<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 27, 1998
ALLIED WASTE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
<TABLE>
<S> <C>
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)
</TABLE>
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> 2
ITEM 5. OTHER EVENTS.
In June 1998, Allied Waste Industries, Inc. ("Allied" or the "Company")
completed the acquisition of the Rabanco Companies and Regional Disposal Company
("Rabanco") in a transaction accounted for using the pooling-of-interests method
for business combinations. The audited financial statements of Rabanco for
December 31, 1996 and 1995 are filed herewith for informational purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Rabanco Companies
(i) Independent Auditors' Report
(ii) Combined Balance Sheets -- December 31, 1996
(iii) Combined Statements of Income and Changes in Equity for the Two Years
Ended December 31, 1996
(iv) Combined Statements of Cash Flows for the Two Years Ended December 31,
1996
(v) Notes to Financial Statements
(b) Financial Statements of Regional Disposal Company
(i) Independent Auditors' Report
(ii) Balance Sheets -- December 31, 1996 and 1995
(iii) Statements of Income and Changes in Equity for the Two Years Ended
December 31, 1996
(iv) Statements of Cash Flows for the Two Years Ended December 31, 1996
(v) Notes to Financial Statements
Exhibit 23 Consent of Sweeney Conrad P.S.
1
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
March 21, 1997
To the Board of Directors and Partners of
Rabanco Companies
We have audited the accompanying combined balance sheets of the entities
listed in Note 1 to the financial statements (the Company) as of December 31,
1996 and 1995, and the related combined statements of income and changes in
equity, and cash flows for the years then ended. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 the audit to obtain
reasonable assurance about 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referenced above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ SWEENEY CONRAD, P.S.
--------------------------------------
2
<PAGE> 4
RABANCO COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ $ 267,580 $ 366,935
Accounts Receivable......................................... 7,974,268 7,853,986
Notes and Other Receivables................................. 63,383 224,139
Due From Affiliates......................................... 3,462,491 3,813,207
Prepaid Expenses and Other.................................. 1,095,468 1,178,703
----------- -----------
TOTAL CURRENT ASSETS.............................. 12,863,190 13,436,970
----------- -----------
PROPERTY AND EQUIPMENT, NET................................. 19,083,538 18,906,909
----------- -----------
OTHER ASSETS
Notes and Other Receivables................................. 346,277 470,673
Permits..................................................... 808,330 966,542
Other....................................................... 48,438 62,950
----------- -----------
TOTAL OTHER ASSETS................................ 1,203,045 1,500,165
----------- -----------
$33,149,773 $33,844,044
=========== ===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable............................................ $ 6,424,217 $ 6,094,829
Accrued Liabilities......................................... 3,188,298 2,507,956
Deferred Revenue............................................ 1,663,123 1,851,363
Advances from Related Party................................. 319,264 1,224,292
Note Payable to Bank........................................ 2,350,000
Current Portion Of Long-Term Obligations.................... 1,544,882 2,845,994
----------- -----------
TOTAL CURRENT LIABILITIES......................... 15,489,784 14,524,434
LONG-TERM OBLIGATIONS, Net of Current Portion............... 9,061,139 10,136,833
MINORITY INTEREST........................................... 885,334 526,636
----------- -----------
25,436,257 25,187,903
COMMITMENTS AND CONTINGENCIES
EQUITY...................................................... 7,713,516 8,656,141
----------- -----------
$33,149,773 $33,844,044
=========== ===========
</TABLE>
See Notes To Financial Statements
3
<PAGE> 5
RABANCO COMPANIES
COMBINED STATEMENTS OF INCOME AND CHANGES IN EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995
------------- -------------
<S> <C> <C>
REVENUE..................................................... $74,991,509 $81,826,832
----------- -----------
COSTS AND EXPENSES
Operating................................................. 59,918,041 63,130,920
General and Administrative................................ 8,077,127 7,001,018
Depreciation and Amortization............................. 3,790,287 3,879,616
----------- -----------
71,785,455 74,011,554
----------- -----------
INCOME FROM OPERATIONS...................................... 3,206,054 7,815,278
OTHER INCOME (EXPENSES)
Interest income........................................... 511,308 621,541
Interest expense.......................................... (1,430,343) (1,844,869)
Other, net................................................ 486,066 489,900
----------- -----------
(432,969) (733,428)
----------- -----------
MINORITY INTEREST........................................... (746,513) (426,903)
----------- -----------
NET INCOME.................................................. 2,026,572 6,654,947
EQUITY AT BEGINNING OF THE YEAR............................. 8,656,141 5,092,400
DISTRIBUTIONS AND DIVIDENDS................................. (2,969,197) (3,091,206)
----------- -----------
EQUITY AT THE END OF THE YEAR............................... $ 7,713,516 $ 8,656,141
=========== ===========
</TABLE>
See Notes To Financial Statements
4
<PAGE> 6
RABANCO COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.................................................. $ 2,026,572 $ 6,654,947
Adjustments to Reconcile Net Income to
Cash Provided By Operating Activities:
Depreciation and Amortization............................. 3,790,287 3,879,616
