- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) September 14, 1999
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 (480) 627-2700
Not Applicable
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 5. Other Events
On July 30, 1999, Allied Waste Industries, Inc. ("Allied") completed
the acquisition of Browning-Ferris Industries, Inc. ("BFI") under which
Allied acquired BFI for $45 in cash per BFI common share. The
transaction was structured as a merger of BFI with a subsidiary of
Allied and was subject to the satisfaction of certain conditions.
Allied recently entered into (1) an agreement to sell BFI's medical
waste operations to Stericycle, Inc. for approximately $440.0 million,
(2) an agreement to sell BFI's Canadian solid waste operations to Waste
Management, Inc. for approximately $501.0 million, (3) an agreement to
sell certain assets of BFI Gas Services, Inc. to Gas Recovery Systems,
Inc. for approximately $78.0 million and (4) an agreement to sell BFI's
equity interest in SITA, S.A. owned by BFI to Suez Lyonnaise des Eaux,
S.A. which was completed for approximately $444.0 million. The
financial statements and pro forma financial statements included herein
are for informational purposes and should be read in connection with
the Form 8-K filed on March 16, 1999 announcing this transaction and
the Agreement and Plan of Merger.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of BFI
(i) Consolidated Statements of Income for the Three
Months and Nine Months Ended June 30, 1999 and
1998 (unaudited)
(ii) Consolidated Balance Sheets as of June 30, 1999
(unaudited) and September 30, 1998
(iii) Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 1999 and 1998 (unaudited)
(iv) Notes to Consolidated Financial Statements (unaudited)
(b) Pro Forma Combined Financial Statements of Allied
(i) Introduction
(ii) Pro Forma Combined Balance Sheet as of
June 30, 1999 (unaudited)
(iii) Pro Forma Combined Statement of Operations for the
Six Months Ended June 30, 1999 (unaudited)
(iv) Pro Forma Combined Statement of Operations for the Year
Ended December 31, 1998(unaudited)
(v) Notes to Pro Forma Combined Financial Statements (unaudited)
<PAGE>
<TABLE>
<CAPTION>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(In Thousands Except for Per Share Amounts)
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- ------------------------
1998 1999 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $1,090,620 $1,042,648 $3,169,243 $3,693,107
Cost of operations 684,500 663,499 1,999,128 2,398,774
Selling, general and
administrative expense 126,745 131,615 387,915 453,231
Depreciation and amortization
expense 107,820 105,956 312,333 364,598
Special charges (credits), net -- -- 19,183 (21,464)
---------- ---------- ---------- ----------
Income from operations 171,555 141,578 450,684 497,968
Interest, net 29,761 22,718 89,501 94,960
Equity in earnings of
unconsolidated affiliates (16,559) (19,283) (36,238) (44,377)
---------- ---------- ----------- ----------
Income before income taxes,
minority interest,
extraordinary item and
cumulative effects of changes
in accounting principles 158,353 138,143 397,421 447,385
Income taxes 61,838 53,453 159,609 177,150
Minority interest in income
of consolidated subsidiaries 1,190 489 3,711 5,933
---------- ----------- ----------- ----------
Income before extraordinary
item and cumulative effects
of changes in accounting
principles 95,325 84,201 234,101 264,302
Extraordinary loss on
redemption of debt of
unconsolidated affiliate,
net of income tax benefit
of $538 -- -- -- 999
Cumulative effects of changes
in accounting principles,
net of income tax benefit
of $4,611 -- -- -- 9,563
---------- ----------- ----------- ----------
Net income $ 95,325 $ 84,201 $ 234,101 $ 253,740
========== =========== =========== ==========
</TABLE>
(Continued on following page)
<PAGE>
<TABLE>
<CAPTION>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(In Thousands Except for Per Share Amounts)
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1998 1999 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings per share:
Basic -
Income before extraordinary
item and cumulative effects
of changes in accounting
principles $ .607 $ .483 $ 1.476 $ 1.440
Extraordinary item -- -- -- (.005)
Cumulative effects of changes
in accounting principles -- -- -- (.052)
------- ------- ------- -------
Net income $ .607 $ .483 $ 1.476 $ 1.383
======= ======= ======= =======
Diluted -
Income before extraordinary
item and cumulative effects
of changes in accounting
principles $ .596 $ .480 $ 1.460 $ 1.431
Extraordinary item -- -- -- (.005)
Cumulative effects of changes
in accounting principles -- -- -- (.052)
------- ------- ------- -------
Net income $ .596 $ .480 $ 1.460 $ 1.374
======= ======= ======= =======
Number of common shares used in
computing earnings per share:
Basic 156,922 174,297 158,608 183,504
======= ======= ======= =======
Diluted 159,913 175,361 160,315 184,677
======= ======= ======= =======
Cash dividends per common
share $ .19 $ .19 $ .57 $ .57
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
- ------------------------------------------------------------------------
June 30, September 30,
1999 1998
(unaudited)
- ------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 60,703 $ 89,893
Short-term investments 2,296 5,812
Receivables -
Trade, net of allowances for doubtful
accounts of $23,915 and $22,072 623,187 603,331
Other 49,786 16,205
Inventories 21,479 21,035
Deferred income taxes 87,524 99,695
Prepayments and other 77,879 101,696
---------- ----------
Total current assets 922,854 937,667
---------- ----------
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation and amortization
of $2,246,891 and $2,223,913 2,775,291 2,812,221
---------- ----------
OTHER ASSETS:
Cost over fair value of net tangible
assets of acquired businesses,
net of accumulated amortization of
$94,726 and $83,050 669,670 592,946
Other intangible assets, net of
accumulated amortization of $77,302
and $81,959 82,867 70,594
Deferred income taxes 23,116 24,588
Investments in unconsolidated affiliates 469,667 512,964
Other 65,842 48,501
---------- ----------
Total other assets 1,311,162 1,249,593
---------- ----------
Total assets $5,009,307 $4,999,481
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------
June 30, September 30,
1999 1998
(unaudited)
- --------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES: (In Thousands Except for Share Amounts)
