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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-4
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 17, 1996
ALLIED WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19285 88-0228636
(Commission File Number) (IRS Employer Identification No.)
15880 N. GREENWAY/HAYDEN LOOP, SUITE 100
SCOTTSDALE, ARIZONA 85260
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (602) 423-2946
NOT APPLICABLE
(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events
On December 7, 1996, Allied Waste Industries, Inc. (the "Company")
filed revised pro forma financial statements related to the pending
acquisition of the solid waste operations of Laidlaw, Inc. The
financial statements filed herein reflect an amendment to the financial
statements prior to the closing of the acquisition.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Laidlaw Solid Waste Management Group
(i) Report of Independent Public Accountants
(ii) Balance Sheets - August 31, 1995 and 1996
(iii) Statements of Operations for the Three Years Ended August
31, 1996
(iv) Statements of Cash Flows for the Three Years Ended August
31,1996
(v) Notes to Financial Statements
(b) Pro Forma Combined Financial Statements of Allied Waste Industries,
Inc.
(i) Introduction
(ii) Pro Forma Combined Balance Sheet - September 30, 1996
(unaudited)
(iii) Pro Forma Combined Statement of Operations for the Nine
Months Ended September 30, 1996 (unaudited)
(iv) Pro Forma Combined Statement of Operations for the Year
Ended December 31, 1995 (unaudited)
(v) Notes to Pro Forma Combined Financial Statements (unaudited)
(c) Exhibits
23 Consent of Coopers & Lybrand
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the balance sheets of the Laidlaw Solid Waste Management Group
(as defined in Note 1) as at August 31, 1995 and 1996 and the statements of
operations and cash flows for the years ended August 31, 1994, 1995 and 1996.
These financial statements are the responsibility of the management of Laidlaw
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Laidlaw Solid Waste Management Group as
at August 31, 1995 and 1996 and the results of its operations and cash flows for
the years ended August 31, 1994, 1995 and 1996 in accordance with United States
generally accepted accounting principles.
COOPERS & LYBRAND
Chartered Accountants
Hamilton, Canada
September 30, 1996
3
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
BALANCE SHEETS AS AT AUGUST 31, 1995 AND 1996
(U.S. $000'S)
1995 1996
---- ----
ASSETS
Current Assets
Trade and other accounts receivable (net of
allowance for doubtful accounts of $1,182;
August 31, 1996 -- $1,224) ......................... $ 95,124 $ 102,966
Inventories ............................................ 7,592 8,008
Income taxes recoverable ............................... 52,386 71,866
Other current assets ................................... 14,382 13,026
---------- ----------
169,484 195,866
---------- ----------
Fixed Assets
Land, landfill sites and improvements .................. 438,740 454,940
Buildings .............................................. 64,903 73,740
Vehicles and other ..................................... 588,320 623,175
---------- ----------
1,091,963 1,151,855
---------- ----------
Less: Accumulated depreciation and amortization ....... 521,193 584,225
---------- ----------
570,770 567,630
---------- ----------
Other Assets
Goodwill (net of accumulated amortization of $37,635;
August 31, 1996 -- $42,334) ........................ 175,463 204,125
Deferred income taxes .................................. 80,476 76,822
Deferred charges ....................................... 3,180 15,407
Other .................................................. 5,582 7,483
---------- ----------
264,701 303,837
---------- ----------
$1,004,955 $1,067,333
========== ==========
LIABILITIES
Current Liabilities
Account Payable ........................................ 78,212 66,407
Accrued Liabilities .................................... 67,479 61,865
Current portion of long-term debt (Note 3) ............. 2,256 2,675
---------- ----------
147,947 130,947
---------- ----------
Environmental and Other Long-Term Liabilities
(Note 4) ........................................... 86,371 81,784
Long-Term Debt (Note 3) ................................ 2,821 1,895
---------- ----------
237,139 214,626
Commitment and Contingencies (Note 5) .................. 767,816 852,707
---------- ----------
Net Investment by Laidlaw Inc. ......................... $1,004,955 $1,067,333
========== ==========
The accompanying notes are an integral part of these statements.
4
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenue ............................................... $750,191 $795,058 $763,534
-------- -------- --------
Operating expenses (Note 6) ........................... 500,866 525,757 526,872
Selling, general and administrative expenses (Note 6).. 58,375 60,348 50,184
Depreciation and amortization ......................... 106,727 102,997 95,938
-------- -------- --------
Income from operations ................................ 84,223 105,956 90,540
Allocated interest expense (Note 1) ................... (26,122) (28,850) (30,081)
Interest portion of closure and post-closure costs .... (3,002) (4,783) (5,455)
Other interest expense ................................ (876) (367) (464)
Interest, dividend and other income ................... 91 264 298
-------- -------- --------
Income before income taxes ............................ 54,314 72,220 54,838
Income taxes (Note 1) ................................. 12,300 14,300 10,200
-------- -------- --------
Net income ............................................ $ 42,014 $ 57,920 $ 44,638
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Net Cash Provided By (Used In):
<S> <C> <C> <C>
Operating activities ............................. $ 180,045 $ 187,953 $ 94,444
Investing activities ............................. (76,443) (119,900) (131,272)
Financing activities ............................. (145,827) (59,812) 121,719
---------- ---------- ----------
(42,225) 8,241 84,891
Net investment by Laidlaw Inc. - beginning of year ... 801,800 759,575 767,816
---------- --------- ----------
Net investment by Laidlaw Inc. - end of year ......... $ 759,575 $ 767,816 $ 852,707
========== ========== ==========
Operating Activities
Net income ........................................... $ 42,014 $ 57,920 $ 44,638
Items not affecting cash:
Depreciation and amortization .................... 106,727 102,997 95,938
Deferred income taxes ............................ 4,100 7,800 3,100
Other ............................................ 9,182 8,036 (5,431)
---------- ---------- ----------
162,023 176,753 138,245
Cash provided by (used in) financing working capital:
Trade and other accounts receivable .............. (6,147) 7,823 (7,842)
Inventories ...................................... (279) (500) (416)
Income taxes recoverable ......................... 15,590 (4,615) (19,480)
Other current assets ............................ 4,157 (3,734) 1,356
Accounts payable and accrued liabilities ........ 4,701 12,226 (17,419)
---------- --------- ----------