(Gain) Loss on Sale of Assets............................. (87,939) (82,809)
Minority Interest In Income............................... 746,513 426,903
Cash Provided (Used) By Changes
In Operating Assets and Liabilities:
Receivables.......................................... (120,282) 1,023,991
Prepaid Expenses and Other Assets.................... 83,235 40,036
Accounts Payable..................................... 329,388 (523,560)
Accrued Liabilities.................................. 680,342 (387,717)
Deferred Income...................................... (188,240) 144,051
----------- -----------
Net Cash Provided By Operations............................. 7,259,876 11,175,458
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures...................................... (3,621,690) (2,632,780)
Proceeds From Sale Of Assets.............................. 119,087 121,485
(Increase) Decrease in Notes and Other Receivables........ 285,152 (11,204)
Change In Other Assets.................................... (33,950) (11,355)
----------- -----------
Net Cash Used For Investing Activities...................... (3,251,401) (2,533,854)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of Long-Term Obligations....................... (3,126,685) (4,878,788)
Changes in Notes Payable.................................. 2,350,000 (50,000)
Proceeds From Long-Term Debt.............................. 580,179 28,395
Net Advances To (From) Related Parties.................... (554,312) (59,689)
Distributions To Minority Interests....................... (387,815) (393,283)
Equity Distributions...................................... (2,969,197) (3,091,206)
----------- -----------
Net Cash Used For Financing Activities...................... (4,107,830) (8,444,571)
----------- -----------
NET CHANGE IN CASH.......................................... (99,355) 197,033
CASH AT THE BEGINNING OF THE YEAR........................... 366,935 169,902
----------- -----------
CASH AT THE END OF THE YEAR................................. $ 267,580 $ 366,935
=========== ===========
</TABLE>
See Notes To Financial Statements
5
<PAGE> 7
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
The Company is primarily in the business of collecting, transporting ,
recycling and disposing of solid waste in Washington State.
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION: The combined financial statements include the
accounts of the companies listed below (collectively, the Company):
Rabanco Companies (a partnership)
J.R. Land Company (a partnership)
United Waste Control, Inc. (a S corporation)
U.S. Disposal Service II (a joint venture)
Recycle Seattle (a joint venture)
Kent-Meridian Disposal (a partnership)
The companies combined in these financial statements are majority owned or
are controlled by the Razore family. Three of the companies are partially owned
by persons not related to the Razores. These latter ownership interests have
been accounted for as a minority interest in the combined financial statements.
Companies with minority interests and the minority interest shares are as
follows:
U.S. Disposal Service II -- 29.5%
Recycle Seattle -- 28.0%
Kent-Meridian Disposal -- 50.0%
All significant inter-company balances and transactions have been
eliminated.
CASH EQUIVALENTS -- For purposes of the statements of combined cash flows,
the Company considers all short-term investments with an initial maturity of 90
days or less to be cash equivalents.
PROPERTY -- Fixed Assets are stated at cost and depreciated primarily on a
straight-line basis over the estimated useful lives ranging from 3 to 15 years.
Amortization of assets under capital lease is included in depreciation expense.
Expenditures for major renewals and betterments are capitalized while those for
repairs and maintenance are expensed as incurred.
Intangible assets consist of permits, goodwill, and other intangibles. They
are recorded at cost and amortized over their useful lives of 5 to 40 years.
FEDERAL INCOME TAX -- All of the combined entities are organized as
partnerships or have elected to file as S corporations as allowed under the
Internal Revenue Code. No provision or benefit for federal income taxes related
to such entities has been made as the obligation or benefit accrues to the
individual partners or shareholders.
REVENUE RECOGNITION -- The Company recognizes revenue as earned, including
amounts not billed as of year end. Certain customers are billed in advance for
refuse and recycling service. These amounts are recorded as deferred revenue
until earned.
REGULATED INDUSTRY -- Certain entities of the Company are subject to the
jurisdiction of the Washington Utilities and Transportation Commission for the
purpose of establishing rates for waste collection.
ALLOWANCE FOR DOUBTFUL ACCOUNTS -- Accounts receivable are net of an
allowance for doubtful accounts of $257,600 and $83,500 at December 31, 1996 and
1995 respectively.
CONCENTRATION OF RISK -- Substantially all receivables are from customers
in western Washington. The Company maintains most of its cash in bank accounts
with one bank. The total balances held by the bank may at times exceed federally
insured limits.
6
<PAGE> 8
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A substantial portion of the Company's revenues are generated from a
limited number of municipal contracts and from operations franchised by the
Washington Utilities and Transportation Commission.
RECLASSIFICATIONS -- Certain reclassifications have been made to the 1995
financial statements to conform with the 1996 presentation.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company has estimated the fair
value of its financial instruments using available market information and other
methodologies in accordance with Statement of Financial Accounting Standards
(SFAS) No. 107. With the exception of stockholder and other related party notes
receivable and notes payable, the Company has estimated that the fair value of
all financial instruments presented in the accompanying balance sheets
approximates the related book value.
