fund payments applicable to such series on the day on which
such payments are due and payable in accordance with the terms of the applicable
Indenture and such Debt Securities. (Sections 3.1 and 4.4 of each Indenture)
Such a trust may only be established if, among other things, Allied or AWNA, as
the case may be, has received from, or there has been published by, the Internal
Revenue Service a ruling or there has been a change in law, which in the Opinion
of Counsel provides that Holders of the Outstanding Debt Securities will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to Federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred; (ii) no Event
of Default (or event that with the passing of time or the giving of notice, or
both, will constitute an Event of Default) shall have occurred or be continuing;
(iii) Allied or AWNA, as the case may be, has delivered to the Trustee an
Opinion of Counsel to the effect that such deposit shall not cause the Trustee
or the Trust so created to be subject to the Investment Company Act of 1940; and
(iv) certain other customary conditions precedent are satisfied. (Section 4.6 of
each Indenture)
Defeasance of Certain Covenants and Certain Events of Default. Unless
otherwise provided in the applicable Prospectus Supplement relating to the Debt
Securities of a particular series, upon the deposit with the relevant Trustee,
in trust, of money and/or Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment, money in an
amount sufficient to pay the
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principal of, premium, if any, and each installment of interest on such Debt
Securities and any mandatory Sinking Fund payments applicable to such series on
the day on which such payments are due and payable in accordance with the terms
of such Indenture and such Debt Securities, Allied, or AWNA and the Guarantors,
as the case may be, may omit to comply with certain covenants applicable to the
Debt Securities of, or within, any series and the occurrence of any Event of
Default described in clause (d) or clause (e) under the caption "Events of
Default, Notice and Certain Rights on Default" above or any additional Event of
Default established with respect to such series of Debt Securities pursuant to
Section 3.1 of the applicable Indenture, shall not be deemed to be a Default or
Event of Default under such Indenture and such Debt Securities. The obligations
of Allied, or AWNA and the Guarantors, as the case may be, under such Indenture
and such Debt Securities, other than with respect to the covenants referred to
above, and the Events of Default, other than the Events of Default referred to
above, shall remain in full force and effect. (Sections 3.1 and 4.5 of each
Indenture) Such a trust may only be established if, among other things, Allied
or AWNA, as the case may be, (i) has delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Notes will not recognize gain or
loss for Federal income tax purposes as a result of such deposit and defeasance
and will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred; (ii) no Event of Default (or event that with the passing of
time or the giving of notice, or both, will constitute an Event of Default)
shall have occurred or be continuing; (iii) Allied or AWNA, as the case may be,
has delivered to the Trustee an Opinion of Counsel to the effect that such
deposit shall not cause the Trustee or the trust so created to be subject to the
Investment Company Act of 1940; and (iv) certain other customary conditions
precedent are satisfied. (Section 4.6 of each Indenture)
In addition, with respect to the Senior Subordinated Indentures, in order
to be discharged or omit compliance with certain covenants as described above,
no default in the payment of principal of, premium, if any, or interest on any
Senior Debt shall have occurred and be continuing and no other event of default
with respect to any Senior Debt shall have occurred and be continuing and shall
have resulted in such Senior Debt becoming or being declared due and payable
prior to the date it would have become due and payable. (Section 4.6 of each
Senior Subordinated Indenture)
In the event Allied, or AWNA and the Guarantors, as the case may be,
exercise its or their option to omit compliance with certain covenants of the
Indenture with respect to such Debt Securities as described in the preceding
paragraphs and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than an Event of Default described in
clause (d) or (e) under the caption "Events of Default, Notice and Certain
Rights on Default" above, the amount of money and Government Obligations on
deposit with the relevant Trustee will be sufficient to pay amounts due on such
Debt Securities at the time of their stated maturity but may not be sufficient
to pay amounts due on such Debt Securities at the time of the acceleration
resulting from such Event of Default. However, Allied, or AWNA and the
Guarantors, as the case may be, would remain liable for any such deficiency.