Net cash provided by operating activities ........... $ 180,045 $ 187,953 $ 94,444
========== ========== ==========
Investing Activities
Purchase of fixed assets ............................ $ (81,167) $(105,357) $ (79,072)
Proceeds from sale of fixed and other assets ........ 6,779 5,187 3,393
Purchase of other assets ............................ (187) (700) (6,392)
Expended on acquisitions (Note 7) ................... (2,213) (14,255) (49,226)
Net (increase) decrease in long-term investments .... 345 (4,775) 25
--------- --------- ----------
Net cash used in investing activities ............... $ (76,443) $(119,900) $(131,272)
========== ========== ==========
Financing Activities
Repayment of long-term debt ......................... (4,347) $ (4,516) $ (507)
Net advances from (repayment to) Laidlaw, Inc. ...... (141,480) (55,296) 122,226
--------- --------- ----------
Net cash provided by (used in) financing activities.. $(145,827) $ (59,812) $ 121,719
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
1. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
These special purpose financial statements have been prepared to reflect the
combined financial position and results of operations of SMAR Smaltimento
Rifiuti S.p.A.; Laidlaw Medical Services Ltd., Laidlaw Waste Systems (Canada)
Ltd. (excluding Laidlaw Environmental Services Limited and its subsidiaries) and
Laidlaw Waste Systems, Inc. (excluding Laidlaw Environmental Services Inc. and
its subsidiaries) which comprise the solid waste operations of Laidlaw Inc.
("Laidlaw Solid Waste Management Group" or the "Group").
Income taxes and interest expense associated with intercompany financing with
the Group's parent, Laidlaw Inc. ("Laidlaw"), have been allocated to the Group
based on it shares of the parent's net assets.
The surplus funds of the Group are regularly transferred to Laidlaw, and any
financing requirements are provided by Laidlaw Inc. Accordingly, no cash or bank
indebtedness balances are reported in these financial statements.
A statement of stockholders' equity has not been provided as it would be
inconsistent with the basis of presentation described above.
Except for the exclusions described in the preceding paragraphs, these financial
statements have been prepared in accordance with United States generally
accepted accounting principles.
As these financial statements have not been prepared for general purposes, users
may require additional information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets, liabilities, income and expenses, and
disclosure of contingencies. Future events could alter such estimates in the
near term.
A summary of significant accounting policies followed in the preparation of
these financial statements is as follows:
(a) Inventories
Inventories are valued at the lower of cost, determined on a first-in, first-out
basis, and replacement cost.
(b) Fixed assets
Landfill sites, preparation costs, and improvements are recorded at cost and
amortized on the basis of landfill capacity utilized during the year.
7
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
Depreciation and amortization of other property and equipment is provided
substantially on a straight-line basis over their estimated useful lives which
are as follows:
Buildings............................... 20 to 40 years
Vehicles and other...................... 5 to 15 years
Management periodically reviews the carrying values of its fixed assets to
determine whether such values are recoverable. Any resulting write downs are
charged against income.
The test for recoverability includes the future cash flows for closure and
post-closure costs associated with the Group's landfills which have not been
recognized as a liability for accounting purposes, as the Group intends to close
the landfills at the end of their useful lives. The future cash flows for
closure and post-closure costs which have been recognized as a liability in the
Group's financial statements have been excluded from the recoverability test.
(c) Other assets
Goodwill is amortized on a straight-line basis over forty years. The Group
reviews the value assigned to goodwill to determine if its recoverability has
been impaired by conditions affecting the Group. The amount of any impairment is
charged against income.
Deferred charges are amortized on a straight-line basis over a two to nine year
period depending on the nature of the deferred costs.
(d) Environmental liabilities
Environmental liabilities include accruals for costs associated with closure and
post-closure monitoring and maintenance of the Group's landfills, remediation at
certain of the Group's facilities and corrective actions at Superfund sites. The
Group accrues for closure and post-closure costs over the life of the landfill
site as airspace is consumed.
(e) Foreign currency translation
The Group's Canadian operations are all of a self-sustaining nature. The
accounts are translated to U.S. dollars on the following basis:
Assets and liabilities at the exchange rate in effect at the balance sheet date
and revenue and expenses at weighted monthly average exchange rates for the
year.
(f) Financial instruments
The Group's accounts receivable, accounts payable and long-term debt constitute
financial instruments. Based on available market information, the carrying value
of these instruments approximates their fair value as at August 31, 1995 and
1996. Concentrations of credit risk in accounts receivable are limited, due to
the large number of customers comprising the Group's customer base throughout
North America. The Group performs ongoing credit evaluations of its customers,
but does not require collateral to support customer
8
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
accounts receivable. Management establishes an allowance for doubtful accounts
based on the credit risk applicable to particular customers, historical trends
and other relevant information.
(g) Revenue
Amounts billed to customers prior to providing the related services are deferred
and later reported as revenues in the period in which the services are rendered.
(h) Accounting Pronouncements Not Yet Required to be Adopted
Management does not expect the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 121 to have a material effect on the Group's financial
position or results of operations. In 1997 the Group will be required to adopt
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", issued by the Financial Accounting
Standards Board. SFAS No. 121 requires that long-lived assets be reviewed for
impairment whenever events or circumstances indicate that the carrying amount of
the asset may not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest charges) from an asset to be held and used in
operations is less than the carrying value of the asset, an impairment loss must
be recognized in the amount of the difference between the carrying value and the
fair value. Should events and circumstances indicate that any of the Group's
landfills be reviewed for possible impairment, such review for recoverability
will be made in accordance with Emerging Issues Task Force Discussion Issue
("EITF") 95-23. The EITF outlines how cash flows for environmental exit costs
should be determined and measured.