It is not practicable to estimate the fair values of stockholder and other
related party notes receivable and notes payable as market comparisons are not
available. The related party notes receivable are carried at cost of $331,403
and $470,673 at December 31, 1996 and 1995. The stockholder and related party
notes payable are carried at cost of $3,647,316 and $3,859,044 at December 31,
1996 and 1995.
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and Equipment Consists of the Following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Vehicles........................................ $ 22,289,197 $ 20,922,117
Toters.......................................... 13,090,796 12,200,223
Containers...................................... 6,369,745 5,499,470
Paper plant equipment........................... 5,335,777 5,201,932
Buildings....................................... 4,578,743 4,473,788
Other equipment................................. 2,136,022 1,937,581
Land............................................ 1,779,965 1,779,965
Construction in progress........................ 57,157 142,953
------------ ------------
55,637,402 52,158,029
Less accumulated depreciation................... (36,553,864) (33,251,120)
------------ ------------
Net fixed assets................................ $ 19,083,538 $ 18,906,909
============ ============
</TABLE>
NOTE 3 -- LINES OF CREDIT AND LONG-TERM OBLIGATIONS
The Company has a $5,000,000 revolving line of credit with a commercial
bank. Draws on the line are limited to 80% of qualified trade accounts
receivable. The line of credit bears interest at the bank's prime rate (8.25% at
December 31, 1996) and expires October 1, 1997. Outstanding borrowings under
this line of credit were $2,350,000 and $0 at December 31, 1996 and 1995.
7
<PAGE> 9
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term obligations consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Note to bank, monthly payments of $51,461 plus interest at
8.28% through April 2003................................ $ 3,025,296 $ 0
Capital lease obligations, monthly payments including
interest ranging from 6.76% to 10.06% through October
2003.................................................... 3,265,830 3,812,697
Unsecured note to affiliate, monthly interest payments at
Prime plus 1%, principal due after December 31, 1998.... 3,400,000 3,400,000
Note to bank, monthly payments plus interest at 8.68%
through January 1998 -- refinanced April, 1996.......... 0 3,543,196
Unsecured notes to affiliate, monthly interest payments at
5.74%, principal due after 1998......................... 247,316 459,044
Note to former joint venture partner, quarterly payments
of $25,000 plus interest at prime plus 1% until maturity
in September 1996, secured by stock of one of the
partners of the Company................................. 0 766,667
Other notes payable, interest ranging from 8.0% to 13.15%,
due through 2000........................................ 667,579 1,001,223
----------- -----------
10,606,021 12,982,827
Less current portion...................................... (1,544,882) (2,845,994)
----------- -----------
Net Long-term obligations................................. $ 9,061,139 $10,136,833
=========== ===========
</TABLE>
Substantially all assets of the Company are pledged as security for the
debt and $ 3,400,000 of the notes to affiliates are subordinated to amounts owed
to the bank.
Subsequent to the 1995 balance sheet date the company refinanced the note
to bank, including entering into an interest rate swap agreement. The new terms
require payments, including interest, of $51,461 for eighty-four months, and
result in a fixed interest rate of 8.68%. The 1995 financial statements have
been presented as if the refinancing occurred on the balance sheet date.
The Company is required to comply with certain restrictive loan covenants
which include requirements with respect to current ratio, debt to equity ratio,
total equity and capital spending.
Assets held under capital lease arrangements at December 31, 1996 and 1995
had a cost of $5,882,000 and $7,002,514 and accumulated amortization of
$1,964,000 and $2,821,206. During 1996 the Company entered into capital lease
agreements totaling $709,700.
During the years ended December 31, 1996 and 1995, the Company paid
interest of $1,452,000 and $1,671,000.
8
<PAGE> 10
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996 the future payments and scheduled maturities of
long-term obligations are as follows:
<TABLE>
<CAPTION>
CAPITAL LONG-TERM
LEASES DEBT TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
1997.......................................... $1,192,594 $ 584,149 $ 1,776,743
1998.......................................... 837,113 572,792 1,409,905
1999.......................................... 1,167,875 3,962,498 5,130,373
2000.......................................... 360,621 529,101 889,722
2001.......................................... 196,878 528,057 724,935
Thereafter.................................... 53,901 1,163,594 1,217,495
---------- ---------- -----------
3,808,982 7,340,191 11,149,173
Less amounts representing interest............ (543,152) (543,152)
---------- ---------- -----------
3,265,830 7,340,191 10,606,021
Less current portion.......................... (960,733) (584,149) (1,544,882)
---------- ---------- -----------
Net long-term obligations..................... $2,305,097 $6,756,042 $ 9,061,139
========== ========== ===========
</TABLE>
NOTE 4 -- TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
In the ordinary course of business, the Company transfers funds among its
affiliated entities as required to meet operational needs. Such balances with
entities which are not included in these financial statements are reflected in
the due to and due from affiliates accounts and are due on demand. These
balances are included in current assets.
Included in interest payable is $79,519 and $49,759 due to related parties
as of December 31, 1996 and 1995.