Notes payable and current portion of
long-term debt $ 8,040 $ 9,241
Accounts payable 307,348 354,916
Accrued liabilities -
Salaries and wages 71,439 83,199
Taxes, other than income 35,997 31,238
Other 332,810 332,221
Income taxes 4,655 9,076
Deferred revenues 173,120 175,615
---------- ----------
Total current liabilities 933,409 995,506
---------- ----------
LONG-TERM DEBT, net of current portion 1,889,706 1,792,863
---------- ----------
OTHER LIABILITIES:
Accrued environmental and landfill costs 379,041 392,853
Deferred income taxes 251,157 210,511
Other 185,625 194,290
---------- ---------
Total other liabilities 815,823 797,654
---------- ----------
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, $.16 2/3 par; 400,000,000
shares authorized; 209,165,002 and
208,310,631 shares issued 34,868 34,725
Additional paid-in capital 1,659,221 1,631,236
Retained earnings 1,534,877 1,390,797
Accumulated other comprehensive loss (58,319) (22,312)
Treasury stock, 51,982,699 and 46,008,054
shares, at cost (1,800,278) (1,620,988)
---------- ----------
Total common stockholders' equity 1,370,369 1,413,458
---------- ----------
Total liabilities and common
stockholders' equity $5,009,307 $4,999,481
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(In Thousands)
- ---------------------------------------------------------------------------
Nine Months Ended
June 30,
---------------------
1999 1998
- ---------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 234,101 $ 253,740
---------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization -
Property and equipment 289,025 327,657
Goodwill 13,025 24,430
Other intangible assets 10,283 12,511
Special charges (credits), net 19,183 (21,464)
Cumulative effects of changes in accounting
principles -- 9,563
Deferred income tax expense 57,155 7,522
Amortization of deferred investment tax credit (530) (530)
Provision for losses on accounts receivable 15,029 16,191
Gains on sales of fixed assets (4,632) (2,180)
Equity in earnings of unconsolidated affiliates,
net of dividends received and extraordinary item 2,850 (12,993)
Minority interest in income of consolidated
subsidiaries, net of dividends paid (1,532) 2,829
Increase (decrease) in cash from changes in
assets and liabilities excluding effects
of acquisitions and divestitures -
Trade receivables (46,476) (26,630)
Inventories (759) (5,200)
Other assets 18,364 66,363
Other liabilities (80,328) (159,213)
---------- ---------
Total adjustments 290,657 238,856
---------- ---------
Net cash provided by operating activities 524,758 492,596
---------- ---------
</TABLE>
(Continued on following page)
<PAGE>
<TABLE>
<CAPTION>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(In Thousands)
- --------------------------------------------------------------------------
Nine Months Ended
June 30,
----------------------
1999 1998
- --------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C>
Capital expenditures (396,098) (287,525)
Payments for businesses acquired (118,653) (23,505)
Proceeds from businesses divested 118,915 987,362
Investments in unconsolidated affiliates (28,014) (35,900)
Proceeds from disposition of assets 17,775 41,158
Purchases of short-term investments (96,687) (76,547)
Return of investment in unconsolidated
affiliates 24,224 87,670
--------- ---------
Net cash provided by (used in) investing
activities (478,538) 692,713
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of common stock 18,233 449,186
Proceeds from issuances of indebtedness 269,390 27,015
Repayments of indebtedness (91,134) (82,542)
Repurchases of common stock (180,814) (1,500,851)
Dividends paid (91,133) (109,190)
--------- ---------
Net cash used in financing activities (75,458) (1,216,382)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES 48 (875)
--------- ---------
NET DECREASE IN CASH (29,190) (31,948)
CASH AT BEGINNING OF PERIOD 89,893 78,746
--------- ---------
CASH AT END OF PERIOD $ 60,703 $ 46,798
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest, net of capitalized amounts $ 77,306 $ 92,170
Income taxes $ 131,157 $ 140,382
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation -
The accompanying unaudited consolidated financial statements have been
prepared by BFI pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. In the opinion of management, all adjustments
and disclosures necessary to a fair presentation of these financial
statements have been included. These financial statements should be read in
conjunction with the financial statements and notes thereto included in
BFI's Annual Report on Form 10-K for the year ended September 30, 1998 as
filed with the Securities and Exchange Commission.
Certain reclassifications have been made in prior year financial
statements to conform to the fiscal year 1999 presentation.
(2) Earnings Per Share -
The following table reconciles the number of common shares outstanding
with the number of common shares used in computing basic and diluted
earnings per share (in thousands):
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Nine Months Ended
June 30,
--------------------
1999 1998
------- -------
Common shares outstanding for purposes of
computing earnings per share, end of period 157,182 176,224
Effect of using weighted average common
shares outstanding 1,426 7,280
------- -------
Shares used in computing earnings per
share - basic 158,608 183,504
Effect of shares issuable under stock option
plans based on the treasury stock method 1,707 1,173
------- -------
Shares used in computing earnings
per share - diluted 160,315 184,677
======= =======
Basic earnings per share amounts were computed by dividing earnings by
the weighted average number of shares of common stock outstanding during
each period. Diluted earnings per share amounts were computed considering
the dilutive effect of stock options in the calculation. Options to purchase
45,000 shares of common stock at prices ranging from $43.13 to $43.38 per
share were outstanding during the first nine months of fiscal 1999 but were
not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
common shares. The 7.25% Automatic Common Exchange Securities had no effect
on the computation for the periods presented prior to their settlement in
June 1998.
(3) Comprehensive Income -
In June 1997, Statement of Financial Accounting Standards ("SFAS") No.
130 - "Reporting of Comprehensive Income" was issued establishing standards
for reporting and presentation of comprehensive income and its components.