3. LONG-TERM DEBT
1995 1996
---- ----
Notes due at various dates from 1997 to 2002
with interest rates from 5% to 10% ......... $4,961 $4,531
Capital leases payable, due in 1997 with
interest rates of 10% ...................... 116 39
------ ------
5,077 4,570
Less: Current portion ......................... 2,256 2,675
------ ------
$2,821 $1,895
====== ======
9
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
The aggregate amount of minimum payments required on long-term debt in each of
the years indicated is as follows:
Year ending August 31,
1997................................. $ 2,675
1998................................. 846
1999................................. 293
2000................................. 111
2001................................. 569
Thereafter........................... 76
------
$4,570
======
4. ENVIRONMENTAL LIABILITIES
The Group has recorded liabilities for closure and post-closure monitoring and
environmental remediation costs as follows:
1995 1996
---- ----
Current portion of environmental liabilities,
included in accrued liabilities...................... $ 23,530 $22,461
Non-current portion of environmental liabilities.... 79,888 76,240
-------- -------
$103,418 $98,701
======== =======
The Group, in the normal course of its business, expends funds for environmental
protection and remediation, but does not expect these expenditures to have a
materially adverse effect on its financial condition or results of operations,
since its business is based upon compliance with environmental laws and
regulations and its services are priced accordingly.
Closure and post-closure monitoring and maintenance costs for U.S. landfills are
estimated based on the technical requirements of the Subtitle D Regulations of
the U.S. Environmental Protection Agency or the applicable state requirements,
whichever are stricter, and the air emissions standards under the Clean Air Act,
and include such items as final capping of the site, methane gas and leachate
management, groundwater monitoring, and operation and maintenance costs to be
incurred during the period after the facility closes and ceases to accept waste.
Closure and post-closure costs for the Group's landfills in Canada are based
upon the local landfill regulations governing the facility.
The Group has also established procedures to routinely evaluate potential
remedial liabilities at sites which it owns or operated, or to which it
transported waste, including 14 sites listed on the Superfund National Priority
List (NPL). In the majority of situations, the Group's connection with NPL sites
relates to allegations that its companies (or their predecessors) transported
waste to the facilities in question, often prior to the acquisition of such
companies by the Group. The Group routinely reviews and evaluates sites
requiring remediation, including NPL sites, giving consideration to the nature
(i.e. owner, operator, transporter or generator), and the extent (i.e. amount
and nature of waste hauled to the location, number of years of site operation by
the Group, or other relevant factors) of the Group's alleged connection with the
site, the accuracy and strength of evidence connecting the Group to the
location, the number, connection and financial ability of other named and
unnamed potentially responsible parties and the nature and estimated cost of the
likely remedy. Where the Group concludes that it is probable that a liability
has been incurred, provision
10
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
is made in the financial statements, based upon management's judgement and prior
experience, for the Group's best estimate of the liability. Such estimates are
subsequently revised as deemed necessary as additional information becomes
available.
Estimates of the extent of the Group's degree of responsibility for remediation
of a particular site and the method and ultimate cost of remediation require a
number of assumptions and are inherently difficult. The ultimate outcome of
these items may differ from current estimates. Management believes that its
extensive experience in the environmental services business provides a
reasonable basis for making its estimates. However, these estimates may include
a range of possible outcomes. In such cases, management provides for the amount
within the range that constitutes its best estimate. It is less than likely but
more than remotely possible that the Group's potential liability could be at the
high end of such ranges, which would be approximately $15 million in the
aggregate higher than the estimates that have been recorded in these financial
statements. While the Group does not currently anticipate that any adjustment to
its estimates would be material to its financial statements, it is reasonably
possible that technological, regulatory or enforcement developments, the results
of environmental studies or other factors could necessitate the recording of
additional liabilities that could be material. The impact of such future events
cannot be estimated at the current time.
Where the Group believes that both the amount of a particular environmental
liability and the timing of the payments are reliably determinable, the cost in
current dollars is discounted to present value assuming inflation of 3% and a
risk free discount rate of 8%. Discontinued amounts previously recorded are
accreted to reflect the effects of the passage of time. The Group's closure and
post-closure expense for the years ended August 31, 1994, 1995 and 1996 was
$24.0 million, $18.6 million and $11.2 million, respectively, which included
accretion of interest of $3.0 million, $4.8 million and $5.5 million on the
closure and post-closure accruals for the years ended August 31, 1994, 1995 and
1996.
The majority of the Group's active landfill sites have estimated remaining lives
ranging from 2 to approximately 88 years based upon current site plans and
anticipated annual volumes of waste. As at August 31, 1996, the Group estimates
that during this remaining site life, it will provide for an additional $254
million (1995 -- $247 million) of closure and post-closure costs, including
accretion for the discount recognized to date. The change in the expected
aggregate undiscounted amount from 1995 to 1996 results primarily from changes
in available airspace.
Anticipated payments of environmental liabilities for each of the next five
years and thereafter are as follows:
Year ending August 31,
1997................................................ $ 22,461
1998................................................ 11,396
1999................................................ 14,320
2000................................................ 12,049
2001................................................ 12,276
Thereafter.......................................... 280,286
--------
$352,788
========
11
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
5. COMMITMENTS AND CONTINGENCIES
(a) Lease commitments
Rental expense incurred under operating leases amounted to $10,524, $8,334 and
$9,693 in the years ended August 31, 1994, 1995, and 1996 respectively.