NOTICES
Notices to holders of registered Debt Securities will be given by mail to
the addresses of such holders as they may appear in the Register. Notes to
holders of Bearer Securities will be sufficiently given if published twice in
any newspaper authorized by the applicable Indenture in New York, New York and
in such other cities, if any, as shall be specified for such series. (Section
1.6 of each Indenture)
OWNER OF DEBT SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement relating
to the Debt Securities of a particular series, Allied, or AWNA and the
Guarantors, as the case may be, the applicable Trustee and any agent of Allied,
or AWNA and the Guarantors, as the case may be, or the applicable Trustee, may
treat the person in whose name a Debt Security in registered form is
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registered, and may treat the bearer of a Debt Security in bearer form, as the
absolute owner thereof (whether or not such Debt Security may be overdue) for
the purpose of receiving payment and for all other purposes. (Section 3.8 of
each Indenture)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York. (Section 1.12 of each
Indenture)
THE TRUSTEE
First Trust National Association, a national banking association, is the
Trustee under each of the Indentures. First Trust National Association is also
the Trustee under the Indenture dated as of May 15, 1997 (the "11.30%
Indenture") relating to Allied's 11.30% Senior Discount Notes due 2007 and the
Indenture dated as of December 1, 1996 (the "10 1/4% Indenture") relating to
AWNA's 10 1/4% Senior Subordinated Notes due 2006. Pursuant to the provisions of
the TIA, upon a default under any of the Senior Indentures, the Subordinated
Indentures, the 11.30% Indenture or the 10 1/4% Indenture, First Trust National
Association may be deemed to have a conflicting interest, by virtue of its
acting as the Trustee under each of the Indentures, thereby requiring it to
resign and be replaced by a successor Trustee under one or more of the
Indentures, the 11.30% Indenture or the 10 1/4% Indenture.
DESCRIPTION OF WARRANTS
Allied may issue Warrants, including Warrants to purchase Allied Debt
Securities ("Debt Warrants"), Preferred Stock or Common Stock. Warrants may be
issued independently or together with any such securities of Allied and may be
attached to or separate from such securities of Allied. The Warrants are to be
issued under warrant agreements (each a "Warrant Agreement") to be entered into
between Allied and a bank or trust company, as warrant agent (the "Warrant
Agent"), all as shall be set forth in the Prospectus Supplement relating to
Warrants being offered pursuant thereto. The description of the terms of the
Warrants that are set forth below and that will be set forth in the applicable
Prospectus Supplement do not purport to be complete and are qualified in their
entirety by reference to the Warrant Agreement and warrant certificate relating
to such Warrants.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the warrant certificates representing such Debt Warrants, including the
following: (i) the specific designation of such Debt Warrants; (ii) the Debt
Securities of Allied for which such Debt Warrants are exercisable; (iii) the
aggregate number of such Debt Warrants; (iv) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant, and the price or
prices at which such Debt Warrants will be issued; (v) the procedures and
conditions relating to the exercise of such Debt Warrants; (vi) the designation
and terms of any related Debt Securities of Allied with which such Debt Warrants
are issued, and the number of such Debt Warrants issued with each such Debt
Security; (vii) the date, if any, on and after which such Debt Warrants and the
related securities of Allied will be separately transferable; (viii) the date on
which the right to exercise such Debt Warrants shall commence, and the date on
which such right shall expire; (ix) the maximum or minimum number of such Debt
Warrants which may be exercised at any time; (x) if applicable, a discussion of
material United States Federal income tax considerations; (xi) any other terms
of such Debt Warrants and terms, procedures and limitations relating to the
exercise of such Debt Warrants; and (xii) the terms of the securities of Allied
purchasable upon exercise of such Debt Warrants. Prior to the exercise of their
Debt Warrants, holders of Debt Warrants exercisable for Debt Securities will not
have any of the
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rights of holders of the Debt Securities purchasable upon such exercise and will
not be entitled to payments of principal (or premium, if any) or interest, if
any, on the Debt Securities purchasable upon such exercise.
OTHER WARRANTS
Allied may issue other Warrants. The applicable Prospectus Supplement will
describe the following terms of any such other Warrants in respect of which this
Prospectus is being delivered: (i) the title of such Warrants; (ii) the
securities (whether Preferred Stock or Common Stock) for which such Warrants are
exercisable; (iii) the price or prices at which such Warrants will be issued;
(iv) if applicable, the designation and terms of the Preferred Stock or Common
Stock with which such Warrants are issued, and the number of such Warrants
issued with each such share of Preferred Stock or Common Stock; (v) if
applicable, the date on and after which such Warrants and the related Preferred
Stock or Common Stock will be separately transferable; (vi) if applicable, a
discussion of material United States Federal income tax considerations; and
(vii) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants. The
applicable Prospectus Supplement will also set forth (a) the amount of
securities called for by such Warrants, and, if applicable, the amount of
Warrants outstanding, and (b) information relating to provisions, if any, for a
change in the exercise price or the expiration date of such Warrants and the
kind, frequency and timing of any notice to be given. Prior to the exercise of
their Warrants for shares of Preferred Stock or Common Stock, holders of such
Warrants will not have any rights of holders of the Preferred Stock or Common
Stock purchasable upon such exercise and will not be entitled to dividend
payments, if any, or voting rights of the Preferred Stock or Common Stock
purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase for cash or other
consideration such principal amount or such number of securities of Allied, at
such exercise price as shall in each case be set forth in, or be determinable as
set forth in, the Prospectus Supplement relating to the Warrants offered
thereby. Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby at any time up to the close of business
on the expiration date set forth in such Prospectus Supplement. After the close
of business on the expiration date (or such later expiration date as may be
extended by Allied), unexercised Warrants will become void.
