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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE 1993 FISCAL YEAR ENDED JAN. 1, 1994
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8513
SAFETY-KLEEN(R) CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN 39-6090019
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 NORTH RANDALL ROAD,ELGIN, ILLINOIS 60123
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (708) 697-8460
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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<S> <C>
Common Stock, $.10 Par Value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 1, 1994 was approximately $0.7 billion.
Shares of Common Stock outstanding at March 1, 1994, were 57,683,756.
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT TO BE FILED ON OR BEFORE MARCH
31, 1994, FOR THE ANNUAL MEETING TO BE HELD ON MAY 13, 1994, ARE INCORPORATED
BY REFERENCE IN PART III AND THE ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED JANUARY 1, 1994, ARE INCORPORATED BY REFERENCE IN PARTS I AND II.
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PART I
ITEM 1. BUSINESS
GENERAL
Safety-Kleen Corp. is a leading provider of services to generators of waste
solvents and other hazardous and non-hazardous liquid wastes and the world's
largest provider of Parts Cleaner Services. Safety-Kleen Corp. was incorporated
in July, 1963 under the laws of the State of Wisconsin. As used herein, the
term "Company" includes Safety-Kleen Corp. and its consolidated subsidiaries.
The Company and its licensees serve nearly 500,000 customers worldwide, through
a network of 262 branch facilities.
In addition to its continental U.S. operations, the Company operates in
Canada, the United Kingdom, the Republic of Ireland, Puerto Rico, Belgium,
France, Italy, Spain and Germany through wholly-owned subsidiaries. The Company
has licensee operations in Israel, Japan, and Korea.
The Company groups its services into three broad categories: Small Quantity
Generator ("SQG") Resource Recovery Services; Envirosystems Services; and Oil
Recovery Services. Each of the Company's services is discussed in greater
detail below.
SQG RESOURCE RECOVERY SERVICES
The Company's SQG Resource Recovery Services are divided into
Automotive/Retail Repair Services, Industrial Services, Paint Refinishing
Services and Dry Cleaner Services. Solvent recycling is an integral part of the
Company's SQG Resource Recovery Services. Substantially all fluid wastes
collected by the Company as part of these services are either recycled for re-
use in these services or processed into waste-derived fuel for use in the
cement manufacturing industry.
AUTOMOTIVE/RETAIL REPAIR SERVICES. Businesses such as service stations, car
and truck dealers, small engine repair shops and fleet maintenance shops
regularly need to clean and degrease small parts. The Company's
Automotive/Retail Repair Parts Cleaner Service enables businesses to clean
parts in a convenient, cost effective, safe and environmentally sound manner.
In this service, the Company's service representative places parts cleaner
equipment and solvent with a customer, and, at regular service intervals,
cleans and maintains the equipment, delivers clean solvent for use in the
degreasing process, and removes the dirty solvent.
INDUSTRIAL SERVICES. The Company markets both Parts Cleaner Services and its
Fluid Recovery Services to industrial customers in the U.S. through its
Industrial Services specialists. The Company's Fluid Recovery Service consists
of the collection of a wide variety of waste solvents and other liquid wastes
generated by industrial customers in relatively small quantities, averaging a
few 55-gallon drums per pickup. Depending upon the content, the material
collected by the Company in its Fluid Recovery Service is either processed into
a waste-derived fuel for use in the cement manufacturing industry, recycled
into usable solvent or disposed of through incineration.
AUTOMOTIVE AND INDUSTRIAL PARTS CLEANING EQUIPMENT CONVERSION. The Company
provides a choice of several models of parts cleaners to customers for their
use as part of the Parts Cleaner Service. The Company also provides service to
customers who own their own parts cleaner equipment. In total, at the end of
1993, the Company was providing services for approximately 469,000 parts
cleaners at customers in the United States, of which approximately 365,000 were
owned by the Company and approximately 104,000 were owned by customers.
The most prevalent models of parts cleaners furnished by the Company are
designated Models 16 and 30. They consist of a sink atop a 16-gallon or 30-
gallon drum of solvent, equipped with a
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submersible pump and a spout through which the solvent flows. The Company had
approximately 247,000 of these units in service at customers at the end of
1993, out of the total 365,000 Company-owned units in service in the United
States.
As a result of customer desires to minimize the amount of waste generated and
reduce annual costs, the Company developed new parts cleaner models which
accomplish these objectives and can replace the current Models 16 and 30. The
new models contain a built in cyclonic separator, which separates dirt
particles from the solvent during use, thus extending the useful life of the
solvent.
In 1993 the Company made the decision to convert its Model 16 and Model 30
parts cleaners, supplied to domestic Automotive/Retail Repair and Industrial
Services customers, to the new cyclonic separator technology. The separator
technology is expected to lower the customers' volume of waste generated,
reduce the number of service visits and lower the costs to the Company and its
customers. The Company expects to convert a large portion of its current
domestic parts cleaner service customers to the new parts cleaner service over
the next two years.
In conjunction with the Company's decision to convert its parts cleaning
equipment, the Company adopted a comprehensive restructuring plan. For a
discussion of this restructuring plan, refer to "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Restructuring and
Special Charges" appearing on page 26 of the Annual Report to Shareholders for
the year ended January 1, 1994 (the "Annual Report"), which is incorporated
herein by reference.
PAINT REFINISHING SERVICES. The Company's Paint Refinishing Services are
supplied to new and used car dealers, auto body repair and paint shops and
fiberglass product manufacturers. The Company provides a machine specially
designed to clean paint spray guns. Company representatives place a machine and
solvent with each customer, maintain the machine and regularly remove the
contaminated solvent and replace it with clean solvent. Waste paint is also
collected from these customers. The Company either recycles the contaminated
solvent and waste paint into clean solvent for reuse or blends it into fuel for
cement kilns. The Company representatives also provide clean buffing pads and
remove dirty pads during regularly scheduled service calls. The dirty pads are
washed, dried, inspected and returned to the Company's distribution system.
DRY CLEANER SERVICES. The Company collects and recycles contaminated dry
cleaner wastes consisting primarily of used filter cartridges and sludge
containing perchloroethylene and mineral spirits.
ENVIROSYSTEMS SERVICE
The Company's Envirosystems Service consists of the collection of waste
solvent and other waste fluids from customers which generate larger quantities
of such waste fluids. The fluids are typically shipped directly from the
customer to one of the Company's recycle centers or fuel blending facilities.
Depending on the content, material collected by the Envirosystems Service is
recycled into usable solvents, processed into fuels for use in the cement
manufacturing industry or disposed of through incineration.
OIL RECOVERY SERVICES
The Company collects used lubricating oils from automobile and truck dealers,
automotive garages, oil change outlets, service stations, industrial plants and
other businesses and either re-refines the oil into reusable lubricating oil or
processes it into fuel for use in industrial furnaces. The Company derives
revenues both from fees it charges customers to haul away used oil and from the
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sale of products it produces by processing the used oil. The Company's
extensive branch network enables it to collect waste oil in sufficient volume
to support oil re-refining operations, which produce lubricating oil that can
be sold at significantly higher prices than industrial fuels. The Company
operates oil re-refining plants in Ontario, Canada and East Chicago, Indiana.
The plant in Ontario has an annual capacity of 34 million gallons of used oil
per year. The East Chicago re-refinery started production in May, 1991, with an
initial capacity of 50 million gallons of used oil per year. The East Chicago
re-refinery's capacity was expanded in 1992 and 1993 to its current capacity of
85 million gallons per year. Waste oil collected in excess of the capacity of
the Company's re-refining facilities is either processed into industrial fuels
or, to a small extent, sold unprocessed for direct use as a fuel in certain
industrial applications for which such oil is suitable.
EUROPE
In 1990, the Company adopted a strategy to develop its SQG Resource Recovery
and Envirosystems Services business in Europe directly to the extent it is
practicable to do so. During 1990 and 1992 the Company made a series of
acquisitions which included Germany's largest solvent recycler, two German
parts cleaner service companies, and the interests of its joint venture
partners in the French, Belgian, Italian and Spanish parts cleaner operations.
The Company primarily provides the Automotive/Retail Repair and Paint
Refinishing services in Europe. The Company's German operations also offer the
Envirosystems recycling service. The Company will be introducing its Fluid
Recovery Services in the United Kingdom during 1994.
PRIMARY RAW MATERIALS
The primary hydrocarbon material used in the Company's Parts Cleaner Service
is a middle distillate naphtha product and is purchased from petroleum refiners
and suppliers through short-term purchase orders. It is not possible for the
Company to accurately estimate the effect of possible future petroleum product
shortages on the Company's operations or those of its customers. At the present
time, the Company expects to be able to purchase required quantities of such
solvent at acceptable prices. For a discussion of the effect of petroleum
product price changes, refer to "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Effects of Petroleum Product
Price Changes", appearing on page 23 of the Annual Report, which is
incorporated herein by reference.
The Company purchases a wide variety of other products and raw materials and
has not experienced any major shortages in the past. The Company believes that
sufficient alternative sources are available should it become necessary to
replace its current sources of supply for these products and materials.
COMPETITIVE CONDITIONS
The Company is the market leader in the United States in its Parts Cleaner,
Paint Refinishing, Dry Cleaner and Oil Recovery services. In these services,
the Company generally competes with local or smaller regional companies. In its
Fluid Recovery Service, the Company generally competes with many firms engaged
in the transportation, brokerage and/or disposal of hazardous wastes through
recycling, fuels programs or incineration. In its Envirosystems Services, the
Company competes with many recyclers of spent solvents, as well as many firms
engaged in hazardous waste disposal through fuels programs or incineration.
The principal methods of competition for all of the Company's services are
price, quality, reliability of service rendered and technical proficiency in
handling hazardous wastes properly. Knowledgeable customers are interested in
the reputation and financial strength of the companies
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they use for management of their hazardous wastes, since the original
generators of hazardous waste remain liable under federal and state
environmental laws for improper disposal of such wastes, even if they employ
companies which have proper permits and licenses. The Company believes that its
reputation and financial strength are important considerations to its customers
in selecting and continuing to utilize the Company's services.
PATENTS
The Company owns unexpired patents covering three of its cleaning units and
certain related accessories. The Company has an exclusive license to use a
patented cyclonic separator in parts cleaner applications. In the Company's
opinion, however, the continued conduct of its business operations does not
depend upon the existence of these patents.
EMPLOYEES
At January 1, 1994, the Company had approximately 6,600 employees.
REGULATION
Overview. Domestic and foreign governmental regulations applicable to the
Company's business govern, among other things: the handling of a number of
substances collected by the Company which are classified as hazardous wastes
under these regulations; the operation of the facilities at which the Company
stores or processes the substances it collects; and the ultimate disposal of
waste the Company removes from the substances it collects.
Operating permits are generally required by federal and state environmental
agencies for the Company's branch, accumulation center, solvent recycling, fuel
blending and oil processing facilities. Most of these permits must be renewed
periodically and the governmental authorities involved have the power, under
various circumstances, to revoke, modify or deny issuance or renewal of these
permits. Zoning, land use and siting restrictions also apply to these
facilities. Regulations also govern matters such as the disposal of residual
chemical wastes, operating procedures, stormwater and wastewater discharges,
fire protection, worker and community right-to-know and emergency response
plans. Air and water pollution regulations govern certain operations at the
Company's facilities. Safety standards under the Occupational Safety and Health
Act in the United States and similar foreign laws are also applicable.
Governmental regulations also apply to the operation of vehicles used by the
Company to transport the substances it collects and distributes, including
licensing requirements for the vehicles and the drivers, vehicle safety
requirements, vehicle weight limitations, shipment manifesting and vehicle
placarding requirements. Governmental authorities have the power to enforce
compliance and violators are subject to civil and criminal penalties. Private
individuals may also have the right to sue to enforce compliance with certain
of the governmental requirements. Similar regulations apply to the Company's
Canadian operations.
In general, environmental requirements are not as strict in countries in
which the Company operates outside North America, but there is a general trend
in Europe and other countries to strengthen environmental requirements. An
increase in governmental requirements for the treatment of any particular
material increases the value to the customer of the Company's capability to
treat the material in an environmentally responsible manner.
The Company has an internal staff of lawyers, engineers, geologists,
hydrogeologists, chemists and safety professionals whose responsibility is to
monitor the Company's compliance with various federal, state and local laws and
regulations involving the protection of the environment and worker health and
safety.
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RCRA Requirements
The Resource Conservation and Recovery Act of 1976 ("RCRA") established a
national program which classified various substances as "hazardous wastes",
established requirements for storage, treatment and disposal of hazardous
wastes, and imposed requirements for facilities used to store, treat or dispose
of such wastes. RCRA was amended in 1984 by the Hazardous and Solid Waste
Amendments ("HSWA") which expanded the scope of RCRA to include businesses
which generate smaller quantities of waste materials (so-called "small quantity
generators"), expanded the substances classified as hazardous wastes by RCRA
and prohibited direct disposal of those wastes in landfills (thereby, in
effect, requiring that the wastes be recycled, treated, or destroyed). With the
exception of used oil and antifreeze, most substances collected by the Company
from its customers are classified as hazardous wastes under RCRA. A major
component of the service the Company provides is to assist customers in
managing their wastes in compliance with applicable governmental requirements.
RCRA imposes requirements which must be met by facilities used to store,
treat and dispose of hazardous wastes. Operators of waste storage, disposal and
treatment facilities must obtain a permit from federal or authorized state
governmental authorities to be able to continue to operate those facilities.
The Company submitted all required permit applications for full operating
permits in advance of the federally-imposed permit application deadline in
November, 1988. These applications cover the Company's branches, accumulation
centers, solvent recycling and fuel blending facilities. More than half of
these permits have been issued. The Company has obtained interim permitted
status or other authorization by federal or state authorities for its remaining
storage, recycling and fuel blending facilities which allows it to continue to
operate those facilities until final action is taken on the Company's pending
permit applications. The Company will not pursue final permits for some of its
facilities, in which case the Company will be able to continue its operations,
in accordance with governmental requirements, by limiting the activities at
these facilities to transfer operations.
In September, 1992, the United States Environmental Protection Agency ("EPA")
finalized regulations that govern the management of used oils. Used oil is
classified as a hazardous waste under certain state laws, although it is not so
classified under federal law. The Company builds and operates its used oil
facilities to standards similar to those required for hazardous waste
facilities, and believes that its oil management standards are more protective
of human health and the environment than current federal standards.