Comprehensive income is defined as all changes in a company's net assets
except changes resulting from transactions with stockholders. BFI has
adopted SFAS No. 130 effective October 1, 1998. For the three and nine month
periods ended June 30, 1999 and 1998, comprehensive income is as follows (in
thousands):
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
Net income $ 95,325 $ 84,201 $234,101 $253,740
Foreign currency translation
adjustment:
Current period translation (10,341) 1,939 (36,007) (44,393)
Reversal of portion of
cumulative translation
adjustment in connection
with sale of international
operations -- -- -- 107,642
-------- -------- -------- --------
Total foreign currency
translation adjustment (10,341) 1,939 (36,007) 63,249
-------- -------- -------- --------
Comprehensive income $ 84,984 $ 86,140 $198,094 $316,989
======== ======== ======== ========
(4) Special Charges (Credits), Net -
Fiscal 1999 Special Charges ($19.2 million).
Special charges of $19.2 million ($15.7 million after income taxes)
were reported for the second quarter of fiscal 1999. Included in these
special charges were approximately $10.0 million of losses associated with
the divestiture of certain operations in connection with the purchase and
sale transaction with Allied, which closed in early April 1999. In addition,
BFI incurred approximately $9.2 million of investment banking, legal and
other expenses related to the merger with Allied, which are not deductible
for federal income tax purposes. See Note (9) for further discussion of the
merger with Allied.
Fiscal 1998 Special Credits ($21.5 million).
Special credits of $21.5 million ($12.9 million after income taxes)
were reported for the six-month period ended March 31, 1998. These special
credits are related principally to the gain of $17.9 million recognized from
the sale in March 1998 of substantially all of BFI's operations outside
North America to SITA, a Paris-based subsidiary of Suez Lyonnaise des Eaux.
In exchange for these operations, BFI received $950 million in cash and an
ownership interest of approximately 19.2% in ordinary shares of SITA. Costs
associated with the sale of these operations included estimated transaction
and other expenses and losses accumulated in the foreign currency
translation component of common stockholders' equity (approximately $133
million). A portion of the total gain, net of expenses, was deferred in
connection with BFI's continuing investment in SITA.
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
BFI's consolidated results of operations on an unaudited pro forma
basis for the nine-month period ended June 30, 1998, as though the sale of
the operations outside North America had occurred on October 1, 1997 are as
follows (in thousands, except per share amounts):
Nine Months Ended
June 30, 1998
-----------------
Pro forma revenues $3,063,510
Pro forma income before extraordinary item
and cumulative effects of changes in
accounting principles $243,612
Pro forma earnings per share -
Basic $1.33
Diluted $1.32
These pro forma results are presented for informational purposes only
and do not purport to show the actual results which would have occurred had
the sale of the international operations been consummated on October 1,
1997, nor should they be viewed as indicative of future results of
operations. In addition, these pro forma amounts give no effect to earnings
from BFI's equity investment in SITA on a pro forma basis for the period
prior to consummation of the sale of the international operations. Had any
such estimated earnings from BFI's investment in SITA been considered in the
BFI pro forma results of operations presented above, management believes
that pro forma earnings per share amounts would reflect significantly less
dilution when compared with the related historical earnings per share
amounts.
The remaining amounts included in special credits were attributable
principally to net gains associated with the divestiture of certain North
American operations in the first six months of fiscal 1998.
(5) Cumulative Effects of Changes in Accounting Principles -
On November 20, 1997, the Financial Accounting Standards Board's
Emerging Issues Task Force issued EITF No. 97-13, a consensus ruling
requiring that certain business process reengineering costs typically
capitalized by companies be expensed as incurred. The ruling further
required that previously capitalized costs of this nature be written off as
a cumulative effect of a change in accounting principle in the quarter
containing November 20, 1997. BFI had previously capitalized these types of
costs in connection with its SAP software implementation project. As a
result, BFI recorded an after-tax charge of $13.8 million or $.075 diluted
earnings per share in the first quarter of fiscal 1998 as the cumulative
effect of a change in accounting principle.
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
During the second quarter of fiscal 1998, BFI changed its method of
accounting for recognition of value changes in its employee retirement plan
for purposes of determining annual expense under SFAS No. 87 - "Employers'
Accounting for Pensions", effective October 1, 1997. BFI has changed its
method of calculating the value of assets of its plan from a calculation
which recognized changes in fair value of assets over five years to
recognition of changes in fair value immediately. BFI has also changed the
method of recognizing gains and losses from deferral within a 10% corridor
and amortization of gains outside this corridor over the future working
careers of the participants to a deferral below a 5% corridor, immediate
recognition within a 5-10% corridor and amortization of gains outside this
corridor over the future working careers of the participants. The new method
is preferable because, in BFI's situation, it produces results which more
closely match current economic realities of BFI's retirement plan through
the use of the current fair value of assets while still mitigating the
impact of extreme gains and losses. As a result, BFI recorded an after-tax
credit of $4.2 million, or $.023 diluted earnings per share, as the
cumulative effect of a change in accounting principle.
(6) Business Combinations -
During the current fiscal year, BFI paid approximately $130.5 million
(including additional amounts payable, principally to former owners, of $3.4
million and the issuance of 257,468 shares of BFI's common stock valued at
$8.4 million) to acquire 54 solid waste businesses, which were accounted for
as purchases. In connection with these acquisitions, BFI recorded other
liabilities of $15.6 million. Included in the current quarter acquisitions
were nine solid waste businesses acquired in connection with the purchase
and sale transaction with Allied. BFI paid approximately $97.7 million and
assumed liabilities of approximately $14.6 million in connection with this
transaction. See Note (4) for further discussion of this transaction. The
results of these business combinations are not material to BFI's
consolidated results of operations or financial position.
During the fiscal year ended September 30, 1998, BFI paid approximately
$25.5 million (including additional amounts payable, principally to former
owners, of $0.7 million and the issuance of 7,089 shares of BFI's common
stock valued at $0.2 million) to acquire 30 solid waste businesses, which
were accounted for as purchases. In connection with these acquisitions, BFI
recorded additional interest-bearing indebtedness of $0.2 million and other
liabilities of $1.5 million. The results of these business combinations were
not material to BFI's consolidated results of operations or financial
position.
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The results of all businesses acquired in fiscal years 1999 and 1998
have been included in the consolidated financial statements from the dates
of acquisition. In allocating purchase price, the assets acquired and
liabilities assumed in connection with BFI's acquisitions have been
initially assigned and recorded based on preliminary estimates of fair value
and may be revised, as additional information concerning the valuation of
such assets and liabilities becomes available. As a result, the financial
information included in BFI's consolidated financial statements is subject
to adjustment prospectively as subsequent revisions in estimates of fair
value, if any, are necessary.