Rentals payable under operating leases for premises and equipment are as
follows:
Year ending August 31,
1997 ............................................ $ 8,365
1998 ............................................ 4,896
1999 ............................................ 4,524
2000 ............................................ 4,009
2001 ............................................ 3,329
Thereafter ...................................... 20,063
-------
$45,186
=======
(b) Legal proceedings
The Group is subject to extensive and evolving laws and regulations and has
implemented its own environmental safeguards to respond to regulatory
requirements. In the normal course of business, the Group provides for closure
and post-closure accruals to comply with all governmental regulations.
In the normal course of conducting its operations, the Group may become involved
in certain legal and administrative proceedings. Some of these actions may
result in fines, penalties or judgments against the Group which may have an
impact on the financial results for a particular period. Management expects that
such matters in process at August 31, 1996 will not have a materially adverse
effect on this Group's financial position or its results from operations.
The consolidated federal income tax returns of the Laidlaw Transportation, Inc.
U.S. Consolidated Tax Group (the United States subsidiaries of the Laidlaw Solid
Waste Management Group are members of this taxpayer group) for the fiscal years
ended August 31, 1986, 1987 and 1988 have been under audit by the Internal
Revenue Service. In March 1994, the Laidlaw Transportation, Inc. U.S.
Consolidated Tax Group received a Statutory Notice of Deficiency proposing that
the Laidlaw Transportation, Inc. U.S. Consolidated Tax Group pay additional
taxes relating to disallowed deductions in those income tax returns. The
principal issue involved relates to the timing and the deductibility for tax
purposes of interest attributable to loans owing to related foreign persons. The
Laidlaw Transportation, Inc. U.S. Consolidated Tax Group has petitioned the
United States Tax Court (captioned as Laidlaw Transportation, Inc. &
Subsidiaries et al v. Commissioner of Internal Revenue, Docket Nos. 9361-94 and
9362-94) for a redetermination of claimed deficiencies of approximately $50.3
million (plus interest of approximately $67.6 million as of August 31, 1996). In
August 1996, the Laidlaw Transportation, Inc. U.S. Consolidated Tax Group
received Revenue Agent's reports proposing that the Laidlaw Transportation, Inc.
U.S. Consolidated Tax Group pay additional taxes of approximately $161.3 million
(plus interest of approximately $105.7 million as of May 31, 1996) relating to
disallowed deductions in federal income tax returns for the fiscal years ended
August 31, 1989, 1990 and 1991 based on the same issues. The Laidlaw
Transportation, Inc. U.S. Consolidated Tax Group intends to vigorously contest
these claimed deficiencies. Although the final outcome cannot be predicted with
certainty, Laidlaw, based upon a thorough review of the facts and the advice of
counsel, believes that the ultimate
12
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
disposition of these issues will not have a materially adverse effect upon
Laidlaw's consolidated financial position or results of operations. In
accordance with the basis of presentation described in Note 1, no provision for
these matters has been recorded in the financial statements of the Group.
(c) Letters of credit and guarantees
At August 31, 1996, the Group had $24,341 (1995 -- $41,101) in outstanding
letters of credit, of which the most significant are in support of the Group's
undertakings in respect of landfill closure and post-closure activities required
in obtaining regulatory operating permits. In addition, Laidlaw and its
affiliates have provided financial assurances, guarantees and additional letters
of credit in the aggregate amount of approximately $180 million for closure and
post-closure activities and bid bonds.
6. RELATED PARTY TRANSACTIONS
Included in operating expenses and selling, general and administrative expenses
are management fees, insurance premiums and rental charges paid to affiliated
companies as follows:
1994 1995 1996
---- ---- ----
Management fees ................... $ 6,862 $ 4,957 $ 4,297
======= ======= =======
Insurance premiums ................ $19,127 $17,098 $18,335
======= ======= =======
Rental charges .................... $ 746 $ 725 $ 725
======= ======= =======
Management fees have been allocated to the Group based upon the Group's share of
Laidlaw's consolidated revenue. Management fees are charged by Laidlaw to each
of its operating groups in order to recover its general and administrative
costs.
Insurance premiums represent charges to the Group by Laidlaw to recover
self-insurance costs relating to the Group's anticipated insurance losses,
primarily for automobile, worker's compensation and general liability coverage.
In addition, the Group is charged for the fixed program costs relating to the
self-insurance program based upon the Group's share of LAIDLAW'S consolidated
revenue.
Rental charges represent rent charged by Laidlaw for use of properties owned by
Laidlaw but used by the Group.
The Group directly incurs all other costs of doing business.
13
<PAGE>
LAIDLAW SOLID WASTE MANAGEMENT GROUP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
(U.S. $000'S)
7. ACQUISITIONS
A summary of the Group's acquisitions of solid waste management companies in the
periods indicated is as follows:
1994 1995 1996
---- ---- ----
Assets acquired -- at fair value
Fixed assets ............................ $ 715 $ 8,271 $ 11,906
Goodwill ................................ 1,553 6,960 37,056
Long-term investments and other assets .. -- -- 6,606
-------- -------- --------
2,268 15,231 55,568
Long-term liabilities assumed ........... 55 794 8,155
Working capital ......................... -- (182) 1,813
-------- -------- --------
Expended on acquisitions ................ $ 2,213 $ 14,255 $ 49,226
======== ======== ========
Number of businesses acquired ........... 7 11 9
======== ======== ========
Annualized revenue acquired ............. $ 4,000 $ 15,000 $ 41,000
======== ======== ========
Pro forma data (unaudited)
Condensed pro forma statements of operations data, as if acquisitions each year
had occurred at the beginning of the previous year, are as follows:
1994 1995 1996
---- ---- ----
Statements of Operations Data:
Revenue ................................. $ 766,783 $ 846,828 $ 776,658
NET Income from operations .............. $ 42,750 $ 59,458 $ 44,979
8. SEGMENTED GEOGRAPHIC INFORMATION
1994 1995 1996
---- ---- ----
United States:
Revenue ............................. $ 488,070 $ 526,484 $ 493,681
Income from operations .............. $ 46,578 $ 64,934 $ 65,469
Total identifiable assets ........... $ 560,780 $ 646,432 $ 649,362
Canada:
Revenue ............................. $ 262,121 $ 268,574 $ 269,853
Income from operations .............. $ 37,645 $ 41,022 $ 25,071
Total identifiable assets ........... $ 346,000 $ 358,523 $ 417,971
14
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
Prior to the closing of the acquisition of the Laidlaw Solid Waste Management
Group ("LSW Subsidiaries") and the related financing (collectively, the
"Transactions"), substantially all of the operating assets and liabilities of
Allied will be contributed (the "Contribution") from Allied to Allied Waste
North America, Inc. ("Allied U.S.").