Most of the fluids collected by the Company's Envirosystems and Fluid
Recovery Services are processed into fuel to be burned in kilns used in the
production of cement. The majority of this waste-derived fuel is supplied to
cement kilns with which the Company has exclusive supply contracts with respect
to such fuel. In August, 1991, these cement kilns became subject to regulations
which govern the burning of hazardous wastes in boilers and industrial furnaces
("BIF"). Facilities covered by the BIF regulations were required to submit
certifications of compliance by August 1, 1992 or to obtain approvals from the
relevant governmental authority to extend the deadline for submission of
certification. Every BIF facility that elects to continue to burn hazardous
waste will also be required to obtain a RCRA operating permit. All of the kilns
with which the Company has exclusive supply contracts have either obtained
their compliance certifications or are in the process of doing so pursuant to
an authorized extension.
In May, 1993, U.S. EPA Administrator Carol Browner announced an initiative to
bring BIF facilities under the control of facility-specific permits. In this
announcement, the EPA made it clear that facilities awaiting permits under the
BIF regulations, such as cement kilns, would be among the
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first priorities to be permitted. This permitting initiative will involve
tighter scrutiny of these kilns and may require more stringent performance
standards. It is possible that data generated during the permit process in 1994
may provide sufficient information for decisions to be made regarding continued
use of hazardous waste-derived fuels by certain cement kilns in the U.S. It is,
therefore, anticipated that a certain percentage of the cement kilns presently
burning hazardous waste derived fuels will need to make significant investments
to achieve permit compliance or may decide to cease the practice of using these
fuels.
None of the kilns utilized by the Company for disposition of the waste it
collects are owned by the Company, and the kiln operators are primarily
responsible for compliance with the new regulations; however, the Company is
taking an active role in assisting the kilns with which it has exclusive
contracts in complying with such regulations. For a discussion of the impact of
the BIF regulations on the Company's results and operations, refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 22 of the Annual Report.
Clean Air Act
The Clean Air Act (CAA) was passed by Congress to control the emissions of
pollutants to the air, and requires permits to be obtained for certain sources.
In 1990, Congress amended the Clean Air Act (the "Clean Air Act Amendments" or
the "CAAAs") to require further reductions of air pollutants with specific
targets for nonattainment areas in order to meet certain ambient air quality
standards. In addition, the CAAAs require the EPA to promulgate regulations
which (i) control emissions of 189 toxic air pollutants; (ii) create uniform
operating permits for major industrial facilities similar to RCRA operating
permits; (iii) mandate the phase-out of ozone depleting chemicals; and (iv)
provide for enhanced enforcement. The Company is preparing the information
necessary to apply for operating permits for those facilities which require
such permits.
In order to meet certain ozone attainment standards, states are required to
promulgate regulations which will result in the reduction of volatile organic
compound (VOC) emissions by 15% by 1996. This will require emission reductions
at the Company's recycle centers and branches and could affect its solvents
used in nonattainment areas. The Company is working with the EPA and
appropriate state and local agencies regarding the regulation of its parts
cleaner and paint spray gun cleaner operations.
Furthermore, for new vehicles purchased after 1998, the Company will be
required to purchase a certain percentage of clean-fuel-burning vehicles
operated in nonattainment areas. The Company will also be required to implement
Employee Commute Reduction Plans, by providing car and van pooling, in non-
attainment areas where the Company has more than 100 employees.
Regulatory Fees and Taxes
State and local authorities are increasingly adopting legislation and
regulations which impose various taxes, assessments and fees upon the
generators, transporters and handlers of waste and hazardous waste. The Company
may or may not be able to pass on such taxes and fees to its customers through
price increases, depending on competitive alternatives.
CERCLA and Related Requirements
The Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA") was originally enacted in December, 1980, and amended in 1986
by the Superfund Amendments and Reauthorization Act ("SARA"). Federal funding
for the CERCLA program was reauthorized in 1990. CERCLA creates a fund of
monies ("Superfund") which can be used by the EPA and state governments to
clean up hazardous waste sites pending recovery of those costs from
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defined categories of "potentially responsible parties" ("PRPs"). Most EPA
cleanup efforts are at sites listed or proposed for listing on the National
Priorities List ("NPL"). Various states have also enacted statutes which
contain provisions substantially similar to CERCLA.
Generators and transporters of hazardous substances, as well as past and
present owners and operators of hazardous release sites, are made strictly,
jointly and severally liable for the clean-up costs with respect to releases
and threatened releases of CERCLA-regulated "hazardous substances." Under
CERCLA, these responsible parties can be ordered to perform a clean-up, can be
sued for costs associated with private party or public agency clean-up, or can
voluntarily settle with the government concerning their liability for clean-up
costs.
A large portion of the materials collected by the Company are recycled or
converted into materials, such as industrial fuels, which may be used for
another purpose. The amount of material that the Company deposits at waste
sites is accordingly small in relation to the volume of materials collected by
the Company and the Company is actively engaged in a waste minimization program
to reduce this small amount even further.
Most of the Company's potential CERCLA responsibilities stem from certain
historic disposal practices in the 1970's. These practices were stopped in the
mid-to-late 1970's with the development of expanded recycling technology. The
Company has been a relatively small contributor in most waste disposal sites
utilized by the Company.
Proceedings are currently pending involving several sites with respect to
which the Company has been notified by the EPA or the appropriate state agency
that the Company may be a PRP. The Company is participating in settlement
discussions with the parties and the government at these sites. The Company's
volumetric share of the total waste at a majority of these sites is among the
smallest of the PRPs and the Company has a larger volumetric share at a
minority of these sites. Management does not believe that its ultimate
liability at the sites will be material to its financial condition, based on
the current proposals for remediation, the identification of other companies as
contributors of waste to these sites and the Company's volumetric share of the
total waste at these sites. The EPA has requested information from the Company
to ascertain if it may be a PRP at several other sites, but the Company has no
record of having dealings with any of these other sites. The Company has
already settled its liability at fourteen superfund sites.
Capital and Certain Other Expenditures Related to the Environment
A portion of the capital expenditures of the Company are, directly or
indirectly, related to protection of the environment and the prevention of
discharge of waste materials into the environment. Estimated capital
expenditures relating to compliance with current environmental laws and
regulations in the Company's existing business approximate $4 million for the
year 1994 and $10 million in the aggregate, for the years 1995 through 1998.
The Company implemented a plan in 1988 to relocate many of its U.S. branch
facilities over the succeeding five years and to remove most of the underground
storage tanks at its facilities, including the removal of single-wall
underground storage tanks at substantially all branches that had such tanks.
The plan has been substantially completed. The Company believes that moving to
above-ground storage or double-wall underground storage tanks will reduce the
possibility that the Company's ongoing operations will cause soil or
groundwater contamination.
When the Company discontinues using or, in certain cases, changes the use of
a hazardous waste management unit, formal closure procedures must be followed.
These closure procedures must be approved by federal or state environmental
authorities. In some cases, costs are incurred to complete remedial cleanup
work at the site. In addition, at certain of the Company's other operating
sites, remedial cleanup work is required as part of the RCRA Corrective Action
Program or other state and federal programs. As more fully described in Note 9
to the Consolidated Financial Statements appearing on pages 38 and 39 of the
Annual Report, the Company has accrued liabilities of
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approximately $67 million as of January 1, 1994 for facility closures, remedial
cleanup work, superfund site liability and certain other environmental expenses
related to all operating and previously closed sites.
Enforcement Actions
The Company's goal is to fully comply with all environmental regulations and
other governmental requirements. The Company has instituted several programs to
enhance compliance, including suspending site operations if appropriate
corrective actions are not taken to remedy potential defects, and the creation
of Compliance Commitment Teams at each branch. These teams perform local
inspections and training, and are designed to develop and improve a local
site's capacity to manage and improve its own environmental operations. The
Company also regularly conducts corporate training courses and seminars focused
on environmental control and safety regulations, in addition to on-going weekly
field training for its site employees.
In spite of the Company's goal to fully comply with all environmental
regulations, from time to time it is likely that the nature of the Company's
business will cause it to incur governmental fines and penalties as a
consequence of its business operations. In the majority of situations where
proceedings are commenced by governmental authorities, the matters involved
relate to alleged technical violations of permits or orders under which the
Company operates, or laws and regulations to which its operations are subject,
and are the result of varying interpretations of the applicable requirements.
Generally, these proceedings result from routine inspections conducted by
federal and state regulatory agencies. In 1991, throughout its United States
facilities, 201 regulatory proceedings were brought by state or federal
authorities against the Company. In 1992, this number was reduced by 29% to
142. This number was reduced again in 1993 to 136. Administrative actions
received by the Company are counted in the year received, regardless of when
the original inspection was conducted. A number of the proceedings brought in
1993 resulted from inspections performed in previous years. Of these
administrative actions in 1993, approximately 27% of the alleged deficiencies
related to incomplete or incorrect paperwork such as labeling, manifesting and
other shipping documents. Alleged defects in site operating records, training
record keeping and other site paperwork accounted for an additional 26% of
these allegations. The Company processed over one million manifests and
completed several million individual drum labels in 1993. Throughout its
facility network, the Company maintains over 200 sets of operating records and
logs in which millions of individual entries are made annually. A clerical
error on a manifest, drum label or site paperwork can result in a violation
notice.
From time to time, the Company becomes subject to claims which allege more
than technical violations or in which the claimant seeks remedies which involve
potentially higher costs than routine technical violation claims. These claims
can be brought by either governmental authorities or private claimants. The
relief sought can involve remediation of the alleged environmental damage,
payment of damages, and (in the case of claims brought by governmental
authorities), fines and penalties.
In some cases of this type, governmental authorities may seek fines and/or
penalties from the Company which exceed $100,000 in each case. Ten such
proceedings were pending against the Company at January 1, 1994. In these
cases, the governmental authorities may allege, among other things, that at
certain of the Company's facilities, the Company is responsible for releases or
threatened releases of hazardous substances, that the Company engaged in soil
excavation or clean-up activities without obtaining requisite advance approvals
and/or that the Company committed certain manifesting, storage and waste
handling violations.
The Company's practice is to attempt to negotiate resolution of claims
against the Company and its facilities. The Company has to date been able to
resolve cases on generally satisfactory terms.
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The Company is, however, prepared to contest claims or remedies which the
Company believes to be inappropriate unless and until satisfactory settlement
terms can be agreed upon. The Company paid approximately $1 million in 1993 for
environmental fines and penalties.
Based on its past experience and its knowledge of pending cases, the Company
believes it is unlikely that the Company's actual liability on the cases now
pending will be materially adverse to the Company's financial condition. It
should be noted, however, that many environmental laws are written in a way in
which the Company's potential liability can be large, and it is always possible
that the Company's actual liability on any particular environmental claim will
prove to be larger than anticipated by the Company. It is also possible that
expenses incurred in any particular reporting period for remediation costs or
for fines, penalties, or judgments could have a material impact on the
Company's earnings for that period.
FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS AND INDUSTRY
SEGMENTS
The Company operates primarily in one business segment-providing generators
of hazardous and non-hazardous liquid wastes with liquid recovery services. For
a discussion of financial information relating to foreign and domestic
operations and industry segments refer to Note 3 to the Consolidated Financial
Statements appearing on pages 32 and 33 of the Annual Report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are:
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NAME AGE POSITION
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<S> <C> <C>
Donald W. 63 Chairman, Chief Executive Officer and Director
Brinckman
John G. 53 President, Chief Operating Officer and Director
Johnson
Jr.
Hyman K. 39 Senior Vice President General Counsel
Bielsky
Robert J. 56 Senior Vice President Human Resources
Burian
Michael H. 46 Senior Vice President Marketing
Carney
Glenn R. 36 Vice President Engineering
Casbourne
Joseph 48 Senior Vice President Processing, Engineering and Oil Recovery
Chalhoub
David A. 53 Senior Vice President North American Sales and Service
Dattilo
Scott E. 39 Senior Vice President Environment, Health and Safety
Fore
F. Henry 40 Senior Vice President Strategic/Environmental Planning
Habicht
William P. 51 Senior Vice President Operations and Information
Kasko
Wallace K. 54 Vice President Information Systems
Louder
Clark J. 56 Vice President Technical Services
Rose
Robert W. 46 Senior Vice President Finance and Secretary
Willmschen
Jr.
Laurence M. 48 Treasurer
Rudnick
John 47 Controller
Rycombel
</TABLE>
Mr. Brinckman has been Chief Executive Officer of the Company since 1968. He
served as President of the Company from 1968 to August, 1990, and December,
1991 to May, 1993. Mr Brinckman was elected Chairman of the Company's Board of
Directors in August, 1990. Mr. Brinckman is also a director of Johnson
Worldwide Associates, Inc., Racine, Wisconsin, Paychex, Inc., Rochester, New
York and Snap-On Tools Corporation, Kenosha, Wisconsin. Mr. Brinckman is
Chairman of the Executive Committee.
9
<PAGE>
Mr. Johnson joined the Company in January, 1993, as Assistant to the
Chairman/CEO and was elected President, Chief Operating Officer and Director in
May, 1993. Prior to joining the Company, he served as Senior Vice President
since 1985 and Director of ARCO Chemical Company and President of ARCO Chemical
Americas, a division of ARCO Chemical Company, since 1987.
Mr. Bielsky was elected Senior Vice President General Counsel in May, 1993.
Mr. Bielsky served as Assistant General Counsel-Commercial since January, 1990,
and as Associate Counsel since joining the Company in 1987.
Mr. Burian was appointed Senior Vice President Human Resources in May, 1993.
He served as Senior Vice President Administration since August, 1990. Mr.
Burian joined the Company in July, 1986, as Vice President Personnel.
Mr. Carney was elected Senior Vice President Marketing in August, 1990. He
served as Vice President Marketing since May, 1987. He joined the Company in
1976, serving in various marketing positions until his appointment to Vice
President Marketing.
Mr. Casbourne was named Vice President Engineering in August, 1991. He served
as Vice President Engineering for the Oil Recovery Division since January,
1990. Prior to this, he served in various engineering capacities in the
Company's Oil Recovery Division and its predecessor, Breslube Enterprises,
since 1987.
Mr. Chalhoub was elected Senior Vice President, Oil Recovery Division in
August, 1990. In August, 1991, Mr. Chalhoub was assigned the additional
responsibilities of overseeing the processing and engineering departments. He
served as Vice President Oil Recovery Division since February, 1990. He has
served as President of the Company's former subsidiary, Breslube Holding Corp.,
since May, 1987.