Advances from a related party are due on demand and interest is accrued at
Prime plus 1%. During 1996 and 1995 interest of $68,088 and $77,079 was expensed
related to these advances.
The Company has lent money to affiliated companies on a long-term basis as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Note receivable from affiliate, monthly payments of $8,775
including interest at 8%, entire balance is due no later
than March 1, 1998........................................ $239,053 $321,608
Notes receivable from affiliate, including interest at 8%
and 10%, due no later than March 1, 1998.................. 89,350 122,065
Note receivable from affiliate, no interest accrues, balance
is payable from share of profits up to $24,000 per year... 3,000 27,000
Other notes receivable...................................... 14,874
-------- --------
$346,277 $470,673
======== ========
</TABLE>
9
<PAGE> 11
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions with affiliates consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenue:
Management fees........................................... $1,499,714 $1,349,889
Other Services............................................ 896,144 939,339
Interest income........................................... 408,527 527,958
Hauling................................................... 276,611 261,794
Rent and other............................................ 219,000 219,000
Expenses:
Dump fees................................................. $1,956,135 $1,697,428
Equipment and property rent............................... 789,478 684,533
Management fees........................................... 227,571 225,300
Interest expense.......................................... 466,555 476,270
Other..................................................... 166,794 91,022
</TABLE>
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
UNCERTAINTIES REGARDING ENVIRONMENTAL ACTIONS -- Certain individual members
of the Razore family and Rabanco Companies have been notified that they were
potentially responsible parties in an environmental matter. Rabanco Companies
believes it does not have any liability related to the matter; however, in
exchange for releases from potential claims, the Company has agreed to pay
$1,000,000 towards a settlement. The amount will be paid and recorded as an
expense at such time, if any, that a settlement is finalized.
In the normal course of business, the Company is subject to litigation and
legal actions relating to the collection, storage and disposal of waste. The
Company is not aware of any pending actions.
OTHER COMMITMENTS -- The Company has ongoing arrangements with certain
formerly affiliated companies. These arrangements include non-competition and
supply and delivery agreements having terms of up to seven years at December 31,
1996. Included in the financial statements for 1996 and 1995 is a net of
approximately $8 million each year in revenue governed by these arrangements.
Additionally, the Company is a guarantor on a $1,600,000 mortgage of a
building owned by an affiliate.
OPERATING LEASES -- During 1996 and 1995, the Company paid $842,000 and
$767,000 of rent expense for operating leases. At December 31, 1996 the future
minimum lease payments on these leases are as follows:
<TABLE>
<S> <C>
1997................................................... $ 739,600
1998................................................... 760,100
1999................................................... 756,100
2000................................................... 851,900
2001................................................... 887,800
Thereafter............................................. 5,888,300
----------
$9,883,800
==========
</TABLE>
All future minimum lease payments, except $170,000 per year through 2000,
are to related parties. The minimum lease payments are net of sub-lease income
from unrelated parties of $1,277,000.
10
<PAGE> 12
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- RETIREMENT PLAN
Through December 31, 1996, the Company participated in a defined benefit
plan which covered substantially all employees of the Company and other
affiliated companies not covered by collective bargaining agreements.
Eligibility was based on employee age and length of service. Benefits were
payable at a rate of approximately 1.25% of compensation times the years of
participation (35 years maximum), payable at age 65. Employees were vested in
the plan after two years of employment.
Effective December 31, 1996 the Plan benefits were frozen and the Company
announced its intention to terminate the Plan. At December 31, 1996 the Company
has accrued the total unfunded liability of the Plan -- $783,000. Included in
expenses for 1996 and 1995 are $685,000 and $340,000 related to this Plan.
Effective October 1996, the Company adopted a defined contribution 401(k)
plan covering substantially all employees not covered by collective bargaining
agreements. Employees are eligible to participate in the plan after one year of
service. The Company contributes three percent of eligible employee compensation
to the plan and will match employee contributions to a maximum of two percent of
compensation. Total contributions and costs incurred by the Company under this
plan were $56,200 in 1996.
11
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
March 21, 1997
To the Partners of
Regional Disposal Company
We have audited the balance sheets of Regional Disposal Company (A Joint
Venture) as of December 31, 1996 and 1995, and the related statements of income
and changes in equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Joint Venture's management. 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 the audit to obtain
reasonable assurance about 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Regional Disposal Company as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ SWEENEY CONRAD, P.S.