The unaudited pro forma combined balance sheet reflects Allied U.S. after the
Contribution and gives effect to the Transactions as if each had occurred on
September 30, 1996. The unaudited pro forma combined statements of operations
for the nine months ended September 30, 1996 and the year ended December 31,
1995 give effect to (i) the acquisition of companies accounted for using the
purchase method for business combinations completed in 1995 and 1996, which are
considered to be significant; (ii) the completion of the Contribution and the
Transactions contemplated herein for approximately $1.5 billion; (iii) the
issuances of 11.7 million shares of Common Stock in a private placement and the
application of the net proceeds therefrom; (iv) the conversion and exercise of
certain convertible securities and warrants into an aggregate of approximately
9.8 million shares of Common Stock; and (v) completion of a public offering of
7.6 million shares of Common Stock, and the application of the net proceeds
therefrom, as if each had occurred on January 1, 1995.
The pro forma adjustments related to the purchase allocation of the Transactions
are preliminary and does not give effect to an appraisal of the assets of the
LSW Subsidiaries which Allied intends to obtain at or near the closing of the
acquisition of the LSW Subsidiaries. The unaudited pro forma combined financial
statements do not reflect adjustments for certain financial benefits,
operational efficiencies and non-recurring items. These statements do not
purport to be indicative of the combined financial position or combined results
of operations of Allied and the LSW Subsidiaries that might have occurred, nor
are they indicative of future financial position or results of operations.
The unaudited pro forma combined financial statements should be read in
conjunction with the Notes to Pro Forma Combined Financial Statements, the
historical consolidated financial statements of Allied and the notes thereto and
the historical financial statements of the LSW Subsidiaries and the notes
thereto.
15
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
LSW Related
Historical Subsidiaries to Acquisitions
(Note 1) (Note 2) (Note 3) Pro Forma
-------- -------- -------- ---------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents ................ $ 7,620 $ -- $ 1,500,000(a) $ 56,620
(1,265,000)(b)
(186,000)(c)
Other current assets ..................... 62,526 195,866 (71,866)(l) 186,526
-------- ---------- ------------ ----------
Total current assets ............. 70,146 195,866 (22,866) 243,146
Property and equipment, net .............. 340,729 567,630 100,000(d) 1,007,289
(1,070)(l)
Goodwill, net ............................ 89,504 204,125 965,635(E) 1,055,139
(204,125)(f)
Other assets ............................. 36,263 99,712 33,500(g) 93,405
(76,070)(l)
Total assets ..................... $536,642 $1,067,333 $ 795,004 $2,398,979
======== ========== ============ ==========
LIABILITIES AND STOCKHOLDERS'S EQUITY
Current portion of long-term debt ........ $ 15,259 $ 2,675 $ -- $ 17,934
Other current liabilities ................ 44,876 128,272 (5,086)(l) 168,062
-------- ---------- ------------ ----------
Total current liabilities ........ 60,135 130,947 (5,086) 185,996
Long-term debt, net of current portion ... 233,132 1,895 1,500,000(a) 1,659,774
110,747(h)
(186,000)(c)
Other long-term liabilities .............. 48,642 81,784 40,000(i) 178,426
8,000(m)
Stockholders' equity ..................... 194,733 852,707 (852,707)(k) 374,783
180,050(j)
-------- ---------- ------------ ----------
Total liabilities and equity ..... $536,642 $1,067,333 795,004 $2,398,979
======== ========== ============ ==========
</TABLE>
The accompanying notes are an integral part of this pro forma combined balance
sheet.
16
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Completed LSW Related to Pro Forma Financing
Historical Acquisitions Subsidiaries Acquisitions for the Transactions
(Note 1) (Note 2) (Note 2) (Note 3) Acquisitions (Note 4) Pro Forma
-------- -------- -------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ............. $ 183,896 $ 165 $573,407 $ -- $ 757,468 $ -- $ 757,468
Cost of
operations ....... 101,153 101 396,429 -- 497,683 -- 497,683
Selling, general
and administrative
expenses ......... 27,152 24 36,775 -- 63,951 -- 63,951
Depreciation and
amortization
expense .......... 23,032 15 71,738 14,568(b) 109,353 -- 109,353
Pooling costs ........ 6,969 -- -- -- 6,969 -- 6,969
--------- ----- ------- ------- ---------- ----- ---------
Operating
income .......... 25,590 25 68,465 (14,568) 79,512 -- 79,512
Interest income ...... (257) -- -- -- (257) -- (257)
Interest expense ..... 6,623 -- -- 3,284(d) 114,074 (409)(b) 113,665
(10,349)(e)
114,516(f)
---------- ---- ------- -------- ----------- ----- --------
Income (loss)
before income
taxes ............ 19,224 25 68,465 (122,019) (34,305) 409 (33,896)
Income tax
expense
(benefit) ........ 9,428 10 -- (21,422) (11,984) 164 (11,820)
---------- ---- ------- --------- ----------- ----- ---------
Net income (loss)
before extra-
ordinary loss .... 9,796 15 68,465 (100,597) (22,321) 245 (22,076)
Dividends ............ (861) -- -- -- (861) -- (861)
---------- ---- ------- --------- ----------- ----- ---------
Net income (loss) to
common share-
holders before
extraordinary
loss ............. $ 8,935 $ 15 $ 68,465 $(100,597) $(23,182) $ 245 $ (22,937)
========== ===== ======== ========== =========== ===== ==========
Net income (loss)
per common
share before
extraordinary
loss ............. $ 0.15 $(0.32) $ (0.31)
========== ========== ==========
Weighted average
and common
equivalent
shares ........... 59,791,034 72,295,076 73,114,675
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this pro forma combined balance
sheet.