Mr. Dattilo was named Senior Vice President North American Sales and Service
in August, 1990. He served as Vice President Corporate Branch Sales and Service
since January, 1980.
Mr. Fore was elected Senior Vice President Environment, Health and Safety in
May, 1993. He served as Vice President Environment, Health and Safety since
August, 1987, and was previously Associate General Counsel since joining the
Company in 1985.
Mr. Habicht joined the Company in March, 1993, as Senior Vice President, and
in May, 1993, he was elected Senior Vice President Strategic/Environmental
Planning. Prior to joining the Company, he served as Deputy Administrator of
the U.S. Environmental Protection Agency from 1989 to 1992. From 1987 to 1989
Mr. Habicht was Vice President of William D. Ruckelshaus Associates, an
environmental consulting firm.
Mr. Kasko was elected Senior Vice President Operations and Information in
August, 1990. He previously served as Vice President Operations since 1981.
Mr. Louder was named Vice President Information Systems in May, 1983, after
serving as Information Systems Manager since joining the Company in July, 1981.
Mr. Rose was named Vice President Technical Services in August, 1989, after
serving as Manager of Recycle Center Operations since joining the Company in
June, 1984.
Mr. Willmschen was named Senior Vice President Finance in August, 1990. He
served as Vice President Finance and Secretary since February, 1982.
10
<PAGE>
Mr. Rudnick joined the Company in September, 1979, and was appointed
Treasurer in January, 1980.
Mr. Rycombel was named Controller in September, 1990. Previously, he served
as Assistant Controller since 1981.
ITEM 2. PROPERTIES
The Company owns 13 solvent recycling plants in the U.S., Puerto Rico, the
United Kingdom and Germany. In total, these plants have an annual recycling
capacity of 70 million gallons of parts cleaner solvents and 45 million gallons
of halogenated, fluorinated and flammable solvents. The total storage capacity
of these plants is approximately 10 million gallons. In addition, the Company
owns 3 fuel blending facilities, located on leased land, which have combined
storage capacity of approximately 2.4 million gallons.
The Company owns 2 oil re-refining plants with a combined annual re-refining
capacity of 119 million gallons. These plants are located in Ontario, Canada
and East Chicago, Indiana.
The Company leases 5 distribution facilities and owns 3 distribution
facilities in the U.S., United Kingdom and Germany, averaging approximately
45,000 square feet. The Company has 18 accumulation centers across the U.S. Of
these, 12 are owned and 6 are leased. A typical accumulation center is
approximately 8,000 square feet. These centers serve branches by collecting
drums of waste from the Fluid Recovery Service, Dry Cleaner Service, Paint
Refinishing Service and other small quantity generator services. As truck load
quantities are collected, they are transported from the accumulation centers to
the recycling plants.
In North America, Germany, France, Belgium, Italy, Spain, the Republic of
Ireland and the United Kingdom, the Company's sales and service representatives
operate out of 248 branch facilities. Of these, approximately 50% are leased
and 50% are owned. A typical branch is approximately 8,000 square feet.
The Company owns a 106,000 square foot plant in New Berlin, Wisconsin, where
parts cleaner machines and buffing pads are manufactured.
The Company and its subsidiaries operate approximately 2,600 van-type
vehicles, 240 straight tanker-type service vehicles, 520 pieces of over-the-
road equipment and 350 branch management vehicles, substantially all of which
are owned. The Company also leases approximately 350 railroad tanker cars.
The Company owns a 285,000 square foot corporate headquarters building
located in Elgin, Illinois and a 66,000 square foot Technical Center located in
Elk Grove Village, Illinois. The Company also owns a 128,000 square foot office
building located in Elgin, Illinois, which is being marketed for sale or lease.
ITEM 3. LEGAL PROCEEDINGS
The Company and certain of its officers and directors were named as
defendants in two lawsuits brought by individual shareholders. Both lawsuits
are currently pending in the United States District Court located in Chicago,
Illinois. In the first case, which was filed on August 7, 1992, plaintiffs
allege that defendants issued a series of public statements in press releases,
interviews, filings with the Securities and Exchange Commission and annual and
quarterly reports to shareholders that were misleading because they did not
include certain information concerning waste fluid storage problems in Puerto
Rico. In the second case, which was filed on December 18, 1992, plaintiffs
allege that
11
<PAGE>
defendants failed to make timely correction of overestimates of the Company's
earnings for the seventeen-week interim reporting period ended January 2, 1993
and that defendants are responsible for other alleged misstatements and
omissions.
These lawsuits have been consolidated for purposes of settlement. On March
14, 1994 the class representatives and defendants in the consolidated action
entered into a settlement agreement. The settlement is subject, among other
things, to court approval. Under the settlement agreement, the defendants have
denied all allegations of wrongdoing or liability, but have agreed to settle
the cases to avoid lengthy and time consuming litigation and the burden,
inconvenience and expense associated with continuing the litigation.
The agreement provides for the payment of $3.575 million for the settlement
of all class claims, notice expenses, fees and expenses of plaintiffs' counsel
and other administrative fees and expenses related to the settlement. The
Company's insurance carrier has agreed to pay the majority of this settlement.
The remainder will be paid by the Company.
Reference is made to "Item 1. Business," subcaption "Regulation," for
information concerning certain environmental matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
interim period of the fiscal year ended January 1, 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The "Market and Dividend Information" appearing on page 41 of the Annual
Report is incorporated herein by reference in response to information required
by Item 5.
ITEM 6. SELECTED FINANCIAL DATA
The "Selected Financial Data" appearing on page 27 of the Annual Report is
incorporated herein by reference in response to information required by Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages 22 to 27 of the Annual Report is incorporated
herein by reference in response to information required by Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Independent Public Accountants", Consolidated Financial
Statements and "Notes to Consolidated Financial Statements" appearing on pages
28 to 39 of the Annual Report are incorporated herein by reference in response
to information required by Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 with respect to executive officers is set
forth in Part I, Item 1 of this Annual Report on Form 10-K. The information set
forth under the headings "PROPOSAL 1: ELECTION OF DIRECTORS" and "COMMON STOCK
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Company's
definitive proxy statement for the May 13, 1994 Annual Meeting of Shareholders
(the "Proxy Statement") is herein incorporated by reference in response to the
other information required by Item 10.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the heading "EXECUTIVE COMPENSATION" in the
Proxy Statement is herein incorporated by reference in response to Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the heading "COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement is herein
incorporated by reference in response to Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the headings "EXECUTIVE COMPENSATION",
"CERTAIN RELATIONSHIPS" and "DIRECTORS' COMMITTEES, MEETINGS AND COMPENSATION"
in the Proxy Statement is herein incorporated by reference in response to Item
13.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 14(a)1. List of Financial Statements.
The following consolidated financial statements of the Company included
on pages 28 to 39 of the Annual Report to Shareholders for the year
ended January 1, 1994 are incorporated by reference:
Consolidated Balance Sheets as of January 1, 1994 and January 2, 1993.
Consolidated Statements of Operations for the fiscal years ended
January 1, 1994, January 2, 1993 and December 28, 1991.
Consolidated Statements of Cash Flows for the fiscal years ended
January 1, 1994, January 2, 1993 and December 28, 1991.
Consolidated Statements of Shareholders' Equity for the fiscal years
ended January 1, 1994, January 2, 1993 and December 28, 1991.
Notes to Consolidated Financial Statements.
Item 14(a)2. Financial Statement Schedules.
The following Consolidated Financial Statement Schedules of Safety-
Kleen Corp. and Subsidiaries are included in response to Item 14(d):
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
Report of Independent Public Accountants............................. 18
Schedule V--Equipment at Customers and Property...................... 19
Schedule VI--Accumulated Depreciation of Equipment at Customers and
Property............................................................. 20
Schedule VIII--Allowance for Doubtful Accounts....................... 21
Schedule X--Supplementary Income Statement Information............... 22
</TABLE>
Schedules other than those listed above are omitted as the information
is not required or not applicable, or the required information is shown
in the financial statements or notes thereto.
Item 14(a)3. List of Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
3.1 Articles of Incorporation of the Registrant. (4)
3.2 By-Laws of the Registrant. (4)
3.3 Form of Rights Agreement, dated November 9, 1988, between
Safety-Kleen Corp. and the First National Bank of Chicago. (1)
4.1 Indenture Agreement dated August 15, 1989, between Safety-Kleen
Corp. and the Chase Manhattan Bank, executed in connection with
the Company's issuance and sale from time to time of up to $200
million aggregate principal amount of Debt Securities. (2)
4.2 Board of Directors' Resolution executed in connection with the
issuance and sale of $100 million aggregate principal amount of
9.25% Senior Notes due September 15, 1999. (2)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
4.3 Board of Directors' Resolution executed in connection with the
future issuance and sale of up to $100 million aggregate
principal amount of Series A Medium Term Notes. (2)
10.1 Safety-Kleen Management Incentive Plan.*
10.2 Employment Contract dated February 5, 1988, as amended August
16, 1988, between Donald W. Brinckman (Chairman of the Board)
and Safety-Kleen
Corp. (1)
10.3 Employment Agreement and Addendum to Severance Agreement dated
January 11, 1993, between John G. Johnson, Jr. and Safety-Kleen
Corp.*
10.4 Safety-Kleen Corp. 1985 Stock Option Plan. (3)*
10.5 Form of Safety-Kleen Corp. Severance Agreement. (3)*
10.5.1 Schedule of Participants to Safety-Kleen Corp. Severance
Agreement.*
10.6 Safety-Kleen Corp. 1988 Non-Qualified Stock Option Plan for
Outside Directors. (1)*
10.7 Safety-Kleen Corp. 1993 Stock Option Plan. (5)*
10.8 Credit Agreement dated March 25, 1988, among the Chase Manhattan
Bank, N.A., The Northern Trust Company, the NBD Bank, N.A. and
the First National Bank of Chicago. (5)
10.8.1 First Amendment dated December 30, 1988, to Credit Agreement
dated March 25, 1988. (5)
10.8.2 Second Amendment dated March 22, 1991, to Credit Agreement dated
March 25, 1988. (5)
10.8.3 Third Amendment and Consent dated December 1, 1993, to Credit
Agreement dated March 25, 1988.
10.9 Credit Agreement dated March 20, 1992, among the Chase Manhattan
Bank, N.A., the Northern Trust Company, the NBD Bank, N.A. and
the First National Bank of Chicago. (5)
10.9.1 Amendment No. 1 and Consent dated December 1, 1993, to Credit
Agreement dated March 20, 1992.
10.10 Safety-Kleen Corp. Excess Benefit Plan. (5)*
13 Annual Report to Shareholders for the year ended January 1,
1994.
21 Subsidiaries of the Registrant. (3)
23 Consent of Experts.
</TABLE>
-------------------------
(1) Previously filed and incorporated herein by reference from
Registrant's Current Report on Form 8-K, dated November 10, 1988.
(2) Previously filed and incorporated herein by reference from
Registrant's Quarterly Report on Form 10-Q for the twelve weeks
ended September 9, 1989.
(3) Previously filed and incorporated herein by reference from
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990.
(4) Previously filed and incorporated herein by reference from
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 28, 1991.
15
<PAGE>
(5) Previously filed and incorporated herein by reference from
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993.
*Indicates each management or compensatory plan or arrangement
required to be filed as an exhibit to this form pursuant to Item
14(c) of this report.
(Copies of these exhibits can be obtained from the Company for its
reasonable out-of-pocket expense for furnishing such copies.)
Item 14(b). Reports on Form 8-K.
On December 15, 1993, the Company filed a current report on Form 8-K
with the Commission to disclose the details of its restructuring
plan.
16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Safety-Kleen Corp.
Date: March 25, 1994 By: /s/ Robert W. Willmschen, Jr.
- ------------------------------------- -------------------------------------
Senior Vice President Finance
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald W. Brinckman
- ------------------------------------
Donald W. Brinckman Chairman, Chief Executive
Officer, and Director March 25, 1994
/s/ John G. Johnson, Jr.
- ------------------------------------
John G. Johnson, Jr. President, Chief Operating
Officer and Director March 25, 1994
/s/ Robert W. Willmschen, Jr.
- ------------------------------------
Robert W. Willmschen, Jr. Senior Vice President
Finance, Chief Financial
Officer March 25, 1994
/s/ John Rycombel
- ------------------------------------
John Rycombel Controller, Chief Accounting
Officer March 25, 1994
- ------------------------------------
Kenneth L. Block Director
/s/ Richard T. Farmer
- ------------------------------------
Richard T. Farmer Director March 25, 1994
/s/ Russell A. Gwillim
- ------------------------------------
Russell A. Gwillim Director March 25, 1994
/s/ Edgar D. Jannotta
- ------------------------------------
Edgar D. Jannotta Director March 25, 1994
/s/ Karl G. Otzen
- ------------------------------------
Karl G. Otzen Director March 25, 1994
/s/ Paul D. Schrage
- ------------------------------------
Paul D. Schrage Director March 25, 1994
/s/ W. Gordon Wood
- ------------------------------------
W. Gordon Wood Director March 25, 1994
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Safety-Kleen Corp.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Safety-Kleen Corp. annual
report to shareholders incorporated by reference into this Form 10-K, and have
issued our report thereon dated February 10, 1994. Our report on the
consolidated financial statements includes an explanatory paragraph with
respect to the changes in the methods of accounting for post-retirement
benefits other than pensions and accounting for income taxes, effective
December 29, 1991, as discussed in Notes 7 and 8 to the consolidated financial
statements. Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Supplemental Schedules V, VI,
VIII and X are the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material
respects, the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN & CO.
Arthur Andersen & Co.