(7) Long-Term Debt -
Long-term debt at June 30, 1999 and September 30, 1998, was as follows
(in thousands):
June 30, September 30,
1999 1998
------------ -------------
Senior indebtedness:
6.10% Senior Notes, net of
unamortized discount of $812
and $986 $ 155,877 $ 155,703
6.375% Senior Notes, net of
unamortized discount of $1,249
and $1,360 159,951 159,840
7 7/8% Senior Notes, net of
unamortized discount of $149
and $169 69,352 69,332
7.40% Debentures, net of
unamortized discount of
$1,685 and $1,720 358,315 358,280
9 1/4% Debentures 99,500 99,500
Solid waste revenue bond
obligations 254,497 220,044
Other notes payable 40,709 46,790
---------- ----------
1,138,201 1,109,489
Commercial paper and short-term
facilities to be refinanced 759,545 692,615
---------- ----------
Total long-term debt 1,897,746 1,802,104
Less current portion 8,040 9,241
---------- ----------
Long-term debt, net of current
portion $1,889,706 $1,792,863
========== ==========
Certain outstanding borrowings classified as long-term debt as of June
30, 1999 have been classified as long-term based upon a commitment by Allied
management to provide long-term financing as such debt becomes due and
payable by BFI. See Note (9) for further discussion of the merger with
Allied. It was BFI's intention to refinance certain outstanding borrowings
classified as long-term debt as of September 30, 1998 through the use of
BFI's existing committed long-term bank credit agreements in the event that
alternative long-term refinancing was not arranged. A summary of such
outstanding borrowings classified as long-term debt as of June 30, 1999 and
September 30, 1998 is as follows (amounts in thousands):
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
June 30, September 30,
1999 1998
------------ -------------
United States -
Commercial paper $508,337 $590,676
Market Value Put Securities 251,208 --
Other -- 101,939
-------- --------
$759,545 $692,615
======== ========
On January 15, 1999, BFI issued $250 million of Market Value Put
Securities ("MVPs"). The MVPs bear interest at 6.08% and are subject to a
mandatory put on January 18, 2000. First Chicago Capital Markets, Inc. holds
an option to remarket the MVPs on that date for an additional two-year term.
Proceeds from the MVPs were used to repay a portion of BFI's commercial paper
balances.
(8) Commitments and Contingencies -
Legal Proceedings.
BFI and certain subsidiaries are involved in various administrative
matters or litigation, including personal injury and other civil actions, as
well as other claims and disputes that could result in additional litigation
or other adversary proceedings.
While the final resolution of any matter may have an impact on BFI's
consolidated financial results for a particular quarterly or annual reporting
period, management believes that the ultimate disposition of these matters
will not have a materially adverse effect upon the consolidated financial
position of BFI.
Environmental Proceedings.
BFI and certain subsidiaries are involved in various environmental
matters or proceedings, including original or renewal permit application
proceedings in connection with the establishment, operation, expansion,
closure and post-closure activities of certain landfill disposal facilities,
and proceedings relating to governmental actions resulting from the
involvement of various subsidiaries of BFI with certain waste sites
(including Superfund sites), as well as other matters or claims that could
result in additional environmental proceedings.
While the final resolution of any matter may have an impact on BFI's
consolidated financial results for a particular quarterly or annual reporting
period, management believes that the ultimate disposition of these matters
will not have a materially adverse effect upon the consolidated financial
position of BFI.
<PAGE>
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(9) Subsequent Events
Merger with Allied.
On July 30, 1999, BFI was acquired by Allied pursuant to the definitive
merger agreement entered into in March 1999. Under the terms of the
agreement, Allied paid $45 in cash for each outstanding share of BFI's common
stock, or a total of approximately $7.5 billion in cash and assumed
approximately $1.9 billion in debt. At the effective date of the merger, BFI
became a wholly-owned subsidiary of Allied. The acquisition of BFI will be
accounted for by Allied using the purchase method of accounting, which
requires an allocation of the purchase price to the assets acquired and
liabilities assumed based on fair value as determined by Allied. BFI's
consolidated financial statements present BFI prior to the merger with
Allied. These consolidated financial statements have been prepared on the
historical cost basis of accounting in accordance with generally accepted
accounting principles which may be greater or less than the fair value of the
assets and liabilities as determined by Allied.
Divestiture of Equity Investment in SITA.
In July 1999, BFI was requested by Allied to sell its equity investment
in SITA to Suez Lyonnaise des Eaux. Prior to the effective date of the merger
with Allied, July 30, 1999, BFI completed the sale of this equity investment
in exchange for approximately $444 million in cash proceeds with an estimated
pre-tax gain of approximately $75 million.
Other Divestitures.
Allied has entered into agreements to sell BFI's Canadian solid waste
assets, North American medical waste assets, substantially all of the assets
and certain development rights of BFI Gas Services, Inc. and certain other
assets required to be sold in connection with approval of the merger
transaction by the U.S. Department of Justice. Aggregate proceeds to be
received from these sales, before expenses, are expected to be approximately
$1.2 billion.
Credit Rating.
In late July 1999, credit rating agencies lowered the credit rating on
BFI's debt securities due to the merger with Allied. As a result, the lessor
of BFI's two corporate headquarters buildings has exercised its right to
require BFI to purchase the buildings at an amount stipulated in the
operating lease agreement, which is currently approximately $90 million. BFI
purchased the buildings on August 9, 1999 for approximately $90 million.
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
The unaudited pro forma combined balance sheet as of June 30, 1999 gives effect
to the acquisition of BFI, the related financings, and the proposed sales of the
medical waste operations of BFI, the Canadian operations of BFI, and certain
assets of BFI Gas Services, Inc. operations and the sale of BFI's investment in
SITA, S.A., as if each had occurred on June 30, 1999. The unaudited pro forma
combined statements of operations for the six months ended June 30, 1999 and the
year ended December 31, 1998 give effect to these transactions as if each had
occurred on January 1, 1998.