--------------------------------------
14
<PAGE> 14
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ $ 657,538 $ 631,030
Accounts Receivable, Trade.................................. 9,360,203 8,898,636
Other Receivables........................................... 172,776
Restricted Cash............................................. 1,840,000
Prepaid Expenses and Other.................................. 626,568 868,171
Assets Held For Sale........................................ 382,106
----------- -----------
TOTAL CURRENT ASSETS........................................ 12,484,309 10,952,719
----------- -----------
PROPERTY AND EQUIPMENT, NET................................. 40,976,467 40,378,401
----------- -----------
OTHER ASSETS
Deposits and Restricted Cash................................ 3,135,246 2,637,985
Permits..................................................... 510,401 525,218
Other....................................................... 638,351 391,365
----------- -----------
TOTAL OTHER ASSETS.......................................... 4,283,998 3,554,568
----------- -----------
$57,744,774 $54,885,688
=========== ===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable............................................ $ 4,718,725 $ 5,249,997
Accrued Liabilities......................................... 2,279,080 986,206
Advances from Related Party................................. 3,479,736
Current Portion Of Long-Term Obligations.................... 5,501,023 2,748,866
----------- -----------
TOTAL CURRENT LIABILITIES................................... 12,498,828 12,464,805
LONG-TERM OBLIGATIONS, Net of Current Portion............... 26,806,947 25,042,859
DEFERRED CLOSURE COSTS...................................... 2,884,779 2,187,909
----------- -----------
42,190,554 39,695,573
COMMITMENTS AND CONTINGENCIES
EQUITY...................................................... 15,554,220 15,190,115
----------- -----------
$57,744,774 $54,885,688
=========== ===========
</TABLE>
See Notes To Financial Statements
15
<PAGE> 15
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
STATEMENTS OF INCOME AND CHANGES IN EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
REVENUE..................................................... $75,612,356 $71,353,891
----------- -----------
COSTS AND EXPENSES
Operating................................................. 53,403,143 48,621,255
General and Administrative................................ 7,230,958 6,315,145
Depreciation and Amortization............................. 7,794,772 7,817,873
----------- -----------
68,428,873 62,754,273
----------- -----------
INCOME FROM OPERATIONS...................................... 7,183,483 8,599,618
OTHER INCOME (EXPENSES)
Interest income........................................... 231,748 219,914
Interest expense.......................................... (2,383,938) (2,696,205)
Other, net................................................ (6,803) 66,102
----------- -----------
(2,158,993) (2,410,189)
----------- -----------
NET INCOME.................................................. 5,024,490 6,189,429
EQUITY AT BEGINNING OF THE YEAR............................. 15,190,115 11,251,686
DISTRIBUTIONS AND DIVIDENDS................................. (4,660,385) (2,251,000)
----------- -----------
EQUITY AT THE END OF THE YEAR............................... $15,554,220 $15,190,115
=========== ===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 16
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.................................................. $ 5,024,490 $ 6,189,429
Adjustments to Reconcile Net Income to
Cash Provided By Operating Activities:
Depreciation and Amortization............................. 7,794,772 7,817,873
(Gain) Loss on Sale of Assets............................. 61,749 (25,878)
Cash Provided (Used) By Changes
In Operating Assets and Liabilities:
Receivables.......................................... (288,791) 507,256
Prepaid Expenses and Other Assets.................... 130,134 (198,281)
Accounts Payable..................................... (531,272) (92,634)
Accrued Liabilities.................................. 1,292,874 (413,641)
Closure Cost Accrual................................. 696,870 682,122
------------ -----------
Net Cash Provided By Operations............................. 14,180,826 14,466,246
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures...................................... (7,971,290) (6,304,504)
Proceeds From Sale Of Assets.............................. 92,000 1,248,974
Change In Other Assets.................................... 66,753 (21,905)
Change In Deposits, Permits and Restricted Funds.......... (2,337,261) 818,404
------------ -----------
Net Cash Used For Investing Activities...................... (10,149,798) (4,259,031)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of Long-Term Obligations....................... (2,928,790) (6,516,210)
Changes in Notes Payable.................................. 2,000,000 (5,350,000)
Proceeds From Long-Term Debt.............................. 2,103,366 2,750,000
Net Advances To (From) Related Parties.................... (518,711) 1,394,274
Equity Distributions...................................... (4,660,385) (2,251,000)
------------ -----------
Net Cash Used For Financing Activities...................... (4,004,520) (9,972,936)
------------ -----------
NET CHANGE IN CASH.......................................... 26,508 234,279
CASH AT THE BEGINNING OF THE YEAR........................... 631,030 396,751
------------ -----------
CASH AT THE END OF THE YEAR................................. $ 657,538 $ 631,030
============ ===========
</TABLE>
See Notes to Financial Statements
17
<PAGE> 17
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS -- Regional Disposal Company is a joint venture
formed in 1991 to raise capital for the ongoing operation of an existing
landfill in Klickitat County, Washington. The landfill is permitted for 3
million tons per year for forty years. The development plan contemplates the use
of approximately 900 acres as actual landfill; the total site is approximately
2,500 acres.
The venturers are:
<TABLE>
<S> <C>
Rabanco Regional Landfill Company 33 1/3%
WJR Environmental 46 2/3%
Waste Associates 10%
MJS Associates 10%
</TABLE>
Net income and losses are allocated according to the ownership percentages.
The Joint Venture contracts with counties, municipalities, and private
companies for the transport and disposal of waste to the landfill in eastern
Washington.
CASH EQUIVALENTS -- The Joint Venture considers cash equivalents to be all
short-term investments with an initial maturity of 90 days or less.