Chicago, Illinois,
February 10, 1994
18
<PAGE>
SCHEDULE V
SAFETY-KLEEN CORP. AND SUBSIDIARIES
EQUIPMENT AT CUSTOMERS AND PROPERTY
FOR THE THREE YEARS ENDED JANUARY 1, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCE
AT WRITEDOWN DUE BALANCE
BEGINNING ADDITIONS TO AT END
OF YEAR AT COST RETIREMENTS RESTRUCTURE(1) OTHER(2) OF YEAR
--------- --------- ----------- -------------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 28,
1991:
Equipment at
customers............ $ 94,534 $ 23,581 $ 9,123 -- $ 551 $109,543
======== ======== ======= ======= ======== ========
Land.................. $ 33,912 $ 6,758 $ 240 -- $ 704 $ 41,134
Building and
improvements......... 127,431 40,203 407 -- (2,297) 164,930
Leasehold
improvements......... 22,895 2,371 62 -- (334) 24,870
Machinery and
equipment............ 244,208 76,985 1,517 -- 835 320,511
Autos and trucks...... 110,126 31,764 4,644 -- (34) 137,212
-------- -------- ------- ------- -------- --------
$538,572 $158,081 $ 6,870 -- $ (1,126) $688,657
======== ======== ======= ======= ======== ========
Year ended January 2,
1993:
Equipment at
customers............ $109,543 $ 16,505 $ 9,906 -- $ (3,019) $113,123
======== ======== ======= ======= ======== ========
Land.................. $ 41,134 $ 4,814 $ 92 -- $ (1,041) $ 44,815
Building and
improvements......... 164,930 49,635 144 -- (3,467) 210,954
Leasehold
improvements......... 24,870 6,819 504 -- (1,236) 29,949
Machinery and
equipment............ 320,511 54,973 8,798 -- (6,803) 359,883
Autos and trucks...... 137,212 16,596 7,540 -- (3,313) 142,955
-------- -------- ------- ------- -------- --------
$688,657 $132,837 $17,078 -- $(15,860) $788,556
======== ======== ======= ======= ======== ========
Year ended January 1,
1994:
Equipment at
customers............ $113,123 $ 20,846 $13,794 $26,489 $ 262 $ 93,948
======== ======== ======= ======= ======== ========
Land.................. $ 44,815 $ 5,213 $ 2,044 $ 932 $ (401) $ 46,651
Building and
improvements......... 210,954 24,294 2,423 9,033 (711) 223,081
Leasehold
improvements......... 29,949 3,550 2,326 1,231 (668) 29,274
Machinery and
equipment............ 359,883 30,647 6,656 41,181 (699) 341,994
Autos and trucks...... 142,955 11,287 7,205 215 (632) 146,190
-------- -------- ------- ------- -------- --------
$788,556 $ 74,991 $20,654 $52,592 $ (3,111) $787,190
======== ======== ======= ======= ======== ========
</TABLE>
NOTES:
1. The Company implemented a restructuring plan during the fourth interim
period of the fiscal year ended January 1, 1994. For a further discussion
of the restructuring plan, refer to "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Restructuring and Special
Charges" on page 26 of the Annual Report.
2. "Other" in all years includes cumulative translation adjustments. Other,
for fiscal years ended December 28, 1991 and January 2, 1993, also includes
the reclassification of property from leasehold improvements to buildings
and improvements and machinery and equipment to reflect the Company's
purchase of previously leased facilities.
3. Depreciation is computed principally using the straight-line method.
Generally, the rates of depreciation are 2.5% for buildings and
improvements, 10.0% for leasehold improvements, and 5.0% to 33.3% for
machinery and equipment, and equipment at customers. Depreciation of autos
and trucks is computed using the straight-line and sum-of-years-digits
methods. Auto and truck lives range from four to ten years.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
19
<PAGE>
SCHEDULE VI
SAFETY-KLEEN CORP. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF EQUIPMENT AT CUSTOMERS AND PROPERTY
FOR THE THREE YEARS ENDED JANUARY 1, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED WRITEDOWN DUE BALANCE
BEGINNING TO COST & TO AT END
OF YEAR EXPENSE RETIREMENTS RESTRUCTURE(1) OTHER(2) OF YEAR
---------- --------- ----------- -------------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 28,
1991:
Equipment at
customers............ $ 31,372 $ 6,470 $ 7,678 -- $ 554 $ 30,718
======== ======= ======= ======= ======= ========
Building and
improvements......... $ 12,302 $ 5,998 $ 20 -- $ (729) $ 17,551
Leasehold
improvements......... 11,596 2,593 5 -- 813 14,997
Machinery and
equipment............ 54,164 19,795 419 -- (15) 73,525
Autos and trucks...... 45,493 16,379 4,615 -- 697 57,954
-------- ------- ------- ------- ------- --------
$123,555 $44,765 $ 5,059 -- $ 766 $164,027
======== ======= ======= ======= ======= ========
Year ended January 2,
1993:
Equipment at
customers............ $ 30,718 $10,920 $ 6,863 -- $(2,064) $ 32,711
======== ======= ======= ======= ======= ========
Building and
improvements......... $ 17,551 $ 6,266 $ 33 -- $(2,066) $ 21,718
Leasehold
improvements......... 14,997 3,364 308 -- 522 18,575
Machinery and
equipment............ 73,525 23,213 2,057 -- (3,401) 91,280
Autos and trucks...... 57,954 19,951 6,958 -- 1,079 72,026
-------- ------- ------- ------- ------- --------
$164,027 $52,794 $ 9,356 -- $(3,866) $203,599
======== ======= ======= ======= ======= ========
Year ended January 1,
1994:
Equipment at
customers............ $ 32,711 $ 9,297 $10,261 $ 1,822 $ 997 $ 30,922
======== ======= ======= ======= ======= ========
Building and
improvements......... $ 21,718 $ 7,559 $ 583 $ 1,564 $(2,172) $ 24,958
Leasehold
improvements......... 18,575 3,013 1,970 84 1,812 21,346
Machinery and
equipment............ 91,280 27,643 6,249 10,081 2,304 104,897
Auto and trucks....... 72,026 18,296 6,096 124 (1,332) 82,770
-------- ------- ------- ------- ------- --------
$203,599 $56,511 $14,898 $11,853 $ 612 $233,971
======== ======= ======= ======= ======= ========
</TABLE>
NOTES:
1. The Company implemented a restructuring plan during the fourth interim
period of the fiscal year ended January 1, 1994. For a further discussion
of the restructuring plan, refer to "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Restructuring and Special
Charges" on page 26 of the Annual Report.
2. "Other" in all years includes cumulative translation adjustments. Other,
for fiscal years ended December 28, 1991 and January 2, 1993, also include
the reclassification of property from leasehold improvements to buildings
and improvements and machinery and equipment to reflect the Company's
purchase of previously leased facilities.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
20
<PAGE>
SCHEDULE VIII
SAFETY-KLEEN CORP. AND SUBSIDIARIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
FOR THE THREE YEARS ENDED JANUARY 1, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JANUARY 1, JANUARY 2, DECEMBER 28,
1994 1993 1991
---------- ---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year................. $ 7,399 $ 7,250 $ 5,278
Provision charged to operating expenses...... 6,822 7,053 6,921
Write-offs net of recoveries................. (5,789) (6,904) (4,949)
------- ------- -------
Balance at end of year....................... $ 8,432 $ 7,399 $ 7,250
======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21
<PAGE>
SCHEDULE X
SAFETY-KLEEN CORP. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED JANUARY 1, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JANUARY 1, JANUARY 2, DECEMBER 28,
1994 1993 1991
---------- ---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs. $31,627 $28,579 $26,450
======= ======= =======
Amortization of
Intangible and Other
Assets................. $15,525 $11,939 $ 9,068
======= ======= =======
Taxes other than income
or payroll............. $11,202 $10,197 $ 8,597
======= ======= =======
</TABLE>
NOTE:
Royalties and advertising costs individually are less than 1% of consolidated
revenue.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
3.1 Articles of Incorporation of the Registrant. (4)
3.2 By-Laws of the Registrant. (4)
3.3 Form of Rights Agreement, dated November 9, 1988, between
Safety-Kleen Corp. and the First National Bank of Chicago. (1)
4.1 Indenture Agreement dated August 15, 1989, between Safety-Kleen
Corp. and the Chase Manhattan Bank, executed in connection with
the Company's issuance and sale from time to time of up to $200
million aggregate principal amount of Debt Securities. (2)
4.2 Board of Directors' Resolution executed in connection with the
issuance and sale of $100 million aggregate principal amount of
9.25% Senior Notes due September 15, 1999. (2)
4.3 Board of Directors' Resolution executed in connection with the
future issuance and sale of up to $100 million aggregate
principal amount of Series A Medium Term Notes. (2)
10.1 Safety-Kleen Management Incentive Plan.*
10.2 Employment Contract dated February 5, 1988, as amended August
16, 1988, between Donald W. Brinckman (Chairman of the Board)
and Safety-Kleen
Corp. (1)
10.3 Employment Agreement and Addendum to Severance Agreement dated
January 11, 1993, between John G. Johnson, Jr. and Safety-Kleen
Corp.*
10.4 Safety-Kleen Corp. 1985 Stock Option Plan. (3)*
10.5 Form of Safety-Kleen Corp. Severance Agreement. (3)*
10.5.1 Schedule of Participants to Safety-Kleen Corp. Severance
Agreement.*
10.6 Safety-Kleen Corp. 1988 Non-Qualified Stock Option Plan for
Outside Directors. (1)*
10.7 Safety-Kleen Corp. 1993 Stock Option Plan. (5)*
10.8 Credit Agreement dated March 25, 1988, among the Chase Manhattan
Bank, N.A., The Northern Trust Company, the NBD Bank, N.A. and
the First National Bank of Chicago. (5)
10.8.1 First Amendment dated December 30, 1988, to Credit Agreement
dated March 25, 1988. (5)
10.8.2 Second Amendment dated March 22, 1991, to Credit Agreement dated
March 25, 1988. (5)
10.8.3 Third Amendment and Consent dated December 1, 1993, to Credit
Agreement dated March 25, 1988.
10.9 Credit Agreement dated March 20, 1992, among the Chase Manhattan
Bank, N.A., the Northern Trust Company, the NBD Bank, N.A. and
the First National Bank of Chicago. (5)
10.9.1 Amendment No. 1 and Consent dated December 1, 1993, to Credit
Agreement dated March 20, 1992.
10.10 Safety-Kleen Corp. Excess Benefit Plan. (5)*
13 Annual Report to Shareholders for the year ended January 1,
1994.
21 Subsidiaries of the Registrant. (3)
23 Consent of Experts.
</TABLE>
-------------------------
(1) Previously filed and incorporated herein by reference from
Registrant's Current Report on Form 8-K, dated November 10, 1988.
(2) Previously filed and incorporated herein by reference from
Registrant's Quarterly Report on Form 10-Q for the twelve weeks
ended September 9, 1989.
(3) Previously filed and incorporated herein by reference from
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990.
(4) Previously filed and incorporated herein by reference from
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 28, 1991.
(5) Previously filed and incorporated herein by reference from
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993.
*Indicates each management or compensatory plan or arrangement
required to be filed as an exhibit to this form pursuant to Item
14(c) of this report.
<PAGE>
EXHIBIT 10.1
SAFETY-KLEEN MANAGEMENT INCENTIVE PLAN
--------------------------------------
February 11, 1994
The Directors of Safety-Kleen Corp. have heretofore decided to compensate their
officers and key management personnel under a compensation plan that will
include base salary plus incentive bonus. The purpose of the incentive plan is
to supplement by incentive bonuses the remuneration for officers and key
management personnel which is competitive externally, equitable internally, and
properly rewarding for performance in the responsibility assigned. On the
recommendation of the Compensation Committee, the following Management Incentive
Plan is hereby established for officers and key management personnel of the
Company.
I. Calculation of Management Incentive Fund
- ---------------------------------------------
In recognition of the fact that one of the key corporate goals is to
provide Safety-Kleen Shareholders a better-than-average return on corporate
equity, the incentive fund, consisting of both a formula and discretionary
fund, will be created as follows:
A. Utilization of the Standard & Poor's 500 as a Comparison Group
-----------------------------------------------------------------
For each Plan year, the return on beginning-of-year equity (ROE) for
each firm comprising the Standard & Poor's 500 will be calculated,
arrayed and summarized in descending ROE order for the four consecutive
calendar quarters ending with the third quarter of the previous year.
B. Determination of Qualifying ROE Level for Generation of
----------------------------------------------------------
Incentive Fund
--------------
The ROE for the 300th company in the array will determine the qualifying
level for the minimum percentage of earnings allocable to the formula
portion of the incentive fund. In other words, in order for any
incentive fund to be created in a given year, Safety-Kleen must attain
an ROE for that year that would place it among the top 60% of the five
hundred publicly held companies comprising the Standard & Poor's 500.
C. Determination of ROE Level Required for Maximum Incentive Fund
-----------------------------------------------------------------
In order to qualify for the maximum percentage of earnings allocable to
the formula portion of the Incentive Fund in a given year, Safety-Kleen
must attain an ROE for that year that would place it among the top 15%
in the array.
-1-
<PAGE>
D. Determination of Formula Incentive Fund Factor
--------------------------------------------------
At the minimum qualifying ROE level (I.B.), a formula incentive fund
consisting of 1% of consolidated pretax earnings will be created.
This factor will rise on a graduated basis to a maximum of 5.0% of
Consolidated Pretax Earnings when the maximum level (I.C.) is
attained (see Table 1). The formula fund factor calculation for each
ensuing fiscal year will be reviewed by the Compensation Committee
of the Board prior to the development of that year's incentive plan.
E. Calculation of the Discretionary Element of the Plan
--------------------------------------------------------
In addition to the fund created by the above calculations, an
additional fund consisting of an amount not exceeding 50% of the
formula amount will be available for discretionary incentive
allocations. The allocation of corporate pretax earnings available
for incentive purposes, therefore, will be limited to a maximum of
7.5% of pretax earnings.
II. Allocation of Funds
- -------------------------
A. Determination of Plan Participants
--------------------------------------
Determination of who will participate in the Plan will be developed
each year by the Chairman of the Board (Chairman) in consultation
with other corporate officers. Such eligibility will be in accordance
with job responsibility and salary grade. The list of job
classifications to be included in the Plan will be submitted at the
beginning of each calendar year for review by the Compensation
Committee.
B. Determination of Individual Fund Shares
-------------------------------------------
The percentage share of the formula incentive fund for each officer
participant, other than the Chairman, will be determined by the
Chairman and submitted to the Compensation Committee for its approval
at the beginning of each calendar year. The Chairman's share will be
determined in accordance with his employment agreement. Non-officer
participant percent shares will be developed by the Chairman in
consultation with other officers.
C. Payment of Annual Incentive
-------------------------------
The calculation of the formula incentive fund will be based on final
audited year-end financial statements, utilizing the method described
previously. The individual share calculations for each officer for
the formula incentive resulting from the above calculation, together
with the recommended discretionary share, which can range from 0 to
50% of the formula amount, shall be submitted to the Compensation
-2-
<PAGE>
Committee for its final approval during the first quarter of the
year following the fiscal year involved.