These unaudited pro forma combined financial statements do not purport to be
indicative of the combined results of operations of Allied and BFI that might
have occurred had the BFI acquisition been completed on such dates, nor are they
indicative of future results of operations. The pro forma adjustments related to
the purchase allocation of the BFI acquisition are preliminary and do not give
effect to any appraisal and marking to fair market value of the assets and
liabilities of BFI which Allied intends to do in connection with the purchase
accounting to be performed subsequent to the filing of this current report.
Purchase price adjustments recorded based upon information to be received in the
future may have a significant impact on total assets, total liabilities, cost of
operations, depreciation and amortization, goodwill amortization and interest
expense. In addition, the pro forma adjustments do not reflect possible
acquisition related costs relating to environmental related matters, litigation
liabilities, regulatory compliance matters, restructuring, integration and
abandonment of assets, which could result in significant additional charges.
Purchase accounting adjustments, acquisition-related costs and other possible
charges, which may arise from the acquisition of BFI, may materially impact our
future combined financial position and combined financial results of operations.
The pro forma combined financial statements do not give effect to other possible
future sales of assets or operations or to any cost savings or other benefits of
the business combination which may result from the integration of Allied's and
BFI's operations.
The unaudited pro forma combined financial statements should be read in
conjunction with the notes to unaudited pro forma combined financial statements,
the historical consolidated financial statements of Allied and the related notes
and the historical consolidated financial statements of BFI and related notes.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Disclosure Regarding Forward Looking Statements" in Allied's Annual
Report on Form 10-K for the year ended December 31, 1998, as amended.
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED BALANCE SHEET
June 30, 1999
(unaudited)
(in thousands)
Pro Forma
Adjustments
Related to the
Allied BFI BFI BFI
Historical Historical Acquisition Dispositions
(Note 1) (Note 2) (Note 3) (Note 4) Pro Forma
-------- -------- -------- -------- ---------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents....... $ 34,896 $ 62,999 $ 89,748 (a) $1,463,000 $ 187,643
(1,463,000)
Other current assets............ 366,016 859,855 2,504 (b) (79,707) 1,148,668
Assets held for sale............ -- -- -- 1,463,000 --
(1,463,000)
------------- ------------- --------------- -------------- -------------
Total current assets......... 400,912 922,854 92,252 (79,707) 1,336,311
Property and equipment, net 1,940,069 2,775,291 -- (238,278) 4,477,082
Costs in excess of net
assets acquired, net......... 1,572,519 669,670 6,329,154 (c) (848,661) 7,722,682
Other assets.................... 150,571 171,825 247,782 (d) (13,309) 556,869
Investments in
unconsolidated affiliates... -- 469,667 -- (331,424) 138,243
------------- ------------- --------------- -------------- -------------
Total assets................ $ 4,064,071 $ 5,009,307 $ 6,669,188 $(1,511,379) $ 14,231,187
============= ============= =============== ============== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current portion of long-term
debt........................ $ 19,391 $ 8,040 $ 1,463,000 (e) $ (989) $ 26,442
(1,463,000)
Other current liabilities...... 483,949 925,369 -- (25,252) 1,384,066
------------- ------------- --------------- -------------- -------------
Total current liabilities... 503,340 933,409 1,463,000 (1,489,241) 1,410,508
Long-term debt, net of
current portion............. 2,263,862 1,889,706 5,521,845 (e) (6,295) 9,669,118
Other long-term liabilities.... 257,006 815,823 15,112 (a) (15,843) 1,072,098
Stockholders' equity........... 1,039,863 1,370,369 (330,769) (f) -- 2,079,463
------------- ------------- --------------- -------------- -------------
Total liabilities and
equity......................... $ 4,064,071 $ 5,009,307 $ 6,669,188 $(1,511,379) $ 14,231,187
============= ============= =============== ============== =============
The accompanying notes are an integral part of this pro forma combined balance sheet.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(unaudited)
(in thousands except for per share amounts)
Pro Forma
Adjustments
Allied BFI Related to the BFI
Historical Historical BFI Acquisition Dispositions
(Note 1) (Note 2) (Note 3) (Note 4) Pro Forma
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $871,402 $ 2,118,516 $ -- $ (187,617) $ 2,802,301
Cost of operations.................... 487,026 1,329,054 -- (118,350) 1,697,730
Selling, general and administrative
expenses........................... 67,474 259,404 -- (19,788) 307,090
Depreciation and amortization
expense............................ 82,900 201,875 (15,610) 269,165
Goodwill amortization................. 18,486 8,714 70,080 (a) (1,917) 95,363
Acquisition related and unusual costs. 1,116 19,183 -- 469 20,768
----------- -------------- ----------------- -------------- -------------
Operating income...................... 214,400 300,286 (70,080) (32,421) 412,185
Interest income....................... (668) (1,158) -- 429 (1,397)
Interest expense...................... 55,538 60,968 273,023 (b) (274) 389,255
Equity income of unconsolidated
affiliates......................... -- (27,526) -- 1,898 (25,628)
----------- --------------- ----------------- -------------- ------------
Net income before income taxes........ 159,530 268,002 (343,103) (34,474) 49,955
Income tax expense.................... 64,612 109,611 (107,844) (c) (13,708) 52,671
Minority interest..................... -- 2,504 -- (383) 2,121
----------- -------------- ----------------- -------------- -------------
Net income (loss) before extraordinary
loss............................... 94,918 155,887 (235,259) (20,383) (4,837)
Dividends............................. -- 60,192 (25,246) (d) -- 34,946
----------- -------------- ----------------- -------------- -------------
Net income (loss) to common
shareholders before extraordinary
loss............................ $ 94,918 $ 95,695 $ (210,013) $ (20,383) $ (39,783)
=========== ============== ================= ============== =============
Basic EPS:
Net income (loss) before extraordinary
loss............................... $ 0.51 $ (0.21)
===========
=============
Weighted average common shares
outstanding........................ 186,424 186,424
=========== =============
Diluted EPS:
Net income (loss) before extraordinary
loss............................... $ 0.50 $ (0.21)
=========== =============
Weighted average common and
common equivalent shares
outstanding..................... 190,291 186,424
=========== =============
The accompanying notes are an integral part of this pro forma combined statement of operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(unaudited)