17
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma
Completed LSW Related to Pro Forma Financing
Historical Acquisitions Subsidiaries Acquisitions for the Transactions
(Note 1) (Note 2 (Note 2) (Note 3) Acquisitions (Note 4) Pro Forma
-------- ------- -------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 217,544 $9,019 $778,029 $ (207)(a) $ 982,571 $ -- $ 982,571
(21,814)(g)
Cost of
operations.......... 119,238 4,317 528,858 (207)(a) 640,592 -- 640,592
(11,614)(g)
Selling, general
and administrative
expenses ...... 36,708 1,918 57,840 (447)(g) 96,019 -- 96,019
Depreciation and
amortization
expense ...... 27,279 1,116 96,214 19,626(b) 140,243 -- 140,243
(3,992)(g)
Pooling costs........... 1,531 -- -- -- 1,531 -- 1,531
---------- ------ -------- --------- -------- ------ ----------
Operating income... 32,788 1,668 95,117 (25,387) 104,186 -- 104,186
Interest income......... (716) -- -- -- (716) -- (716)
Interest expense........ 11,316 13 -- 393(c) 156,891 (125)(a) 151,841
4,378(d) (4,925)(b)
(11,897)(e)
152,688(f)
Conversion fee
on debt securities
converted........... 56 -- -- -- 56 (56)(c) --
--------- ----- ------- --------- -------- ------ ----------
Income (loss) before
income taxes........ 22,132 1,655 95,117 (170,949) (52,045) 5,106 (46,939)
Income tax expense
(benefit) ...... 9,751 662 -- (30,333) (19,920) 2,042 (17,878)
--------- ------ -------- --------- --------- ------ ----------
Net income (loss)
before
extraordinary loss.. 12,381 993 95,117 (140,616) (32,125) 3,064 (29,061)
Dividends............... (4,070) ------ -- -- (4,070) 2,743 (1,327)
Conversion fee on
equity securities
converted........... (2,151) -- -- -- (2,151) 2,151 --
--------- ------ ------- --------- --------- ------ ----------
Net income (loss) to
common shareholders
before
extraordinary
loss................ $ 6,160 $ 993 $ 95,117 $(140,616) $ (38,346) 7,958 $ (30,388)
========== ====== ======== ========== ========== ====== ==========
Net income (loss) per
common share before
extraordinary loss.. $ 0.15 $ (0.72) $ (0.43)
========== ========== ==========
Weighted average
common and
common
equivalent shares... 40,046,459 53,289,571 71,407,951
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this pro forma combined balance
sheet.
18
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. HISTORICAL
The historical balances represent the financial position and results of
operations of Allied for each of the indicated dates and periods. The historical
consolidated financial statements have been restated to reflect acquisitions
accounted for as poolings-of-interests.
2. HISTORICAL AMOUNTS RELATED TO ACQUISITIONS
The amounts related to the LSW Subsidiaries in the September 30, 1996 pro forma
combined balance sheet represent the historical combined balance sheet of the
LSW Subsidiaries. The amounts in the pro forma combined statements of operations
represent the results of operations of the companies purchased in 1995 and 1996
("Completed Acquisitions"), and the results of operations of the LSW
Subsidiaries contemplated in the Transactions, for the period prior to
acquisition date, for each period presented.
The following represents acquisitions included in these pro forma combined
financial statements (collectively referred to as THE "ACQUISITIONS").
January 1995 -- Allied acquired Pen-Rob, Inc. ("Pen-Rob") for total
consideration of approximately $1.5 million.
May 1995 -- Allied acquired L and M Disposal, Inc. for total consideration of
approximately $518,000.
June 1995 -- Allied acquired Illinois Development Corporation ("IDC") for total
consideration of approximately $4.2 million.
September 1995 -- Allied acquired Duckett Disposal, Inc. ("Duckett") and
Brickyard Disposal and Recycling, Inc. ("Brickyard") for total consideration of
approximately $14.4 million.
January 1996 -- Allied acquired Service Waste, Inc. for total consideration of
approximately $6.2 million, including approximately 778,000 shares of Common
Stock.
February 1996 -- Allied acquired Clayco Sanitation Company, Inc. ("Clayco") for
total consideration of approximately $2.9 million.
September 1996 -- Allied entered into a stock purchase agreement to purchase the
LSW Subsidiaries for total consideration of approximately $1.5 billion, as
follows (in thousands):
Cash............................... $ 1,200,000
7% Debenture....................... 77,567
Zero coupon debenture.............. 33,180
Common Stock....................... 101,288
Warrant............................ 45,000
-----------
Total....................... $ 1,457,035
===========
19
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The LSW Subsidiaries balance sheet data reflects balances at August 31, 1996.
Amounts for the LSW Subsidiaries statement of operations for the year ended
December 31, 1995 and for the nine months ended September 30, 1996 are for the
12 months ended February 29, 1996 and the nine months ended August 31, 1996,
respectively. Revenues and income before pro forma income taxes of $365.0
million and $43.0 million, respectively, for the six months ended February 28,
1995 have been excluded and replaced with revenues and income before pro forma
income taxes of $367.7 million and $36.1 million, respectively, for the six
months ended February 29, 1996 in the LSW Subsidiaries' pro forma statement of
operations for the year ended December 31, 1995. Revenues and income before pro
forma income taxes of $190.1 million and $21.0 MILLION, respectively, for the
three months ended November 30, 1995 have been excluded in the ^ LSW
Subsidiaries' pro forma statement of operations for the nine months ended
September 30, 1996. Revenues and income before pro forma income taxes of $177.6
million and $15.1 million, respectively, for the three months ended February 29,
1996 have been included in the LSW Subsidiaries statement of operations for the
12 months ended February 29, 1996 and the nine months ended August 31, 1996.
3. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following:
Pro Forma Combined Balance Sheet
(a) To reflect the completion of a $525 million private placement of
senior subordinated notes (the "Notes") and the funding of $975
million of a senior credit facility (the "Senior Credit Facility").
Allied has commitments from prospective buyers to purchase in excess
of $525 million of the Notes. Closing on the sale of the Notes is
expected in December 1996. The interest rate on the Notes as of
September 30, 1996 would have been 10.25%.
(b) To reflect cash paid in connection with the acquisition of the LSW
Subsidiaries.
(c) To reflect repayment of debt in connection with the refinancings
contemplated in the Transactions.
(d) To reflect the estimated fair value of land held for permitting as
landfills but currently not in use.
(e) To reflect goodwill recorded in connection with the acquisition of the
LSW Subsidiaries.
(f) To remove goodwill recorded on the books of the LSW Subsidiaries.
(g) To reflect commitment fees paid in connection with the Notes and the
Senior Credit Facility contemplated in the acquisition of the LSW
Subsidiaries.
(h) To reflect the issuances of the $150 million face value ($78 million
discounted value) of Allied Waste Holdings (Canada) Ltd. 7% debentures
and $168 million face value ($33 million discounted value) of the zero
coupon debenture (collectively, the "Allied Canada Debentures") which
were recorded at a discount using a 14% implicit interest rate, in
CONNECTION with the acquisition of the LSW Subsidiaries.
(i) To reflect the deferred tax liability related to temporary differences
between book and tax basis of Allied Canada Debentures and certain
fixed assets in connection with the acquisition of the LSW
Subsidiaries.
20
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(j) To reflect the issuances of 14.6 million shares of Common Stock at
$9.25 per share; and the Warrant, valued at $45 million, in connection
with the acquisition of the LSW Subsidiaries. The Warrant was valued
using a binomial pricing model adjusted for the size of the block of
warrants and the restrictions on the block of warrants.
(k) To reflect the elimination of investment in subsidiary in connection
with the acquisition of the LSW Subsidiaries.
(l) To eliminate income tax assets and liabilities arising prior to the
date of sale of the LSW Subsidiaries and any intercompany investments,
advances and loans not included in the sale.
(m) To accrue $8 million for the estimated costs of severance and
transition benefits that are expected to be paid to approximately 200
employees, primarily management, sales and administrative, of the LSW
Subsidiaries as a result of the acquisition.
Allied has engaged Emcon Environmental Services, Inc. to perform an
environmental assessment of cert in properties to be acquired by Allied in the
transactions. Although the Emcon work is not complete and due diligence
continues, Emcon has identified certain third-party contaminated waste sites and
landfills of the LSW Subsidiaries. Since the Emcon Environmental Report is not
yet complete, currently no amount or range of amounts can be determined which
would be required to be recorded or disclosed in accordance with SFAS No. 5.
Once the Emcon Environmental Report is completed, remediation plans and related
cost estimates must be determined. Cost, if any, in excess of amounts accrued by
the Laidlaw ^ SELLERS will be accounted for in accordance with GAAP when all
facts and circumstances are known.
Pro Forma Combined Statements of Operations
(a) To eliminate rent expense and rental revenue between Allied and IDC.
21
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(b) To reflect the amortization of goodwill recorded in connection with
the Acquisitions, calculated based on a 40 year life of goodwill,
as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
Total December 31, September 30,
Goodwill 1995 1996
-------- ---- ----
<S> <C> <C> <C>
L and M Disposal, Inc. for the
4 months ended April 30, 1995 ............... $ 601 $ 6 $ --
IDC, for the 5 months
ended May 31, 1995 .......................... 1,046 11 --
Duckett for the 8 months ended
August 31, 1995 ............................. 3,510 59 --
Service Waste, Inc. for the year
ended December 31, 1995 .................... 2,649 66 --
Clayco for the year ended December 31,
1995 and the MONTH ended
January 31, 1996 ............................ 2,703 68 6
LSW Subsidiaries for the year ended
December 31, 1995 and the 9 months
ended September 30, 1996 .................... $974,625 $19,416 $14,562
-------- ------- -------
Total pro forma goodwill and amortization... $985,134 $19,626 $14,568
======== ======= =======
</TABLE>
(c) To reflect interest expense on debt issued or assumed in connection
with the Completed Acquisitions, calculated as follows (in thousands):
YEAR ENDED
DECEMBER 31, 1995
-----------------
Duckett seller NOTES, interest at 7% for 8 months..... $ 163
Brickyard seller notes, interest at 7% for 8 months... 148
Clayco seller notes, interest at 9% for 12 months..... 82
------
$ 393
======
(d) To reflect amortization of commitment fees related to the Notes and
the Senior Credit Facility contemplated in connection with the
acquisition of the LSW Subsidiaries, as follows (in thousands):
Commitment Fee Amortization Period
-------------- -------------------
Notes......................... $ 9,500 10 years
Senior CREDIT FACILITY........ $24,000 7 years
22
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(e) To reflect the reduction of interest expense resulting from the
repayment of certain indebtedness with the proceeds from the Senior
Credit Facility contemplated in connection with the acquisition of the
LSW Subsidiaries, calculated as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1995 1996
---- ----
<S> <C> <C>
1994 $100 million senior subordinated notes,
interest at 10.75% for one month during 1995.... $ (897) $ --
1994 $100 million senior subordinated notes,
interest at 12% for 11 months DURING 1995 and
7 months during 1996............................ (11,000) (7,000)
Credit Agreement, interest at 9.25% for
7 months during 1996............................ -- (1,179)
Credit Facility interest at 7% for
2 months during 1996............................ -- (2,170)
--------- ---------
Total pro forma interest savings..... $(11,897) $(10,349)
========= =========
</TABLE>
(f) To reflect interest expense related to the Senior Credit
Facility, the Notes, and the Allied Canada Debentures calculated
FOR EACH PERIOD as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1995 1996
---- ----
<S> <C> <C>
Senior Credit Facility, interest at 8.5%.......... $ 82,875 $ 62,156
Notes, interest at 10.25%......................... 53,813 40,360
7% Debenture, implicit interest at 14%............ 11,200 8,400
Zero Coupon Debenture, implicit INTEREST at 14%... 4,800 3,600
-------- --------
Total pro forma interest expense....... $152,688 $114,516
======== ========
</TABLE>
An increase in the interest rate of one-eighth of a percent on the
Senior Credit Facility would increase interest expense $1.2 million
and $0.9 million and decrease net income $0.7 million and $0.5 million
for the year ended December 31, 1995 and the nine months ended
September 30, 1996, respectively.