The Chairman will recommend the discretionary amount for each
officer based on his analysis of each individual's performance
during the year. The Chairman's discretionary share will be
determined in accordance with his employment agreement. A non-
officer participant's discretionary share will be recommended by
the participant's immediate supervisor for approval by the Chairman.
III. Incentive Plan Participation and Communications
- -----------------------------------------------------
The Chairman shall notify the Compensation Committee of the Board regarding
officers and the key management positions that will be included in the Plan
for the current year. Such a list should be determined as early as possible
in any fiscal year and no later than the end of the first quarter of each
fiscal year. Early identification of participants is desirable to provide
maximum opportunity for communicating throughout the year regarding company
performance and each individual participant's related bonus opportunity,
thereby maximizing the effectiveness of the Incentive Plan.
IV. General Provisions
- -----------------------
A. Plan Eligibility
----------------------
To be eligible to participate under the plan, an officer or employee
must be actively employed with the company on the last working day of
the year for which the year's compensation is payable; provided, that
in the event a participant's employment is terminated prior to year-
end by reason of death occurring after June 1, his share of the
formula incentive fund will be adjusted on the basis of his full-year
share, prorated for the period of his actual employment.
B. Less Than Full-Year's Employment
--------------------------------------
In the event a participant's employment commences after January 1,
adjustment of his share of the formula incentive fund will be on the
basis of his full-year share, prorated for the period of the
participant's actual employment.
C. Definition of Consolidated Pretax Earnings
------------------------------------------------
For purposes of determining the dollar amount to be set aside for the
formula portion of the fund as above provided, consolidated pretax
earnings shall consist of the reported earnings before income tax,
and before deducting the amount calculated for both the formula and
the discretionary portions of the incentive fund, as reflected in
the audited statements
-3-
<PAGE>
of that year, subject to the following limitations: profits or losses
on the sale or other distribution of fixed or capital assets not in
the ordinary course of business shall be excluded in the
determination of profits.
D. Definition of Return on Beginning-of-Year Equity
----------------------------------------------------
Return on beginning-of-year equity shall be calculated on the basis of
consolidated pretax earnings as defined in IV.C., less the expense
provision for both the formula and discretionary portions of the
incentive fund, and less the applicable income tax provision.
V. Final Responsibility for Plan Administration
- ------------------------------------------------
Notwithstanding the foregoing provisions, all matters pertaining to the
administration of this Incentive Compensation Plan, including but not
limited to the determination of the Fund amount, selection of participants,
amounts of awards to be paid to individual participants, and other policy
matters, shall be within the sole discretion of the Board of Directors.
This plan may be revoked, amended or revised by the Board of Directors of
the Company but no revocation, amendment or revision shall affect a
participant's granted percentage share of the Fund.
-4-
<PAGE>
EXHIBIT 10.3
January 11, 1993
Mr. John G. Johnson, Jr.
650 Twin Arch Lane
Brynmawr, PA 19010
Dear Jack:
Per our telephone discussion on Friday and to conclude our recent
agreements concerning your employment as a Corporate Officer and Assistant to
the Chairman/CEO with Safety-Kleen, we wish to be responsive to your request for
assurances with respect to compensation in the event, for whatever reason we
cannot now anticipate, your employment with Safety-Kleen would be terminated.
We, therefore, agree that if the Company terminates your employment, for reasons
other than gross misconduct, during the first three years commencing January 18,
1993, you will be entitled to receive separation payments as follows:
(a) If termination occurs between January 18, 1993, and January 17, 1995,
your compensation (taken to mean your bi-weekly salary then in effect,
together with that amount to which you would have been entitled,
absent your termination, under the formula share of the Safety-Kleen
Management Incentive Plan, but excluding any rights under the Safety-
Kleen Stock Option Plan and any other benefits plans normally
available to employees or officers) would be continued for twelve (12)
months from the date of termination.
(b) If termination occurs between January 18, 1995, and January 17, 1996,
then your compensation (as defined in Paragraph (a) would continue for
six months following the date of termination.
Salary continuation payments would be made to you in equal bi-weekly
installments following your termination, and any payments due under the
Management Incentive Plan would be paid in February following your termination.
<PAGE>
Mr. John G. Johnson, Jr. Page Two
Brynmawr, PA 19010
January 11, 1993
In consideration for the Company's promise to employ you and for its
promise to pay you these separation payments, your agreement will be
acknowledged, by signing and returning the enclosed copy of this letter along
with the Company's Non-Competition Agreement and Ethics Code.
As previously indicated, your starting base salary will be $225,000 per
annum paid bi-weekly. This base will be adjusted at the time you are named
President. An incentive target of $200,000 will be set for 1993, of which
$125,000 will be guaranteed.
A stock option will be granted on a value of $500,000. The option price
will be the market value on the date of grant, February 5, 1993.
You understand that employment will be contingent upon the successful
completion of a post offer employment physical examination, including drug and
alcohol screening. As a further condition of employment, we also agreed that if
you find it preferable to move to the Elgin area during the first twelve (12)
months with the Company, we will reimburse reasonable closing costs associated
with the sale of your existing home, together with your moving costs.
I look forward enthusiastically to your joining our management team. We
feel that your experience and enthusiasm for our business should combine to
produce meaningful results for yourself and the Company.
Very truly yours,
/s/ Donald W. Brinckman
DONALD W. BRINCKMAN
Chairman/CEO
DWB/kl
AGREED:
/s/ John G. Johnson, Jr.
_____________________
John G. Johnson, Jr.
January 12, 1993.
<PAGE>
ADDENDUM TO SEVERANCE AGREEMENT OF JANUARY 11, 1993
---------------------------------------------------
It is further agreed that if the Company terminates employment for reasons other
than gross misconduct before January 17, 1996, in addition to the separation
payments, the Company would:
1. Recommend to the Board the accelerated vesting of any stock options
granted prior to the date of termination.
2. During the 12 months following termination, pay for one move to the
East Coast according to the Company Moving Policy in place at the time.
3. Provide executive outplacement services with a national firm.
Agreed: Agreed:
/s/ John G. Johnson, Jr. /s/ Donald W. Brinckman
_______________________ _________________________
John G. Johnson, Jr. Donald W. Brinckman
Chairman & CEO
Safety-Kleen
January 12, 1993. January 19, 1993
<PAGE>
EXHIBIT 10.5.1
SAFETY-KLEEN CORP. SEVERANCE AGREEMENT PARTICIPANTS
John G. Johnson, Jr. President and Chief Operating Officer
Hyman K. Bielsky Senior Vice President/General Counsel
James L. Breece Vice President, Technical
Roy D. Bullinger Divisional Vice President
Robert J. Burian Senior Vice President, Administration
Michael H. Carney Senior Vice President, Marketing
Glenn R. Casbourne Vice President, Engineering
Joseph Chalhoub Senior Vice President, Processing,
Engineering & Oil Recovery
David A. Dattilo Senior Vice President, Sales and Service
Scott E. Fore Senior Vice President,
Environment, Health & Safety
F. Henry Habicht, II Senior Vice President, Strategic/
Environmental Planning
James M. Isanhart Divisional Vice President
William P. Kasko Senior Vice President, Operations and
Information
Wallace K. Louder Vice President, Information Systems
Ulisse Marini Vice President, Recycle Center Operations
Clyde R. Phillips Divisional Vice President
Clark J. Rose Vice President, Technical Services
Laurence M. Rudnick Treasurer
John Rycombel Controller
Robert W. Willmschen, Jr. Senior Vice President, Finance
<PAGE>
EXHIBIT 10.8.3
THIRD AMENDMENT AND CONSENT
dated as of December 1, 1993
to
CREDIT AGREEMENT
dated as of March 25, 1988
among
SAFETY-KLEEN CORP.
the BANKS signatory thereto
and
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
<PAGE>
THIRD AMENDMENT AND CONSENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT AND CONSENT dated as of December 1, 1993 among
SAFETY-KLEEN CORP., the BANKS signatory hereto and THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as Agent.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the parties hereto are parties to a Credit Agreement dated as of
March 25, 1988, as amended by a First Amendment dated as of December 30, 1988
and a Second Amendment dated as of March 22, 1991 (the "Agreement");
WHEREAS, in connection with the circumstances described in Exhibit A
hereto (the "Charge"), the Borrower will breach Section 8.01 and Section 8.04
of the Agreement;
WHEREAS, in order to avoid such breaches of the Agreement, the Borrower has
requested, and the Banks have agreed, to amend Section 8.01 and waive compliance
with Section 8.04 of the Agreement, as more fully set forth below; and
WHEREAS, the parties hereto desire to amend Section 11.01 of the Agreement
in certain respects, as more fully set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions.
-----------
Unless otherwise specifically defined herein, each term used herein which
is defined in the Agreement shall have the meaning assigned to such term in the
Agreement.
SECTION 2. Consent to Charge.
-----------------
The Borrower and the Banks hereby agree as follows:
(a) Section 8.01 (as previously amended) is hereby amended to delete the
words "$375,000,000 plus 50%" and insert in their stead the words "$239,000,000
plus 50%."
(b) Any non-compliance with Section 8.04 of the Agreement for the last
fiscal quarter of 1993 is hereby waived.
(c) For the purposes of clause (a) in the definition of "Material Adverse
Effect", the Charge will not be deemed to be a negative impact.
<PAGE>
SECTION 3. Amendment of Section 11.01 of the Agreement.
-------------------------------------------
Section 11.01 of the Agreement is amended to read as follows:
"Section 11.01. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrower, the Agent and
the Required Banks, or by the Borrower and the Agent acting with the consent of
the Required Banks and any provision of this Agreement may be waived by the
Required Banks or by the Agent acting with the consent of the Required Banks;
provided that no amendment, modification or waiver shall, unless by an
instrument signed by all of the Banks or by the Agent acting with the consent of
all of the Banks: (a) increase or extend the term, or extend the time or waive
any requirement for the reduction or termination, of the Commitments, (b) extend
the date fixed for the payment of principal of or interest on any Loan, (c)
reduce the amount of any payment of principal thereof or the rate at which
interest is payable thereon or any fee payable hereunder, (d) alter the terms of
this Section 11.01, (e) amend the definition of the term 'Required Banks' or (f)
waive any of the documentary conditions precedent set forth in Section 4.01
hereof and provided, further, that any amendment of Article 10 hereof or any
amendment which increases the obligations of the Agent hereunder shall require
the consent of the Agent. No failure on the part of the Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law."
SECTION 4. Representations.
---------------
The Borrower represents and warrants:
(a) Each of the representations and warranties contained in Article 5 of
the Agreement is true and correct on the date hereof as though made on and as of
the date hereof and as if each reference in such Article 5 to "this Agreement"
and "the Notes" included reference to this Third Amendment and Consent and no
event has occurred and is continuing which constitutes a Default or Event of
Default.
(b) The execution, delivery and performance by the Borrower of the
Agreement, as amended hereby, have been duly authorized by all necessary
corporate action.
(c) Upon the effectiveness of this Third Amendment and Consent pursuant to
Section 5, the Agreement as amended hereby, will constitute a valid and binding
obligation of the Borrower.
-2-
<PAGE>
SECTION 5. Effectiveness.
-------------
This Third Amendment and Consent shall be effective as of the date hereof
when the parties hereto shall have each executed a counterpart hereof and
delivered the same to the Agent.
SECTION 6. Effect of Amendment on Agreement; Ratification and Confirmation
---------------------------------------------------------------
of Agreement, as Amended.
- ------------------------
On and after the effective date of this Third Amendment and Consent each
reference in the Agreement to "this Agreement", "hereunder", "hereof", or words
of like import referring to the Agreement, and each reference in the Notes
referring to "the Agreement", "thereunder", "thereof", or words of like import
referring to the Agreement, shall mean the Agreement as amended by this Third
Amendment and Consent. The Agreement, as amended by this Third Amendment and
Consent, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed.
SECTION 7. Amendment Fee.
-------------
The Borrower will pay to the Banks a non-refundable amendment fee, in an
amount acceptable to the Agent in its sole discretion. The amendment fee shall
be payable to the Banks pro rata in accordance with their respective
Commitments. The amendment fee shall be due and payable on December 31, 1993,
and fully earned when due. If the amendment fee is not fully paid when due, this
Third Amendment and Consent shall become void and of no effect.
SECTION 8. Counterparts.
------------
This Third Amendment and Consent may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 9. Section Headings.
----------------
The Section headings in this Third Amendment and Consent are inserted for
convenience only and shall not be part of this instrument.
SECTION 10. GOVERNING LAW.
-------------
THIS THIRD AMENDMENT AND CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
-3-
<PAGE>
SECTION 11. Entire Agreement.
----------------
This Third Amendment and Consent and the Agreement as amended hereby
constitute the entire agreement and understanding between the parties hereto and
supersede any and all prior agreements and understandings relating to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
and Consent to be executed as of the date first above written.
SAFETY-KLEEN CORP.
By: /s/ Laurence M. Rudnick
------------------------------
Title: Treasurer
By: ------------------------------
Title:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as Agent
By: /s/ Thomas T. Daniels
------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By: /s/ Thomas T. Daniels
------------------------------
Title: Vice President
THE NORTHERN TRUST COMPANY
By: /s/ John R. Falb
------------------------------
Title: Vice President
-4-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Armund J. Schoen, Jr.
------------------------------
Title: Vice President
NBD BANK, N.A.
By: /s/ Steven K. Wagner
------------------------------
Title: Second Vice President
-5-
<PAGE>
EXHIBIT A
Safety-Kleen Corp.
1000 N. Randall Road
Elgin, Illinois 60123
[Safety-Kleen Logo] N E W S (708) 697-8460
For further information:
FOR RELEASE: IMMEDIATELY CONTACT: ROBERT W. WILLMSCHEN
(708) 468-2002
LARRY RUDNICK
(708) 468-2408
SAFETY-KLEEN CORP. REPORTS RESTRUCTURING PLAN
ELGIN, IL, December 13, 1993 -- Safety-Kleen Corp. (NYSE: SK) announced today
that it has developed a restructuring plan based on conversion of its core
Parts Cleaner Service to new technology and a comprehensive review of all of
its operations. The Company had previously announced on October 4, 1993 that it
would develop such a plan. The Company said it would record a special charge of
$229 million ($136 million after tax or $2.36 per share) in the fourth quarter
related to the restructuring plan and a change in accounting for the cost of
environmental remediation at the Company's facilities. Further, the Company said
it expects a net earnings benefit in 1994 in the range of $12 million to $15
million as a direct result of these actions.