(in thousands except for per share amounts)
Pro Forma
Adjustments
Allied Pro Forma Related to the BFI
Historical BFI BFI Acquisition Dispositions
(Note 1) (Note 2) (Note 3) (Note 4) Pro Forma
-------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues............................ $ 1,575,612 $ 4,112,782 $ -- $ (370,107) $ 5,318,287
Cost of operations.................. 892,273 2,613,419 -- (228,413) 3,277,279
Selling, general and administrative
expenses......................... 155,835 515,149 -- (42,840) 628,144
Depreciation and amortization
expense.......................... 149,260 392,347 -- (26,481) 515,126
Goodwill amortization............... 30,705 17,031 140,651 (a) (3,928) 184,459
Acquisition related and unusual costs 247,902 (3,545) -- (257) 244,100
Asset impairments.................... 69,714 -- -- -- 69,714
------------ -------------- ----------------- -------------- -------------
Operating income..................... 29,923 578,381 (140,651) (68,188) 399,465
Interest income...................... (4,030) (4,723) -- 560 (8,193)
Interest expense..................... 88,431 110,759 546,045 (b) (408) 744,827
Equity in earnings of unconsolidated
affiliates........................ -- (51,208) -- 7,846 (43,362)
------------ ------------- ----------------- -------------- -------------
Income (loss) before income taxes,
minority interest and extraordinary
loss........................... (54,478) 523,553 (686,696) (76,186) (293,807)
Income tax expense................... 43,773 206,283 (215,688) (c) (28,754) 5,614
Minority interest.................... -- 2,233 -- -- 2,233
------------ -------------- ----------------- -------------- -------------
Income (loss) before extraordinary
loss.............................. (98,251) 315,037 (471,008) (47,432) (301,654)
Dividends............................ -- 133,545 (66,943) (d) -- 66,602
------------ -------------- ----------------- -------------- -------------
Net income (loss) to common
shareholders before extraordinary
loss........................... $ (98,251) $ 181,492 $ (404,065) $ (47,432) $ (368,256)
============ ============== ================= ============== =============
Basic EPS:
Net loss before extraordinary loss... $ (0.54) $ (2.01)
============ =============
Weighted average common shares
outstanding....................... 182,796 182,796
============ =============
Diluted EPS:
Net loss before extraordinary loss... $ (0.54) $ (2.01)
============ =============
Weighted average common and
common equivalent shares
outstanding.................... 182,796 182,796
============ =============
The accompanying notes are an integral part of this pro forma combined statement of operations.
</TABLE>
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
1. Allied Historical Balance Sheet and Statement of Operations
The historical balances represent the balance sheet and results of operations of
Allied as of and for each of the indicated periods as reported in the historical
consolidated financial statements of Allied.
2. BFI Historical Balance Sheet and Pro Forma Statement of Operations
BFI Historical Balance Sheet
The historical balances represent the consolidated balance sheet of BFI as of
June 30, 1999, as reported in the historical consolidated financial statements
of BFI.
BFI Pro Forma Statements of Operations
The amounts related to the BFI Acquisition in the pro forma combined statements
of operations represent the historical results of operations of BFI for the six
months ended June 30, 1999 and the year ended September 30, 1998 adjusted to
give effect to BFI's divestiture of its operations outside of North America
associated with the SITA Transaction (as defined below). Therefore, the pro
forma statements of operations do not include BFI's three months ended December
31, 1998. Revenues and income before income taxes were $1,050.7 million and
$129.4 million, respectively, for the three months ended December 31, 1998.
In November 1997, BFI entered into an agreement to merge its operations outside
North America with SITA, a subsidiary of Suez Lyonnaise des Eaux. On March 31,
1998, BFI announced that this transaction had been completed (the "SITA
Transaction"). Under the terms of the agreement, BFI received cash totaling $950
million and shares of SITA stock amounting to approximately 19.2% equity
interest in SITA. Suez Lyonnaise des Eaux owns more than 50% of SITA.
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
The following table represents the historical results of operations of BFI for
the year ended September 30, 1998, giving pro forma effect to the SITA
Transaction as if it had occurred on October 1, 1997 (amounts in thousands):
<TABLE>
<CAPTION>
Pro Forma
Adjustments
For SITA Pro Forma
BFI Historical Transaction BFI
---------------- ---------------- ---------------
<S> <C> <C> <C>
Revenues.......................... $ 4,745,748 $ (632,966) $ 4,112,782
Cost of operations................ 3,064,171 (450,752) 2,613,419
Selling, general and
administrative expenses.......
586,819 (71,670) 515,149
Depreciation and
amortization expense........... 469,955 (60,577) 409,378
Acquisition related and
unusual costs.................. (21,464) 17,919 (3,545)
---------------- ---------------- ---------------
Operating income.................. 646,267 (67,886) 578,381
Interest income................... (4,723) -- (4,723)
Interest expense.................. 123,000 (12,241) 110,759
Equity income of
unconsolidated affiliates...... (60,078) 8,870 (51,208)
---------------- ---------------- ---------------
Income before income taxes,
minority interest and
extraordinary loss........... 588,068 (64,515) 523,553
Income tax expense
(benefit)...................... 232,089 (25,806) 206,283
Minority interest................. 6,606 (4,373) 2,233
================ ================ ===============
Net income before
extraordinary loss............. $ 349,373 $ (34,336) $ 315,037
================ ================ ===============
</TABLE>
3. Pro Forma Adjustments Related to the BFI Acquisition
The pro forma adjustments related to the purchase allocation of the BFI
acquisition are preliminary and do not give effect to any appraisal and marking
to fair market value of the assets and liabilities of BFI which Allied intends
to do in connection with the purchase accounting to be performed subsequent to
the filing of this current report. Purchase price adjustments recorded based
upon information to be received in the future may have a significant impact on
total assets, total liabilities, cost of operations, depreciation and
amortization, goodwill amortization and interest expense. In addition, the pro
forma adjustments do not reflect possible acquisition related costs with respect
to environmental related matters, litigation liabilities, regulatory compliance
matters, restructuring, integration and abandonment of assets, which could
result in significant additional charges. Future combined financial position and
combined financial results of operations may be materially impacted by the
purchase accounting adjustments, acquisition related costs and other possible
charges, which may arise from the acquisition of BFI.