RESTRICTED CASH -- The Joint Venture is required to set aside cash for debt
retirement, landfill closure costs and landfill post closure costs. This cash is
shown as restricted cash in the balance sheet and is classified as a current or
non-current asset based on the maturity of the corresponding liability.
REVENUE RECOGNITION -- The Joint Venture recognizes revenues as earned,
including amounts not billed as of year end.
INTANGIBLE ASSETS -- The Joint Venture has capitalized the cost of certain
permits and franchise fees. These costs are being amortized over the 40 year
life of the landfill. Additionally, the Joint Venture has capitalized the
issuance costs related to the Industrial Revenue Bonds. These costs are being
amortized over the 10 year life of the bonds. Accumulated amortization at
December 31, 1996 and 1995 totaled $82,300 and $67,500, respectively.
FIXED ASSETS -- Property is stated at cost and depreciated on a straight
line basis over estimated useful lives ranging from three to forty years.
Capital lease assets are amortized over the lease terms, which range from five
to seven years. Amortization of capital lease assets is included in depreciation
expense. Expenditures for major renewals and betterments are capitalized while
those for repairs and maintenance are expensed as incurred.
LANDFILL CONSTRUCTION COSTS -- Costs directly associated with the
construction of the landfill have been capitalized and are being amortized over
the life of the landfill at $1.84 per ton based on management's estimate of
total landfill costs and capacity.
ALLOWANCE FOR DOUBTFUL ACCOUNTS -- Accounts receivable are net of an
allowance for doubtful accounts of $244,000 and $150,000 at December 31, 1996
and 1995 respectively.
CONCENTRATION OF RISK -- A substantial portion of revenues are earned from
contracts with counties and municipalities in Washington State. During 1996 and
1995, $39,869,000 (53%) and $35,903,000 (51%) of revenues were earned from five
contracts. Cash, including restricted funds, is on deposit in one bank and
exceeds the federal insured limit of $100,000.
18
<PAGE> 18
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FEDERAL INCOME TAXES -- The Joint Venture does not pay any federal income
taxes; any such taxes accrue directly to the venture partners. Accordingly, no
federal income tax expense or liability has been recorded in the financial
statements.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company has estimated the fair
value of its financial instruments using available market information and other
methodologies in accordance with Statement of Financial Accounting Standards
(SFAS) No. 107. With the exception of stockholder and other related party notes
payable, the Company has estimated that the fair value of all financial
instruments presented in the accompanying balance sheets approximates the
related book value.
It is not practicable to estimate the fair values of stockholder and other
related party notes payable as market comparisons are not available. The
stockholder and related party notes payable are carried at cost of $ 2,327,000
at December 31, 1996 and 1995.
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and Equipment Consists of the Following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Landfill and development costs.................... $28,102,221 $26,747,622
Containers........................................ 14,431,954 12,447,806
Buildings......................................... 13,585,908 12,451,946
Landfill equipment................................ 10,056,257 7,927,838
Vehicles.......................................... 3,839,767 3,230,286
Other equipment................................... 577,914 484,404
Land.............................................. 1,996,756 1,996,756
Construction in progress.......................... 937,906 155,268
----------- -----------
73,528,683 65,441,926
Less accumulated depreciation..................... (32,552,216) (25,063,525)
----------- -----------
Net property and equipment........................ $40,976,467 $40,378,401
=========== ===========
</TABLE>
The permitted landfill capacity is 120 million tons. As of December 31,
1996 and 1995, respectively, 6,937,000 and 5,230,000 tons had been accepted at
the landfill.
NOTE 3 -- LINE OF CREDIT AND LONG-TERM OBLIGATIONS
The Joint Venture has a $7,000,000 revolving line of credit with a
commercial bank. Draws on the line are limited to 80% of qualified trade
accounts receivable. The line of credit bears interest at the prime rate (8.25%
at December 31, 1996) and expires on October 1, 1997. $1,000,000 of the credit
line is used to provide Letters of Credit for bonding purposes.
19
<PAGE> 19
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Long-term obligations as of December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Capital lease obligations, interest ranging from 6.75% to
11.15%, due through October, 2001......................... $ 3,991,081 $ 2,935,333
Industrial development revenue bonds (IRB's), monthly
payment of interest at the available rate (5.3% at
December 31, 1996) based on rates for similar bonds as
determined by bank........................................ 11,900,000 11,900,000
Notes payable to bank, interest ranging from 7.90% to 10.40%
due August 1998 to January 2002........................... 8,275,179
Note payable to bank, interest at 8.69% due April 2003...... 7,379,936
Line of Credit with bank refinanced January 1997............ 2,000,000
Advances from Related Party refinanced January 1997......... 2,961,025
Other Current Liabilities refinanced January 1997........... 38,975
Notes payable to institutional lender , monthly payments
aggregating $23,969 including interest at 8.8% until
maturity in November 1999................................. 1,039,696 1,226,787
Note payable to related party, interest only payments at
bank prime rate plus 1% (9.25% at December 31, 1996)...... 2,327,000 2,327,000
Other notes payable, interest ranging from 6.9% to 10.49%,
due through August 1999................................... 670,257 1,127,426
----------- -----------
32,307,970 27,791,725
Less current portion........................................ (5,501,023) (2,748,866)
----------- -----------
Net Long-term obligations................................... $26,806,947 $25,042,859
=========== ===========
</TABLE>
The IRB's were issued to fund the cost of acquiring land and constructing
and equipping the landfill.