The Company said that the pretax special charge includes $179 million related to
the restructuring plan and $50 million related to a change in accounting for
remediation costs. It further said that the pretax restructuring charge of $179
million includes $117 million of asset writedowns and $62 million of other
restructuring charges. The after-tax total special charge of $136 million
includes an estimated $39 million of costs that will require cash outflows in
the future ($3 million in 1993 and 1994 and $36 million thereafter) and $97
million of non-cash items.
Donald W. Brinckman, Chairman and Chief Executive Officer of Safety-Kleen, said,
"We have been extremely disappointed with our poor operating results during
1993. As a result, we undertook a comprehensive review of our operations and
developed a strategic restructuring plan which we believe better focuses the
Company on our core environmental services and reduces our current cost
structure. We believe it also improves the value of these services, particularly
our parts cleaner services, to our customers."
"A major factor in our sluggish earnings performance in 1993 is the lack of
growth in our core parts cleaner service," Brinckman added. "We believe this is
due to a number of factors, including customers' desires to minimize hazardous
waste generation and/or reduce costs, as well as the sluggish economy. We
believe that the new filtration parts cleaner service we have been test
marketing represents a substantial increase in the value of our service and
responds to the changing
<PAGE>
needs of the marketplace. The new parts cleaner extends the life of the solvent
and reduces the number of annual services required. As a result, the customer
generates less waste and the annual cost of the service is less. We have priced
the service such that the customer, on an annual basis, will pay approximately
10% less than he currently pays for our standard parts cleaner service.
However, since the unit is serviced less frequently, our annual service cost is
also lower. If the customer uses the recommended service intervals, we expect
our annual gross profit margins on the new service will be higher than on the
existing service."
Brinckman said, "As part of the restructuring plan, we have provided for the
writedown of the cost of parts cleaner machines which we expect to replace
with the new filtration parts cleaners, as well as the cost of converting the
customers to the new machines. We plan a major effort to convert a large
portion of our current parts cleaner service customers to the new filtration
parts cleaner service over the next two to three years. This new service has
been well received in our test markets and we believe it will result in better
customer retention and market penetration."
"The anticipated conversion of a large portion of our parts cleaners to the new
technology will reduce the amount of solvent recycling capacity required,"
Brinckman said. "We plan to close our Clayton, New Jersey recycling plant in
1994. We have provided for this as well as certain other capacity reductions in
our restructuring charge."
Brinkckman said, "With the anticipated future collection of less spent solvent
from our parts cleaner service, we plan to convert many of our branch permitted
hazardous waste storage facilities to transfer locations, eliminating the need
for permits required under the Resource Conservation and Recovery Act (RCRA),
thus reducing unnecessary operating costs driven by RCRA-imposed requirements.
The restructuring charge includes the write-off of the capitalized cost of the
permits at the affected facilities."
The Company said that other elements of the restructuring plan include the
following:
. a workforce reduction of approximately 375 jobs
. discontinuing certain minor business activities, including the sale of
Allied Products, that are not essential to providing customers with
quality environmental services
<PAGE>
. writedown of goodwill and other assets of certain business operations
that have sustained economic impairment affected by changes in market
and regulatory conditions
. consolidation of the Company's accumulation and distribution centers to
improve operating efficiencies
The Company said that the $50 million charge represents a change in accounting
principles and a change in estimate for remediation costs relating to all
operating and previously-closed sites prior to conducting detailed individual
site investigations to ascertain the existence and extent of contamination.
Brinckman said, "We expect a net earnings benefit in 1994 in the range of $12
million to $15 million as a direct result of cost reductions and other actions
resulting from the restructuring plan and the accounting change. This does not
include the impact of potential higher margins and growth as a result of our new
filtration parts cleaner service or the impact of potential growth in any of our
other businesses."
"We also plan to keep a tight rein on capital expenditures," Brinckman added.
"Our capital expenditures are currently expected to be in the range of $100
million in both 1993 and 1994, down from $168 million in 1991 and $143 million
in 1992."
Brinckman concluded, "We believe that the actions we have taken will enhance
the value of our services to our customers and provide better returns for our
shareholders."
Safety-Kleen Corp. is the world's largest recycler of automotive and industrial
hazardous and non-hazardous fluids. Safety-Kleen's common stock is traded on the
New York Stock Exchange under the trading symbol SK.
# # #
<PAGE>
EXHIBIT 10.9.1
[Composite Conformed Copy]
AMENDMENT NO. 1 AND CONSENT
dated as of December 1, 1993
to
CREDIT AGREEMENT
dated as of March 20, 1992
among
SAFETY-KLEEN CORP.
the BANKS signatory thereto
and
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
<PAGE>
AMENDMENT NO. 1 AND CONSENT TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 AND CONSENT dated as of December 1, 1993 among
SAFETY-KLEEN CORP., the BANKS signatory hereto and THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as Agent.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the parties hereto have entered into a Credit Agreement dated as of
March 20, 1992 (the "Agreement");
WHEREAS, in connection with the circumstances described in Exhibit A hereto
(the "Charge"), the Borrower will breach Section 8.01 and Section 8.04 of the
Agreement;
WHEREAS, in order to avoid such breaches of the Agreement, the Borrower has
requested, and the Banks have agreed, to amend Section 8.01 and waive compliance
with Section 8.04 of the Agreement, as more fully set forth below; and
WHEREAS, the parties hereto desire to amend Section 11.01 of the Agreement in
certain respects, as more fully set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions.
-----------
Unless otherwise specifically defined herein, each term used herein which is
defined in the Agreement shall have the meaning assigned to such term in the
Agreement.
SECTION 2. Consent to Charge.
-----------------
The Borrower and the Banks hereby agree as follows:
(a) Section 8.01 is hereby amended to delete the words "$425,000,000 plus
50%" and insert in their stead the words "$289,000,000 plus 50%."
(b) Any non-compliance with Section 8.04 of the Agreement for the last fiscal
quarter of 1993 is hereby waived.
(c) For the purposes of clause (a) in the definition of "Material Adverse
Effect", the Charge will not be deemed to be a negative impact.
<PAGE>
SECTION 3. Amendment of Section 11.01 of the Agreement.
-------------------------------------------
Section 11.01 of the Agreement is amended to read as follows:
"Section 11.01. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrower, the Agent and
the Required Banks, or by the Borrower and the Agent acting with the consent of
the Required Banks and any provision of this Agreement may be waived by the
Required Banks or by the Agent acting with the consent of the Required Banks;
provided that no amendment, modification or waiver shall, unless by an
instrument signed by all of the Banks or by the Agent acting with the consent of
all of the Banks: (a) increase or extend the term, or extend the time or waive
any requirement for the reduction or termination, of the Commitments, (b) extend
the date fixed for the payment of principal of or interest on any Loan, (c)
reduce the amount of any payment of principal thereof or the rate at which
interest is payable thereon or any fee payable hereunder, (d) alter the terms of
this Section 11.01, (e) amend the definition of the term 'Required Banks' or (f)
waive any of the documentary conditions precedent set forth in Section 4.01
hereof and provided, further, that any amendment of Article 10 hereof or any
amendment which increases the obligations of the Agent hereunder shall require
the consent of the Agent. No failure on the part of the Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law."
SECTION 4. Representations.
---------------
The Borrower represents and warrants:
(a) Each of the representations and warranties contained in Article 5 of
the Agreement is true and correct on the date hereof as though made on and as
of the date hereof and as if each reference in such Article 5 to "this
Agreement" and "the Notes" included reference to this Amendment No. 1 and
Consent and no event has occurred and is continuing which constitutes a Default
or Event of Default.
(b) The execution, delivery and performance by the Borrower of the
Agreement, as amended hereby, have been duly authorized by all necessary
corporate action.
(c) Upon the effectiveness of this Amendment No. 1 and Consent pursuant to
Section 5, the Agreement as amended hereby, will constitute a valid and binding
obligaton of the Borrower.
-2-
<PAGE>
SECTION 5. Effectiveness.
-------------
This Amendment No. 1 and Consent shall be effective as of the date hereof
when the parties hereto shall have each executed a counterpart hereof and
delivered the same to the Agent.
SECTION 6. Effect of Amendment on Agreement; Ratification and Confirmation
---------------------------------------------------------------
of Agreement, as Amended.
- ------------------------
On and after the effective date of this Amendment No. 1 and Consent each
reference in the Agreement to "this Agreement", "hereunder", "hereof", or words
of like import referring to the Agreement, and each reference in the Notes
referring to "the Agreement", "thereunder", "thereof", or words of like import
referring to the Agreement, shall mean the Agreement as amended by this
Amendment No. 1 and Consent. The Agreement, as amended by this Amendment No. 1
and Consent, is and shall continue to be in full force and effect and is hereby
in all respects ratified and confirmed.
SECTION 7. Amendment Fee.
-------------
The Borrower will pay to the Banks a non-refundable amendment fee, in an
amount acceptable to the Agent in its sole discretion. The amendment fee shall
be payable to the Banks pro rata in accordance with their respective
Commitments. The amendment fee shall be due and payable on December 31, 1993,
and fully earned when due. If the amendment fee is not fully paid when due, this
Amendment No. 1 and Consent shall become void and of no effect.
SECTION 8. Counterparts.
------------
This Amendment No. 1 and Consent may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 9. Section Headings.
----------------
The Section headings in this Amendment No. 1 and Consent are inserted for
convenience only and shall not be part of this instrument.
SECTION 10. GOVERNING LAW.
-------------
THIS AMENDMENT NO. 1 AND CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
SECTION 11. Entire Agreement.
----------------
This Amendment No. 1 and Consent and the Agreement as amended hereby
constitute the entire agreement and understanding between the parties hereto and
supersede any and all prior agreements and understandings relating to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 and
Consent to be executed as of the date first above written.
SAFETY-KLEEN CORP.
By:/s/ Laurence M. Rudnick
-----------------------
Title: Treasurer
By:
-----------------------
Title:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as Agent
By:/s/ Thomas T. Daniels
-----------------------
Title: Vice President
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By:/s/ Thomas T. Daniels
-----------------------
Title: Vice President
THE NORTHERN TRUST COMPANY
By:/s/ John R. Falb
-----------------------
Title: Vice President
-4-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Armund J. Schoen, Jr.
-------------------------------------
Title: Vice President
NBD BANK, N.A.
By: /s/ Steven K. Wagner
-------------------------------------
Title: Second Vice President
-5-
<PAGE>
EXHIBIT A
Safety-Kleen Corp.
1000 N. Randall Road
Elgin, Illinois 60123
[Safety-Kleen Logo] N E W S (708) 697-8460
For further information:
FOR RELEASE: IMMEDIATELY CONTACT: ROBERT W. WILLMSCHEN
(708) 468-2002
LARRY RUDNICK
(708) 468-2408
SAFETY-KLEEN CORP. REPORTS RESTRUCTURING PLAN
ELGIN, IL, December 13, 1993 -- Safety-Kleen Corp. (NYSE: SK) announced today
that it has developed a restructuring plan based on conversion of its core
Parts Cleaner Service to new technology and a comprehensive review of all of
its operations. The Company had previously announced on October 4, 1993 that it
would develop such a plan. The Company said it would record a special charge of
$229 million ($136 million after tax or $2.36 per share) in the fourth quarter
related to the restructuring plan and a change in accounting for the cost of
environmental remediation at the Company's facilities. Further, the Company said
it expects a net earnings benefit in 1994 in the range of $12 million to $15
million as a direct result of these actions.
The Company said that the pretax special charge includes $179 million related to
the restructuring plan and $50 million related to a change in accounting for
remediation costs. It further said that the pretax restructuring charge of $179
million includes $117 million of asset writedowns and $62 million of other
restructuring charges. The after-tax total special charge of $136 million
includes an estimated $39 million of costs that will require cash outflows in
the future ($3 million in 1993 and 1994 and $36 million thereafter) and $97
million of non-cash items.
Donald W. Brinckman, Chairman and Chief Executive Officer of Safety-Kleen, said,
"We have been extremely disappointed with our poor operating results during
1993. As a result, we undertook a comprehensive review of our operations and
developed a strategic restructuring plan which we believe better focuses the
Company on our core environmental services and reduces our current cost
structure. We believe it also improves the value of these services, particularly
our parts cleaner services, to our customers."
"A major factor in our sluggish earnings performance in 1993 is the lack of
growth in our core parts cleaner service," Brinckman added. "We believe this is
due to a number of factors, including customers' desires to minimize hazardous
waste generation and/or reduce costs, as well as the sluggish economy. We
believe that the new filtration parts cleaner service we have been test
marketing represents a substantial increase in the value of our service and
responds to the changing
<PAGE>
needs of the marketplace. The new parts cleaner extends the life of the solvent
and reduces the number of annual services required. As a result, the customer
generates less waste and the annual cost of the service is less. We have priced
the service such that the customer, on an annual basis, will pay approximately
10% less than he currently pays for our standard parts cleaner service.
However, since the unit is serviced less frequently, our annual service cost is
also lower. If the customer uses the recommended service intervals, we expect
our annual gross profit margins on the new service will be higher than on the
existing service."
Brinckman said, "As part of the restructuring plan, we have provided for the
writedown of the cost of parts cleaner machines which we expect to replace
with the new filtration parts cleaners, as well as the cost of converting the
customers to the new machines. We plan a major effort to convert a large
portion of our current parts cleaner service customers to the new filtration
parts cleaner service over the next two to three years. This new service has
been well received in our test markets and we believe it will result in better
customer retention and market penetration."
"The anticipated conversion of a large portion of our parts cleaners to the new
technology will reduce the amount of solvent recycling capacity required,"
Brinckman said. "We plan to close our Clayton, New Jersey recycling plant in
1994. We have provided for this as well as certain other capacity reductions in
our restructuring charge."
Brinkckman said, "With the anticipated future collection of less spent solvent
from our parts cleaner service, we plan to convert many of our branch permitted
hazardous waste storage facilities to transfer locations, eliminating the need
for permits required under the Resource Conservation and Recovery Act (RCRA),
thus reducing unnecessary operating costs driven by RCRA-imposed requirements.
The restructuring charge includes the write-off of the capitalized cost of the
permits at the affected facilities."
The Company said that other elements of the restructuring plan include the
following:
. a workforce reduction of approximately 375 jobs
. discontinuing certain minor business activities, including the sale of
Allied Products, that are not essential to providing customers with
quality environmental services
<PAGE>
. writedown of goodwill and other assets of certain business operations
that have sustained economic impairment affected by changes in market
and regulatory conditions
. consolidation of the Company's accumulation and distribution centers to
improve operating efficiencies
The Company said that the $50 million charge represents a change in accounting
principles and a change in estimate for remediation costs relating to all
operating and previously-closed sites prior to conducting detailed individual
site investigations to ascertain the existence and extent of contamination.