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
Pro Forma Balance Sheet
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following (in thousands):
(a) Sources Uses
----------------------------------- --------------- -------------------------------------- --------------
<S> <C> <C>
Draw funds under the new credit $ 5,000,000 The acquisition of BFI. $ 7,384,089
facility.
The issuance of the senior 1,993,360 The repayment of the BFI commercial 589,515
subordinated notes. paper and other short-term facilities.
The issuance of the 6.5% senior 1,000,000 The repayment of amounts under 419,000
convertible preferred stock. Allied's term loan and revolving
credit facilities.
Draw funds under the Asset Sale 1,000,000 The payment of fees associated with 254,120
Term Loan. the financing for the transaction.
The proceeds from gain on 15,112 The payment of severance and 177,000
interest rate protection. termination fees.
The payment of transaction costs
associated with the acquisition. 70,000
The fees associated with the 25,000
issuance of the 6.5% senior
convertible preferred stock.
Net cash provided. $ 89,748
</TABLE>
(b) The deferred tax benefit of $2.5 million from the write-off of deferred
debt issuance costs related to the repayment of loans outstanding under
Allied's term loan and revolving credit facilities.
(c) The cost of the acquisition of BFI in excess of the net assets acquired
in the amount of $6,329.1 million.
(d) The payment of fees associated with the financings of $254.1 million
less the write-off of deferred financing costs associated with Allied's
term loan and revolving credit facilities of $6.3 million.
(e) Draw funds under the senior secured credit facilities of $5,000.0
million, the issuance of the senior subordinated notes of $2,000.0
million, and the draw funds on the Asset Sale Term Loan of $1,000.0
million, less the repayment of amounts outstanding under Allied's term
loan and revolving credit facilities of $419.0 million and the repayment
of the BFI commercial paper and other short-term facilities of $589.5
million.
(f) The issuance of 6.5% senior convertible preferred stock of $1,000.0
million less associated fees of $25.0 million, and the deferred tax
benefit from the write-off of deferred debt issuance costs related to
the repayment of amounts outstanding under Allied's term loan and
revolving credit facilities of $2.5 million, less the write-off of the
deferred financing costs associated with Allied's term loan and
revolving credit facilities of $6.3 million and the elimination of the
BFI stockholders' equity of $1,301.9 million as a result of the
acquisition of BFI.
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
Pro Forma Statement of Operations
(a) Goodwill amortization related to $6.1 billion of goodwill expected to be
recorded in connection with the acquisition of BFI, net of the impact of
divestitures, based on a 40 year life and reduced by the elimination of
historical goodwill amortization of BFI.
(b) The net increase in interest expense and the amortization of debt
issuance costs, net of reduction for write-off of debt issuance costs
related to the old Allied credit facility calculated as follows (in
thousands):
<TABLE>
<CAPTION>
Interest
Expense
For the Interest Expense
Six Months For the Year
Ended June Ended
30, 1999 December 31, 1998
Rate Due Amount
----------------- ------- ------------- ------------ ------------------
Borrowings:
Credit Facility:
<S> <C> <C> <C> <C> <C>
Asset Sale Term Loan--secured Libor +2.50% 2001 $ 1,000,000 $ 38,600 $ 77,200
Tranche A Term Loan--secured 5.74% +2.50% 2005 1,750,000 72,100 144,200
Tranche B Term Loan--secured 5.74% +2.75% 2006 1,250,000 53,063 106,125
Tranche C Term Loan--secured Libor +3.00% 2007 1,500,000 61,650 123,300
Tranche D Term Loan--unsecured Libor +3.50% 2004 500,000 21,800 43,600
Senior subordinated notes 10.06% 2009 1,993,360 100,266 200,532
Amortization of gain on interest
rate protection (529) (1,058)
Amortization of debt issuance
costs related to the financing 15,374 30,748
------------ ------------------
Increase in interest expense 362,324 724,647
------------ ------------------
Repayment of:
Allied's term loan and revolving Libor +0.75% 2004 419,000 (12,507) (25,014)
credit facilities
BFI commercial paper and other
short-term facilities 5.93% 2000 589,515 (17,479) (34,958)
Asset Sale Term Loan--secured Libor +2.50% 2001 1,000,000 (38,600) (77,200)
Tranche D Term Loan--unsecured Libor +3.50% 2004 463,000 (20,187) (40,374)
Amortization of debt issuance
costs related to Allied's term
loan (528) (1,056)
and revolving credit facilities
------------ ------------------
Decrease in interest expense (89,301) (178,602)
------------ ------------------
Adjustment to pro forma
interest expense
$273,023 $ 546,045
============ ==================
<FN>
As a portion of the financing arrangement has a variable rate which is not
covered by a hedging agreement, the effect of a 1/8% increase in the LIBOR rate
for the unhedged portion of variable rate debt is an increase in interest
expense of $1.9 million and $3.8 million for the six months ended June 30, 1999
and the year ended December 31, 1998, respectively.
</FN>
</TABLE>
(c) The income tax expense at Allied's current tax rate of 39.5% applied to
deductible items.
(d) The elimination of BFI's historical dividends less dividends paid on the
senior convertible preferred stock calculated based on $1 billion of
shares outstanding at a 6.5% rate compounded on a quarterly basis.
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
4. BFI Dispositions
The pro forma financial statements give effect to the proposed divestitures of
the BFI medical waste operations for approximately $440.0 million, the Canadian
operations of BFI for approximately $501.0 million, and certain assets of BFI
Gas Services, Inc. operations for $78.0 million (which are all under definitive
agreement) and the BFI investment in the common stock of SITA, S.A. which was
sold for $444.0 million. The combined sales proceeds of approximately $1,463.0
million will be used to repay the $1.0 billion Asset Sale Term Loan and $463.0
million under the Tranche D Term Loan.