The IRB's require that monthly payments of $141,667 be paid into a sinking
fund account controlled by a trustee. A portion of the bonds may be redeemed
annually, at the trustee's option, with cash from the sinking fund. At December
31, 1996, the balance in this account was $1,840,000 and the trustee elected to
redeem $1,700,000 in bonds in early 1997. At December 31, 1995, the trustee
elected not to redeem any of the bonds and therefore the balance in the sinking
fund was released to the company in 1996.
In January 1997 the company refinanced $5,000,000 of current debt into a
single note with the bank and entered into an interest rate swap agreement. The
new terms require payments, plus interest, of $83,333 for sixty months, and
result in a fixed interest rate of 8.69%. The 1996 financial statements have
been presented as if the refinancing occurred on the balance sheet date.
Subsequent to the 1995 balance sheet date the company refinanced the notes
to bank into a single note and entered into an interest rate swap agreement. The
new terms require payments, including interest, of $127,058 for eighty-four
months, and result in a fixed interest rate of 8.69%. The 1995 financial
statements have been presented as if the refinancing occurred on the balance
sheet date.
At December 31, 1996 and 1995, the Joint Venture had standby letters of
credit totaling $10,381,100 and $12,111,270, respectively, used to guarantee
payment of the IRB's. Additionally at December 31, 1996 and 1995, the Joint
Venture had other standby letters of credit totaling $1,100,000 used as
performance guarantees.
Substantially all assets of the Joint Venture are pledged as security for
the debt.
The Joint Venture is required to comply with certain restrictive covenants
which include requirements with respect to its current ratio, debt to equity
ratio, total equity and capital spending.
20
<PAGE> 20
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Assets held under capital lease arrangements at December 31, 1996 and 1995
had a cost of $8,037,400 and $7,043,692 and accumulated amortization of
$2,097,500 and $2,484,620. During 1996 the Joint Venture entered into capital
lease arrangements totaling $2,445,000.
During the years ended December 31, 1996 and 1995, the Joint Venture paid
interest of $1,962,000 and $2,750,000. Of these amounts, $217,128 and $228,685
was paid on the related party note described above.
The Joint Venture has an interest rate swap agreement the effect of which
is to fix the interest rate on a portion of the IRB's at 4%.
At December 31, 1996 the future payments and scheduled maturities of
long-term obligations are as follows:
<TABLE>
<CAPTION>
CAPITAL LONG-TERM
LEASES DEBT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
1997........................................ $ 1,687,765 $ 4,088,822 $ 5,776,587
1998........................................ 1,131,460 4,150,005 5,281,465
1999........................................ 755,311 4,478,374 5,233,685
2000........................................ 443,389 3,884,052 4,327,441
2001........................................ 601,959 3,993,777 4,595,736
Thereafter.................................. 7,721,859 7,721,859
----------- ----------- -----------
4,619,884 28,316,889 32,936,773
Less amounts representing interest on
leases.................................... (628,803) (628,803)
----------- ----------- -----------
3,991,081 28,316,889 32,307,970
Less current portion........................ (1,412,201) (4,088,822) (5,501,023)
----------- ----------- -----------
Net long-term obligations................... $ 2,578,880 $24,228,067 $26,806,947
=========== =========== ===========
</TABLE>
NOTE 4 -- TRANSACTIONS WITH AFFILIATES
In the ordinary course of business, the Joint Venture transfers funds to
and from entities affiliated with certain of the venturers as required to meet
operational needs. Such balances are reflected in the due to affiliates account
at December 31, 1996 and 1995 and are due on demand. Interest on these amounts
is charged at the bank's prime rate. During 1996 and 1995, the Joint Venture
paid $376,989 and $434,055 of interest to related parties on these balances.
One of the venturers and an affiliate of the Joint Venture provide
management services to the Joint Venture. The venturer was paid fees of $410,160
and $397,260 for 1996 and 1995 respectively. The affiliate was paid $1,461,914
and $1,312,089. The fee paid to the affiliate includes rent on the Joint
Venture's headquarters building. The Joint Venture is one of the named parties
to this lease which provides for future minimum payments of $8,516,000. This
commitment is net of sublease income of $1,277,000.
21
<PAGE> 21
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Other transactions with affiliates consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenue:
Dump fees......................................... $1,956,135 $1,697,428
Other............................................. 166,794 91,022
Expenses:
Hauling and handling fees......................... 276,611 261,794
Rent.............................................. 561,500 561,500
Repairs........................................... 896,144 939,339
</TABLE>
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
HAULING AND DISPOSAL CONTRACTS -- The Joint Venture has entered into
numerous contracts with counties and commercial customers for the hauling and
disposal of refuse. The terms of major contracts have initial expiration dates
beginning in 1999 and provide for renewal periods ranging from five to twenty
years.