Upon receipt of payment and the warrant certificate properly completed and
duly executed at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement, Allied will, as soon
as practicable, forward the securities purchasable upon such exercise. If less
than all of the Warrants represented by such warrant certificate are exercised,
a new warrant certificate will be issued for the remaining Warrants.
MODIFICATIONS
Each Warrant Agreement and the terms of the Warrants and the Warrant
Certificates issued thereunder may be amended by Allied and the applicable
Warrant Agent, without the consent of the holders, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision therein or in any other manner which Allied may deem
necessary or desirable and which will not adversely affect the interests of the
holders in any material respect.
PLAN OF DISTRIBUTION
Allied or AWNA may sell Securities to or through one or more underwriters
or dealers and also may sell Securities directly to institutional investors or
other purchasers, or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
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In connection with the sale of Securities, underwriters or agents may
receive compensation from Allied or AWNA or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from Allied and any profit on the
resale of Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from Allied or AWNA will be
described, in the related Prospectus Supplement.
Under agreements which may be entered into by Allied and/or AWNA,
underwriters and agents who participate in the distribution of Securities may be
entitled to indemnification by Allied and AWNA against certain liabilities,
including liabilities under the Securities Act.
If so indicated in the related Prospectus Supplement, Allied or AWNA will
authorize underwriters or other persons acting as Allied's or AWNA's agents to
solicit offers by certain institutions to purchase Securities from Allied or
AWNA pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by Allied or AWNA. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for Allied, AWNA or their respective
affiliates in the ordinary course of their respective businesses.
The Securities may or may not be listed on a national securities exchange
or Nasdaq (other than the Common Stock, which is listed on the Nasdaq National
Market tier of Nasdaq). Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on the Nasdaq National Market tier of Nasdaq. No
assurances can be given that there will be an active trading market for the
Securities.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for Allied, AWNA and the
Guarantors by Fried, Frank, Harris, Shriver & Jacobson (a partnership which
includes professional corporations), New York, New York, and for the
underwriters, dealers or agents, if any, by Sullivan & Cromwell, New York, New
York.
EXPERTS
The audited consolidated financial statements of Allied incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference in reliance upon the authority of said firm as experts in giving said
report.
The audited consolidated financial statements of Laidlaw Solid Waste
Management Group incorporated by reference in this Prospectus and elsewhere in
the Registration Statement have been audited by Coopers & Lybrand, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ALLIED SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary............. S-3
Risk Factors.............................. S-8
Use Of Proceeds........................... S-9
Price Range Of Common Stock............... S-9
Dividend Policy........................... S-10
Capitalization............................ S-10
Selected Financial Data................... S-11
Summary Pro Forma Condensed Combined
Financial Data.......................... S-13
Management's Discussion And Analysis Of
Financial Condition And Results Of
Operations.............................. S-15
Disclosure Regarding Forward Looking
Statements.............................. S-31
Business And Properties................... S-32
Management................................ S-40
Shares Eligible For Future Sale........... S-43
Principal Stockholders.................... S-44
Underwriting.............................. S-49
Certain United States Tax Consequences to
Non-United States Holders............... S-51
Validity Of Common Stock.................. S-54
Index To Pro Forma Combined Financial
Statements.............................. F-1
PROSPECTUS
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 3
Use of Proceeds........................... 3
Risk Factors.............................. 4
Ratio of Earnings to Fixed Charges and
Earnings to Fixed Charges and Preferred
Stock Dividends......................... 10
Description of Capital Stock.............. 11
Description of Debt Securities and
Guarantees.............................. 14
Description of Warrants................... 28
Plan of Distribution...................... 29
Validity of Securities.................... 30
Experts................................... 30
</TABLE>
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16,200,000 SHARES
ALLIED WASTE
INDUSTRIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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[ALLIED WASTE LOGO]
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GOLDMAN SACHS INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
REPRESENTATIVES OF THE UNDERWRITERS
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