Pro Forma Balance Sheet
The following table represents the historical balance sheets of the BFI medical
waste operations, the BFI Canadian operations, the BFI Gas Services, Inc.
operations and the SITA investment (together, the "BFI Dispositions") which are
reclassified to assets held for sale in the pro forma adjustments (amounts in
thousands):
<TABLE>
<CAPTION>
June 30, 1999
------------------------------------------------------------------------------------
Canadian Medical Waste Gas Services SITA BFI
Operations Operations Operations Investment Dispositions
-------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ -- $ -- $ -- $ -- $ --
Other current assets 61,555 18,152 -- -- 79,707
Assets held for sale (501,000) (440,000) (78,000) (444,000) (1,463,000)
-------------- ------------- -------------- ------------- -------------
Total current assets (439,445) (421,848) (78,000) (444,000) (1,383,293)
Property and equipment, net 99,730 60,548 78,000 -- 238,278
Goodwill, net 365,517 370,568 -- 112,576 848,661
Other assets 13,309 -- -- -- 13,309
Investments in unconsolidated affiliates -- -- -- 331,424 331,424
-------------- ------------ --------------- ------------- ------------
Total assets $ 39,111 $ 9,268 $ -- $ -- $ 48,379
============= ============= ============= ============= =============
Other current liabilities $ 22,054 $ 3,198 $ -- $ -- $ 25,252
Current portion of long-term debt 19 970 -- -- 989
Long-term debt, net of current portion 2,133 4,162 -- -- 6,295
Other long-term liabilities 14,905 938 -- -- 15,843
------------- ------------- -------------- ------------- -------------
Total liabilities and equity $ 39,111 $ 9,268 $ -- $ -- $ 48,379
============= ============= ============= ============= =============
</TABLE>
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
Pro Forma Statements of Operations
The following tables represent the historical results of operations of the BFI
medical waste operations, the Canadian operations of BFI and the SITA
investment, which are eliminated in the pro forma adjustments (amounts in
thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------------------------------------------
Canadian Medical Waste SITA BFI
Operations Operations Investment Dispositions
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues........................................ $ 86,022 $ 101,595 $ -- $ 187,617
Cost of operations.............................. 57,657 60,693 -- 118,350
Selling, general and administrative expenses 7,597 12,191 -- 19,788
Depreciation and amortization................... 7,146 8,464 -- 15,610
Goodwill amortization........................... 495 1,422 -- 1,917
Acquisition related and unusual costs........... -- (469) -- (469)
------------- ------------- ------------- -------------
Operating income.......................... 13,127 19,294 -- 32,421
Interest income................................. (429) -- -- (429)
Interest expense................................ -- 274 -- 274
Equity in earnings of unconsolidated affiliates -- -- (1,898) (1,898)
------------- ------------- ------------- -------------
Income before taxes, minority interest
and extraordinary loss................ 13,556 19,020 1,898 34,474
Income taxes.................................... 6,100 7,608 -- 13,708
Minority interest............................... 383 -- -- 383
------------- ------------- ------------- -------------
Income before extraordinary loss.......... $ 7,073 $ 11,412 $ 1,898 $ 20,383
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30, 1998
-----------------------------------------------------------------
Canadian Medical Waste SITA BFI
Operations Operations Investment Dispositions
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues......................................... $ 172,457 $ 197,650 $ -- $ 370,107
Cost of operations............................... 109,147 119,266 -- 228,413
Selling, general and administrative expenses 19,122 23,718 -- 42,840
Depreciation and amortization.................... 15,196 11,285 -- 26,481
Goodwill amortization............................ 1,197 2,731 -- 3,928
Acquisition related and unusual costs............ -- 257 -- 257
------------- -------------- ------------- --------------
Operating income............................. 27,795 40,393 -- 68,188
Interest income.................................. (560) -- -- (560)
Interest expense................................. -- 408 -- 408
Equity in earnings of unconsolidated affiliates -- -- (7,846) (7,846)
------------- -------------- ------------- --------------
Income before taxes and extraordinary
loss..................................... 28,355 39,985 7,846 76,186
Income taxes..................................... 12,760 15,994 -- 28,754
------------- -------------- -------------- --------------
Income before extraordinary loss............. $ 15,595 $ 23,991 $ 7,846 $ 47,432
============= ============== ============= ==============
<FN>
As discussed in note 2 to the BFI consolidated financial statements as
previously filed on Form 8-K, dated July 19, 1999, there is no impact to the
historical statement of operations for the divestiture of certain assets of BFI
Gas Services, Inc. for the periods presented as the net cash flows from methane
gas recovery activities at closed landfills were considered a component of
closure and post-closure costs.
</FN>
</TABLE>
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(unaudited)
5. Net Income (Loss) Before Extraordinary Loss Per Common Share
Pro forma net income (loss) per common share is calculated by dividing pro forma
net income (loss) to common shareholders before extraordinary loss less
requirements on the 6.5% senior convertible preferred stock by the pro forma
weighted average common and common equivalent shares outstanding during the
period. Pro forma weighted average common and common equivalent shares have been
computed as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
------------------------ -------------------------
Basic Diluted Basic Diluted
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Historical weighted average common shares............. 186,424 186,424 182,796 182,796
Common stock equivalents -
Stock options and warrants.................... N/A -- N/A --
Pro forma effect of issuing the
6.5% senior convertible preferred stock...... N/A -- N/A --
Pro forma effect of issuing stock dividends
on the 6.5% senior convertible preferred stock N/A -- N/A --
========== ========= ========== ==========
186,424 186,424 182,796 182,796
========== ========= ========== ==========
<FN>
Conversion has not been assumed for stock options and warrants and the 6.5%
senior convertible preferred stock in the diluted earnings per share calculation
as the effect would not be dilutive.
</FN>
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant, Allied Waste Industries, Inc., has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By: /s/PETER S. HATHAWAY
---------------------------------------------
Peter S. Hathaway
Vice President & Chief Accounting Officer
Date: September 14, 1999