Brinckman said, "We expect a net earnings benefit in 1994 in the range of $12
million to $15 million as a direct result of cost reductions and other actions
resulting from the restructuring plan and accounting change. This does not
include the impact of potential higher margins and growth as a result of our new
filtration parts cleaner service or the impact of potential growth in any of our
other businesses."
"We also plan to keep a tight rein on capital expenditures," Brinckman added.
"Our capital expenditures are currently expected to be in the range of $100
million in both 1993 and 1994, down from $168 million in 1991 and $143 million
in 1992."
Brinckman concluded, "We believe that the actions we have taken will enhance
the value of our services to our customers and provide better returns for our
shareholders."
Safety-Kleen Corp. is the world's largest recycler of automotive and industrial
hazardous and non-hazardous fluids. Safety-Kleen's common stock is traded on the
New York Stock Exchange under the trading symbol SK.
# # #
<PAGE>
EXHIBIT 13
FINANCIAL REPORTS
- --------------------------------------------------------------------------------
22 Management's Discussion and Analysis of
Financial Condition and Results of Operations
27 Selected Financial Data
28 Report of Independent Public Accountants
28 Consolidated Statements of Operations
29 Consolidated Balance Sheets
30 Consolidated Statements of
Shareholders' Equity
31 Consolidated Statements of Cash Flows
32 Notes to Consolidated Financial Statements
21
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
The following table sets forth for the periods indicated (i) percentages which
certain items reflected in the financial data bear to consolidated revenue of
the Company and (ii) the percentage increase (decrease) of such items as
compared to the indicated prior period:
<TABLE>
<CAPTION>
Period to Period
Relationship to Increase
Consolidated Revenue (Decrease)
Fiscal Year Fiscal Years
1993 1992 1991 1992-93 1991-92
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 0.1% 14.3%
- -------------------------------------------
Costs and Expenses
Operating costs
and expenses 76.1 75.0 71.8 1.7 19.4
Selling and
administrative
expenses 15.0 14.3 14.6 4.9 11.7
Restructuring and
special charges 28.8 - - N/A -
Interest income (0.1) (0.2) (0.3) (36.2) (29.0)
Interest expense 1.4 1.6 1.9 (11.6) (3.4)
- -------------------------------------------
121.2 90.7 88.0 33.8 17.8
- -------------------------------------------
Earnings before
income taxes and
cumulative effect
of changes in
accounting
principles (21.2) 9.3 12.0 (327.0) (10.9)
Income taxes (8.5) 3.6 4.6 (332.3) (8.9)
- -------------------------------------------
Net earnings before
the cumulative
effect of changes
in accounting
principles (12.7%) 5.7% 7.4% (323.5%) (12.1%)
===========================================
</TABLE>
In 1987, the Company made two long-term strategic acquisitions to enter the
North American Oil Recovery Service and expand its ability to service large and
small industrial customers' fluid waste disposal needs. Subsequent to these
acquisitions, substantial capital and other infrastructure investments were made
to accommodate future anticipated growth. In 1990, the Company made the
strategic decision to develop and expand its business in Western Europe on a
direct basis. The implementation of this strategy has required investments in
the acquisition of its joint venture partners' interests in operations in
several countries, acquisition of other related businesses and accompanying
infrastructure investments.
In 1991, 1992 and 1993, the Company's net earnings before restructuring and
special charges declined 7%, 12% and 24%, respectively. The 1991 and 1992 net
earnings decline occurred despite revenue growth of 18% and 14%, respectively,
while 1993 revenue was virtually flat with 1992. The cost increases underlying
these earnings declines are the result of the aforementioned strategic and
infrastructure investments made primarily in anticipation of future long-term
growth. The Company has not yet realized the growth it had anticipated from
these investments. The Company has also experienced increases in environmental
compliance costs. In addition, the Company's 1992 earnings were adversely
affected by costly regulatory problems encountered at its Puerto Rico
operations, which are more fully described below.
The Company's revenues have grown at a slower rate than anticipated primarily
because of lowered demand for the Company's services. The Company believes that
the lower demand has been caused by a number of factors including customers'
waste and cost minimization efforts, sluggish economies in North America and
Europe and slower than expected development of the European operations.
The Company has developed, test-marketed and has now begun a conversion of its
parts cleaners to a new parts cleaner service to address the waste minimization
concerns of its customers. The new service employs a premium non-hazardous
solvent and a separation system that extends the life of the solvent used for
cleaning and degreasing. In conjunction with the conversion of its parts
cleaners to new technology and a comprehensive review of its operations, the
Company adopted a restructuring plan in the fourth quarter of 1993, more fully
described below, to address the Company's disappointing 1993 earnings
performance.
In 1992, net earnings declined $6.2 million or 12% (before the cumulative effect
of changes in accounting principles) to $45.3 million. The Company's 1992 net
earnings decline includes a decline in net earnings of $14.7 million from the
Company's Puerto Rico operations. A portion of this decline is attributable to
pre-tax charges totaling approximately $11.4 million ($7.3 million after-tax) to
record the estimated costs to reduce excess storage of hazardous waste fluids to
permitted levels, provide for possible environmental remediation of waste water
discharges and for related penalties. These charges were recorded as a result
of a Company investigation of its Puerto Rico operations, conducted in the third
quarter of 1992, which revealed the storage of hazardous waste in two large,
off-site, unpermitted tanks. Upon discovery of the problem, the Company
reported its findings to the appropriate authorities and commenced a corrective
action program including curtailment of business activities for a period of
approximately twenty days.
In 1992 and 1993, the Company has incurred substantially higher costs than 1991
and prior years to process waste-derived fuel collected from its Puerto Rico
customers. During 1992 and 1993, the local cement kiln outlet, used by the
Company's Puerto Rico operations to burn its waste-derived fuels, has been
unable to do so on a
22
<PAGE>
sustained basis, which resulted in excess waste-derived fuel that was shipped to
the U.S. mainland for processing at higher costs. Although the cement kiln in
Puerto Rico is permitted to burn waste-derived fuel under the Boiler and
Industrial Furnace (BIF) regulations on an interim basis, the kiln operation is
having difficulty maintaining the new permit operating parameters, and has also
encountered other operating constraints which have interrupted the burning of
waste-derived fuel. Although the Company increased prices to its customers in
Puerto Rico to cover a portion of the added costs, revenue from the Puerto Rico
operations has declined significantly, as compared to the pre-investigation
level. The reduction in revenue is due primarily to lower volumes received from
customers, including a limitation in the types of waste streams handled.
OTHER TRENDS, EVENTS AND UNCERTAINTIES
While the Company generally benefits from increased governmental regulation, as
a leading environmental services company, it is also the focus of regulatory
scrutiny. The Company has committed significant human and capital resources in
its attempt to ensure its operations are in compliance with all applicable
regulations. The Company's goal is to fully comply with all regulations and thus
avoid any fines or penalties. Nonetheless, given its extensive operations, the
technical aspects of the regulations, and the varying interpretations of the
requirements from jurisdiction to jurisdiction, the Company may incur fines and
penalties from time to time. While the Company does not anticipate that the
amount of fines and penalties will have a material adverse impact on its
financial condition, many environmental laws are written and enforced in a way
in which the potential liability can be large, and it is always possible that
the Company's actual liability in any particular case will prove to be larger
than anticipated by the Company. The Company paid approximately $1.0 million,
$3.0 million and $2.0 million in 1993, 1992 and 1991, respectively, for
environmental fines and penalties.
State and local authorities are increasingly adopting legislation and
regulations which impose various taxes, assessments and fees upon the
generators, transporters and handlers of waste and hazardous waste. The Company
may or may not be able to pass on such taxes and fees to its customers through
price increases, depending on competitive alternatives.
In May, 1993, U.S. EPA Administrator, Carol Browner, announced an initiative to
bring existing hazardous waste incinerators and industrial furnaces under the
control of facility specific permits. In this announcement, the Agency made it
clear that facilities awaiting permits, such as cement kilns, would be among the
first priorities to be permitted. This permitting initiative will involve
tighter scrutiny of these kilns and may require more stringent performance
standards. It is possible that data generated during the permit process in 1994
may provide sufficient information for decisions to be made regarding continued
use of hazardous waste-derived fuels by certain cement kilns in the U.S. It is,
therefore, anticipated that a certain percentage of the cement kilns presently
burning hazardous waste derived fuels will need to make significant investments
to achieve permit compliance or may decide to cease the practice of using these
fuels.
The Company produces waste-derived fuel primarily from its Envirosystems and
Fluid Recovery Services. The waste-derived fuel is supplied to cement kilns as
an alternative fuel source. Most of the waste-derived fuel is supplied to cement
plants with which the Company has exclusive contracts to provide the waste-
derived fuel. Due to the BIF regulations, these cement plants, as well as the
others that burn waste-derived fuel, are incurring higher costs. As a result of
these increased costs, the owners of the cement plants with which the Company
has exclusive contracts, are demanding increased prices to burn the waste-
derived fuel supplied by the Company. The Company is currently engaged in
discussions to resolve the owners' demands. It is likely that as a result of
these discussions, the Company will incur increased charges to burn waste-
derived fuel.
The cement kiln used by the Company's Puerto Rico operation has completed
certain tests required under BIF regulations to obtain a Part B permit to burn
waste-derived fuel. The test results have been submitted to the EPA for its
evaluation and final determination. The EPA has issued Notice of Deficiencies to
which the Company and the cement kiln operator are responding.
EFFECTS OF PETROLEUM PRODUCT PRICE CHANGES
Through its Oil Recovery operations, the Company re-refines and markets
petroleum based products at prices positively correlated to crude oil prices
over the long-term. The Company's various service operations also consume
petroleum based products, the cost of which are positively correlated to crude
oil prices over the long-term. Consequently, any meaningful increase or decrease
in crude oil prices will have both positive and negative effects on earnings.
Generally, the Company's earnings are positively affected by higher crude oil
prices and are negatively affected by lower crude oil prices. The speed at which
the Company is able to raise prices on its Parts Cleaner Service (and some re-
refined lubricating oil products) is restricted somewhat by committed price
contracts.
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Capital spending in 1993, 1992 and 1991 for additions of equipment at customers
and property, excluding business acquisitions, totaled $96 million, $143 million
and $168 million, respectively. To implement its strategy to develope its
business in Europe directly, the Company expended an additional $19 million and
$42 million in 1992 and 1991, respectively, for business acquisitions in the
major Western European markets. These capital expenditures and acquisitions were
financed primarily by cash from operations and long-term debt. Long-term debt
decreased $12 million in 1993. In 1992, long-term debt increased by $57 million.
The Company expects to finance its 1994 capital expenditures entirely through
internally generated funds. In 1994, the Company expects that its long-term debt
as a percentage of total capital will decline from the 44% at January 1, 1994.
As more fully described in Note 5 to the Consolidated Financial Statements, the
Company and its subsidiaries have lines of credit aggregating approximately $370
million. As of January 1, 1994, total borrowings under these lines were $182
million. The Company expects its capital expenditures for equipment at customers
and property additions for the full year 1994 will be less than $100 million.
The Company does intend to lease equipment and property to a greater extent than
it has in the recent past.
A portion of the Company's capital expenditures are, directly or indirectly,
related to the protection of the environment and the prevention of discharge of
waste materials into the environment. Estimated capital expenditures relating to
compliance with current environmental laws and regulations in the Company's
existing business, approximate $3.7 million for 1994 and $10.5 million for the
years 1995 through 1998. In the fourth interim period of 1993, the Company
recorded restructuring and special charges of $136 million net, ($229 million
pre-tax) or $2.36 per share. For a discussion of the effects of these charges on
cash flows, refer to the section on page 26, entitled "Restructuring and Special
Charges".
RESULTS OF OPERATIONS
REVENUES: Total revenue derived from the Company's North American Services and
European operations for each of the three fiscal years in the period ended
January 1, 1994, are presented below:
<TABLE>
<CAPTION>
Percentage
Increase (Decrease)
(Expressed in thousands) Fiscal Years
1993 1992 1991 1992-93 1991-92
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
North America
Automotive/Retail
Repair Services $248,700 $251,069 $235,625 (1%) 7%
Industrial Services 212,940 197,270 163,920 8% 20%
Oil Recovery
Services 113,277 114,671 95,568 (1%) 20%
Other Service Areas 141,117 150,261 141,438 (6%) 6%
____________________________________________________________
Total North America 716,034 713,271 636,551 0% 12%
Europe 79,474 81,271 58,450 (2%) 39%
____________________________________________________________
Consolidated $795,508 $794,542 $695,001 0% 14%
____________________________________________________________
____________________________________________________________
</TABLE>
NORTH AMERICA: The 1993 revenue decline of the Company's North American
Automotive/Retail Repair Service was due entirely to an 8% decline in service
volumes, partially offset by service charges which averaged 7% higher in 1993
than 1992. The 1993 service volume decline is primarily a result of lengthening
in the average time interval between services and a decline in parts cleaner
machines in service. Revenue growth of the Company's North American
Automotive/Retail Repair Service in 1992 was due primarily to increased prices
of the Parts Cleaner Service. The Parts Cleaner Service volumes declined in
1992 primarily as a result of lengthening in the average time interval between
services, partially offsetting the favorable effect of increased prices.
The Company's North American Industrial Services include revenues from the Fluid
Recovery Service of $96.8 million in 1993, $85.0 million in 1992, and $66.6
million in 1991. The 14% and 28% revenue increases in the Industrial Fluid
Recovery Service in 1993 and 1992, respectively, were due primarily to increased
volume. North American Industrial Services include revenue from the Industrial
Parts Cleaner Service of $116.1 million in 1993, $112.2 million in 1992 and
$97.3 million in 1991. Revenue growth of the Industrial Parts Cleaner Service
in 1993 was primarily due to increased prices. The Parts Cleaner
Service volumes declined 5% in 1993 primarily as a result of lengthening in the
average time interval between services, partially offsetting the favorable
effect of increased prices. Approximately 34% of the 1992 increased revenue from
the Industrial Parts Cleaner Service was due to volume, with the balance due to
increased prices.