(G) To reflect elimination of revenues and expenses of the LSW
Subsidiaries related to assets that will not be acquired in connection
with the transactions.
23
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. FINANCING TRANSACTIONS
The pro forma combined financial statements assume that (i) Allied issued 11.7
million shares of Common Stock on January 1, 1995 in connection with a private
placement of equity which closed on January 31, 1995, (ii) certain holders of
preferred stock, convertible debt and warrants converted their preferred stock
or convertible debt into or exercised their warrants for, an aggregate of
approximately 9.8 million shares of Common Stock and, (iii) Allied completed a
public offering of 6.5 million shares of Common Stock in January 1996.
The pro forma combined financial statements do not include the extraordinary
charge of APPROXIMATELY $18 million ($11 million net of income tax benefit)
related to the early extinguishment of debt.
The adjustments related to the financing transactions reflected in the pro forma
combined financial statements give effect to the following:
(a) To reflect reduction of interest expense resulting from the repayment of
certain indebtedness of Allied from the proceeds of the private placement
of equity completed in 1996.
(b) To reflect reduction of interest expense resulting from the conversion of
certain convertible subordinated debt into COMMON STOCK and the repayment
of certain indebtedness from the proceeds of the sale of 7.6 million shares
of Common Stock in a public offering completed in 1996.
(c) To reflect the elimination of one-time costs related to the conversion of
debt securities converted in 1995.
24
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. NET INCOME (LOSS) PER COMMON SHARE
Pro forma net income (loss) per common share is calculated by dividing pro forma
net income to common shareholders less requirements on Series D preferred stock,
7% preferred stock, and 9% preferred stock by the pro forma weighted average
common and common equivalent shares outstanding during the periods. Pro forma
weighted average common and common equivalent shares have been computed as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, 1995 September 30, 1996
---------------------------- ----------------------------
Pro Forma Pro Forma
for Acquisitions Pro Forma for Acquisitions Pro Forma
---------------- --------- ---------------- ---------
<S> <C> <C> <C> <C>
Historical weighted average
common shares ..................... 37,823,370 37,823,370 57,594,445 57,594,445
Pro forma effect of issuing
common shares for --
Service Waste acquired and
accounted for as a purchase .... 889,445 889,445 100,631 100,631
The LSW Subsidiaries contem-
plated to be acquired and
accounted for as a purchase .... 14,600,000 14,600,000 14,600,000 14,600,000
Common shares issued pursuant
to a private placement ......... -- 962,433 -- --
Common shares issued in
connection with the
public offering ................ -- 7,606,282 -- 638,484
Conversion of convertible
subordinated debt
into common shares ............. -- 1,827,639 -- 172,883
Conversion of Series C Preferred
into common shares ............. -- 233,533 -- --
Conversion of Series D Preferred
into common shares ............. -- 731,255 -- --
Conversion of 9% Preferred into
common shares and issuances
of inducement conversion shares -- 4,859,991 -- --
Conversion of $90 Preferred into
common shares and issuances
of inducement conversion shares -- 1,343,374 -- --
To remove the impact of contingently
issuable shares ................ (23,244) (23,244) -- --
Exercise of warrants ............... -- 553,873 -- 8,232
---------- ---------- ---------- ----------
53,289,571 71,407,951 72,295,076 73,114,675
========== ========== ========== ==========
</TABLE>
25
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. PRO FORMA MATURITIES OF LONG-TERM DEBT
Aggregate future maturities of pro forma long-term debt outstanding at September
30, 1996 (in thousands):
Maturity
--------
3 months1996................ $ 4,046
1997........................ 53,067
1998........................ 74,343
1999........................ 92,256
2000........................ 101,604
2001........................ 236,021
Thereafter.................. $1,323,624
26
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant, Allied Waste Industries, Inc., has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By: /s/PETER S. HATHAWAY
----------------------------
Vice President, Treasurer
and Chief Accounting Officer
Date: FEBRUARY 18, 1997
27
CONSENT OF INDEPENDENT ACCOUNTANTS
LAIDLAW SOLID WASTE MANAGEMENT GROUP
We consent to the incorporation by reference in the registration statement of
Allied Waste Industries, Inc. on Form S-4 Registration #333-3585 of our report
dated September 30, 1996, to the Directors of Laidlaw Inc. on the balance sheets
of the Laidlaw Solid Waste Management Group as at August 31, 1995 and 1996 and
the statements of operations and cash flows for years ended August 31, 1994,
1995 and 1996, which report is incorporated in the Form 8K/A-4.
This letter is provided to securities regulatory authorities pursuant to the
requirements of their securities legislation and is not for any other purpose.
/s/ Coopers & Lybrand
---------------------------
February 18, 1997 Coopers & Lybrand
Hamilton, Canada Chartered Accountants