LANDFILL OPERATION -- The Joint Venture has entered into an agreement with
Klickitat County to operate the landfill for 22 years with an option for 3 five
year renewals. The Joint Venture is obligated to pay the county quarterly fees
ranging from $.30 to $3.43 per ton. Additionally, the Joint Venture pays $75,000
per year to fund certain items such as scholarships and economic development and
provides certain disposal services within the county free of charge.
CLOSURE COSTS AND POST CLOSURE COSTS -- The Joint Venture accrues an
estimated liability for costs to close the landfill and provide monitoring after
closure. Additionally, the Joint Venture is required to make deposits, based
upon tonnage, into a fund which will be available to pay these costs. At
December 31, 1996 and 1995, $2,884,779 and $2,187,909 had been accrued for these
costs and included on the balance sheet as a long-term obligation. Funds on
deposit and included in Deposits and Restricted Cash at December 31, 1996 and
1995 total $3,093,000 and $2,359,500.
ENVIRONMENTAL RISKS -- In the normal course of business, the Joint Venture
is subject to litigation and legal actions regarding environmental hazards. The
Joint Venture is not aware of any pending actions which would be material to the
financial statements.
ADMINISTRATIVE PROCEEDING -- The Joint Venture is involved in a
administrative proceeding with the EEOC regarding charges filed by a former
employee. Outside counsel for the Company has advised that an opinion as to the
probable outcome of the proceeding cannot be offered at this time. Management
intends to vigorously defend its position and does not believe the outcome of
this proceeding will have a material adverse impact on the financial statements.
22
<PAGE> 22
REGIONAL DISPOSAL COMPANY (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING LEASES -- During 1996 and 1995, the Joint Venture paid $670,000
and $522,000 for numerous operating lease agreements for buildings, an
intermodal facility, and easements. These agreements expire between 1998 and
2031. Certain of the agreements contain renewal options and escalation clauses.
Minimum future lease payments on agreements extending longer than one year are
as follows:
<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
1997................................... $ 342,500 $ 201,000 $ 543,500
1998................................... 342,500 196,000 538,500
1999................................... 342,500 196,000 538,500
2000................................... 342,500 196,000 538,500
2001................................... 171,250 196,000 367,250
Thereafter............................. 1,838,500 1,838,500
---------- ---------- ----------
Total.................................. $1,541,250 $2,823,500 $4,364,750
========== ========== ==========
</TABLE>
In addition to the minimum lease payments, one lease with an unrelated
party provides for quarterly royalty payments of $.50 per ton for each ton
received. The royalty totaled $50,544 and $49,775 in 1996 and 1995.
OTHER COMMITMENTS -- The Joint Venture agreement commits the Joint Venture
to distribute sufficient income to the partners to pay the resulting individual
tax liabilities from the allocation of income.
NOTE 6 -- PENSION PLAN
The Joint Venture participated in a defined benefit pension plan covering
substantially all non-union employees of the Joint Venture and related
companies. Effective December 31, 1996 the Plan benefits were frozen and the
companies have announced their intention to terminate the Plan. The Joint
Venture's portion of the required annual contribution was $227,500 and $51,200
for 1996 and 1995 respectively.
Effective October 1996, the Joint Venture instituted a defined contribution
401(k) plan covering substantially all employees. Terms of the plan call for the
Joint Venture to contribute three percent of eligible employees' compensation.
Additionally, contributions to the plan by the employees are matched up to two
percent of their compensation. The total contributions for the individual
employees are subject to limits prescribed by the Internal Revenue Service.
Total contributions and costs incurred by the Joint Venture under this plan were
$58,800 during 1996.
23
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant, Allied Waste Industries, Inc., has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ PETER S. HATHAWAY
------------------------------------
Peter S. Hathaway
Vice President and
Chief Accounting Officer
Date: August 27, 1998
24
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
23 Consent of Sweeney Conrad P.S.
</TABLE>
25
<PAGE> 1
SWEENEY CONRAD, P.S.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
AUGUST 27, 1998
As independent public accountants, we hereby consent to the inclusion of our
reports on the financial statements of Rabanco Companies and Regional Disposal
Company dated March 21, 1997 in this Current Report on Form 8-K and the
incorporation by reference of our reports dated March 21, 1997 into Rabanco
Companies and Regional Disposal Company's previously filed Registration
Statements on Form S-3 (File No. 33-73618, No. 333-30559 and No. 333-57507),
Form S-4 (File No. 333-22575, No. 333-31231, No. 333-35639, 333-52501 and No.
333-60727) and Form S-8 (File No. 33-42354, No. 33-63510, No. 33-79654, No.
33-79756, No. 33-79664 and No. 333-48357). It should be noted that we have not
audited any financial statements of Rabanco Companies and Regional Disposal
Company subsequent to December 31, 1996 or performed any audit procedures
subsequent to the date of our report.
SWEENEY CONRAD, P.S.