The 1993 revenue decline reported by the North American Oil Recovery Services
was primarily due to lower prices realized in 1993 for sales of re-refined
lubricating oil and
24
<PAGE>
collection of used oil. Partially offsetting the negative effect of lower
prices, was a shift in sales mix from lower value industrial fuel to higher
value re-refined lubricating oil which was enabled by a 12% and 50% expansion of
the Company's East Chicago, Indiana, re-refinery in 1993 and 1992, respectively.
The revenue growth realized in 1992 by North American Oil Recovery Services was
due primarily to a shift in sales mix from lower value industrial fuel to higher
value re-refined lubricating oil. In May, 1991, the Company started up a new oil
re-refining plant in East Chicago, Indiana. In addition, the collection revenues
in 1992 increased due to a 14% increase in the volume of used oil collected.
EUROPE: The European revenue decline in 1993 was attributable to weaker
European currencies, which lowered 1993 revenue by approximately $9.0 million.
Exclusive of the change in exchange rates, European revenue increased nearly 9%.
Approximately 50% of this 1993 revenue increase is attributable to the
acquisition of the Company's joint venture partner's 50% interest in the Spanish
Joint Venture completed in September, 1992. The remaining 1993 increase in
European revenue is a result of volume growth in France and Italy and
approximately 3% higher prices charged for European parts cleaner services in
1993 than 1992. Prior to 1990, the Company's consolidated European operations
consisted of its wholly-owned subsidiary in the United Kingdom and a small
operation in the Republic of Ireland. During 1990 and 1992 the Company made a
series of acquisitions which included Germany's largest solvent recycler, two
German parts cleaner service companies and the Company's joint venture partner's
interests in the Belgian, French, Italian and Spanish parts cleaner operations.
Approximately 70% of the 1992 revenue growth realized by the Company's European
operations was derived from the acquired European operations.
OPERATING COSTS AND EXPENSES: The following table arrays the gross profit
margins of the Company's North American services and European operations for
each of three fiscal years in the period ended January 1, 1994.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Gross Profit Margin
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1993 1992 1991
- -------------------------------------------------------------------------------
North America
Automotive/Retail
Repair Services 31% 36% 37%
Industrial Services 33% 33% 34%
Oil Recovery Services 8% 9% 5%
Other Service Areas 12% 8% 22%
Total North America 24% 25% 28%
Europe 22% 24% 29%
Consolidated 24% 25% 28%
</TABLE>
The North American gross margins in 1993 and 1992 were adversely affected by
expansion costs incurred in anticipation of growth in demand for the Company's
services that was not fully realized in either year. In addition, the Company
incurred higher costs in 1993 and 1992 for environmental compliance in its
branch, distribution and recycling network. These higher fixed expansion and
environmental compliance costs affected all of the North American services
except for Oil Recovery Services, in varying degrees. These costs have been
especially adverse on the Automotive/Retail Repair Service gross margin because
of the decline in service volumes and corresponding effect on revenue.
The 1993 decline in gross profitability of the Company's Oil Recovery Services
is primarily due to lower prices realized in 1993 for sales of lubricating oil
and the collection of used oil. In 1993 and 1992, the Company's re-refining
volume was near available capacity.
The 1993 improvement in North America Other Service Areas gross profitability is
primarily due to a $10.5 million reduction in 1993 from 1992 in the gross loss
of the Company's Puerto Rico Envirosystems Operations. This improvement in the
Puerto Rico operations is attributable to the costly 1992 regulatory problems
discussed earlier. Partially offsetting the favorable effects of the Puerto
Rico operations are $2.2 million higher costs incurred in 1993 than 1992 by the
Company's U.S. Envirosystems operations for alternative waste fuel processing
costs. These higher fuel processing costs are the result of regulatory
constraints on cement kilns which serve as the Company's primary outlet for
waste fuels.
The 1993 decline in Europe's gross profit margin from 1992 is due primarily to
increased costs coupled with weak volume and revenue growth realized by the
Company's UK and German parts cleaner service operations.
The Company's North American 1992 gross profitability was adversely affected by
certain environmental regulatory and compliance costs incurred. 1992 gross
profits from the Other Service Areas reflect a $19.8 million decline in the
gross profits from the Company's Puerto Rico operations. This decline stems from
the regulatory problems discussed earlier. Gross profits of Other Service Areas
were also adversely effected by a $2.0 million charge to settle a dispute with
the State of Kentucky regarding hazardous waste fees and penalties for alleged
violations.
Underlying the 1992 improvement in the Oil Recovery Services gross margin was a
greater sales mix of higher value lubricating oil and a 14% increase in used oil
gallons collected.
The decline in the Company's European gross profitability in 1992 was primarily
due to the German and the United Kingdom operations which were adversely
affected by weak economic activity. In addition, the Company incurred some
redundant costs and other costs in connection with its acquisition in Germany.
25
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses
increased 5% in 1993, representing a significant slow down in the growth of
these expenses. Selling and administrative expenses increased at a slower rate
than revenue in 1992. The dollar increases in selling and administrative
expenses in both years were primarily due to additional employees and employee
expenses and increases in compensation and benefits.
RESTRUCTURING AND SPECIAL CHARGES: During the fourth interim period of 1993 the
Company adopted a restructuring plan based upon the decision to convert its core
Parts Cleaner Service to new technology and other strategic actions to better
focus the Company on its core environmental services, reduce its current cost
structure and improve the value of its services to its customers. In
conjunction with the adoption of this plan the Company recorded a special charge
of $179 million ($106 million after-tax or $1.84 per share). The pre-tax
restructuring charge of $179 million includes $93 million of asset write-downs
and $86 million of other restructuring charges. The after-tax restructuring
charges of $106 million includes an estimated $34 million of costs that will
require cash outflows after 1994 and $72 million of non-cash items.
The Company developed the restructuring plan in response to its poor operating
results during 1993. A major factor in the Company's earnings performance in
1993 is the lack of growth in its core Parts Cleaner Service coupled with higher
expansion and environmental compliance costs. The Company believes that the
lack of growth in its core Parts Cleaner Services in 1993 was due to a number of
factors, including customers' desires to minimize hazardous waste generation
and/or reduce costs, as well as the sluggish economy. Based upon the Company's
test marketing, the Company believes that the new parts cleaner service it has
developed responds to the changing needs of the marketplace. The new parts
cleaner extends the life of the solvent and reduces the number of annual
services required. As a result, the customer generates less waste and the
annual cost of the service is less. The Company has priced the service such
that the customer, on an annual basis, will pay approximately 10% less than he
currently pays for the standard parts cleaner service. However, since the unit
is serviced less frequently, the Company's annual service cost is also lower.
If the customer uses the recommended service intervals, the Company expects its
annual gross profit margins on the new service will be higher than on the
existing service.
As part of the restructuring plan, the Company has provided for the write-down
of the cost of parts cleaner machines expected to be replaced with the new parts
cleaners, as well as the cost of converting the customers to the new service.
The Company plans a major effort to convert a large portion of its current parts
cleaner service customers to the new parts cleaner service over the next two to
three years. This new service has been well received in test markets and the
Company believes it will result in better customer retention and market
penetration.
The anticipated conversion of a large portion of the Company's parts cleaners to
the new technology will reduce the amount of solvent recycling capacity
required. Accordingly, the restructuring charge includes a write-down of
recycling capacity.
With the anticipated future collection of less spent solvent from the Company's
parts cleaner service, the Company plans to convert many of its branch permitted
hazardous waste storage facilities to transfer locations, eliminating the need
for permits required under the Resource Conservation and Recovery Act (RCRA),
thus reducing unnecessary operating costs driven by RCRA-imposed requirements.
The non-cash restructuring charge includes the write-off of the capitalized cost
of the permits at the affected facilities.
Other elements of the restructuring plan include the following:
. a work force reduction of approximately 375 jobs and payment of severance
benefits,
. a write-down of inventories and other assets for discontinuing certain
minor business activities, including the sale of Allied Products, that are
not essential to providing customers with quality environmental services,
and
. accrual of costs and asset write-downs related to the curtailment or sale
of certain operations.
In addition to the restructuring charges, the Company recorded a $50 million
special charge ($30 million after-tax or $0.52 per share) representing a change
in estimate for remediation costs. These additional remediation costs have been
estimated prior to conducting detailed individual site investigations to
ascertain the existence and extent of contamination, and are related to all
operating and previously closed sites. The Company expects the expenditures for
these remediation costs will occur over several years beginning with 1995.
The Company expects a net earnings benefit in 1994 in the range of $12 million
to $15 million as a direct result of cost reductions and other actions resulting
from the restructuring plan and the accounting change. This does not include
the impact of potential higher margins from the Company's new parts cleaner
service.
26
<PAGE>
INTEREST INCOME: The $480,000 and $542,000 declines in interest income in 1993
and 1992 are due primarily to lower interest rates.
INTEREST EXPENSE: Interest expense decreased $1,460,000 and $446,000 in 1993
and 1992, respectively, due to lower interest rates. Interest expense excludes
$4,513,000 and $5,168,000 of interest capitalized during 1993 and 1992,
respectively.
INCOME TAXES: The effective income tax rate was 40% in 1993, 39% in 1992 and
38% in 1991. The increase in the effective tax rate in 1993 is primarily due to
an increase in the U.S. statutory income tax rate. The increase in the
effective tax rate in 1992 was primarily due to the absence of low-taxed income
from the Company's Puerto Rico operations in 1992.
ACCOUNTING CHANGES: The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 112 on accounting for post-employment benefits in fiscal
year 1993. The effect of adopting this accounting change was not material. The
Company adopted SFAS No. 106 on accounting for post-retirement benefits and SFAS
No. 109 on accounting for income taxes in fiscal year 1992. The cumulative
prior years' effect of SFAS No. 106 reduced net earnings by $2.9 million, or
five cents per share. The cumulative prior years' effect of SFAS No. 109
increased net earnings by $3.2 million, or six cents per share. The effects of
adopting SFAS Nos. 106 and 109 are more fully discussed in Notes 7 and 8 to the
Consolidated Financial Statements.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR /1/
- ----------------------------------------------------------------------------------------
1993 1992/4/ 1991 1990 1989
- ----------------------------------------------------------------------------------------
(Expressed in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
- ----------------------------------------------------------------------------------------
Revenue $ 795,508 $ 794,542 $695,001 $588,987 $478,117
Net earnings (loss) (101,346)/2/ 45,637/3/ 51,551 55,198 45,987
Earnings (loss) per share (1.76)/2/ 0.79/3/ 0.90 1.05 0.91
Cash dividends per share 0.360 0.340 0.320 0.267 0.240
BALANCE SHEET DATA
- ----------------------------------------------------------------------------------------
Current assets 193,724 188,717 182,275 169,772 139,143
Current liabilities 149,415 140,988 128,156 102,720 82,040
Working capital 44,309 47,729 54,119 67,052 57,103
Total assets 995,378 1,006,446 903,824 718,548 538,002
Long-term debt 288,633 300,724 243,724 122,158 138,406
Shareholders' equity 362,664 492,095 463,621 429,833 260,630
- ----------------------------------------------------------------------------------------
</TABLE>
/1/ The per share data has been restated to reflect stock splits.
/2/ Includes restructuring and special charges, net of tax benefit, of $136
million ($229 million pre-tax) or $2.36 per share.
/3/ Includes $300,000 ($.01 per share) increase in net earnings from net
cumulative prior years effect of adopting Statement of Financial Accounting
Standards (SFAS) No. 106 on accounting for post-retirement benefits and
SFAS No. 109 on accounting for income taxes.
/4/ Fiscal year 1992 was a fifty-three week year. All other years presented
were fifty-two week.
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Safety-Kleen Corp.:
We have audited the accompanying consolidated balance sheets of Safety-Kleen
Corp. (a Wisconsin corporation) and Subsidiaries as of January 1, 1994, and
January 2, 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 1, 1994. These financial statements are the responsibility
of the Company'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 Safety-Kleen Corp. and
Subsidiaries as of January 1, 1994, and January 2, 1993, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 1, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 7 and 8 to the consolidated financial statements,
effective December 29, 1991, the Company changed its methods of accounting for
post-retirement benefits other than pensions and income taxes.
Chicago, Illinois, Arthur Andersen & Co.
February 10, 1994
CONSOLIDATED
STATEMENTS OF OPERATIONS
Safety-Kleen Corp. and Subsidiaries
For The Years Ended January 1, 1994, January 2, 1993 and December 28,1991
<TABLE>
<CAPTION>
Fiscal Year
- -------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Expressed in thousands, except per share amounts)
REVENUE $ 795,508 $794,542 $695,001
- -------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Operating costs and expenses 605,815 595,572 498,911
Selling and administrative expenses 119,037 113,433 101,592
Restructuring and special charges 229,000 - -
Interest income (846) (1,326) (1,868)
Interest expense 11,111 12,571 13,017
- -------------------------------------------------------------------------------------------------------------
964,117 720,250 611,652
- -------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES (168,609) 74,292 83,349
INCOME TAXES (67,263) 28,955 31,798
- -------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES (101,346) 45,337 51,551
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES - 300 -
- -------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $(101,346) $ 45,637 $ 51,551
- -------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE
Earnings (loss) before cumulative effect of changes in
accounting principles $ (1.76) $ 0.78 $ 0.90
Cumulative effect of changes in accounting principles - 0.01 -
- -------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE $ (1.76) $ 0.79 $ 0.90
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
CONSOLIDATED BALANCE SHEETS
Safety-Kleen Corp. and Subsidiaries
As of January 1, 1994 and January 2, 1993
<TABLE>
<CAPTION>
JANUARY 1, 1994 JANUARY 2, 1993
- -------------------------------------------------------------------------------------------------------------------
ASSETS (Expressed in thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 17,375 $ 30,565
Trade accounts receivable, less allowances of $8,432 and $7,399, respectively 98,678 100,013
Refundable taxes 19,500 802
Inventories 34,362 37,913
Prepaid taxes 10,527 8,410
Prepaid expenses and other 13,282 11,014
- -------------------------------------------------------------------------------------------------------------------
193,724 188,717
- -------------------------------------------------------------------------------------------------------------------
EQUIPMENT AT CUSTOMERS AND COMPONENTS, AT COST, LESS
Accumulated Depreciation of $30,922 and $32,711, respectively 63,026 80,412
- -------------------------------------------------------------------------------------------------------------------
PROPERTY, AT COST
Land 46,651 44,815
Buildings and improvements 223,081 210,954
Leasehold improvements 29,274 29,949
Machinery and equipment 341,994 359,883
Autos and trucks 146,190 142,955
- -------------------------------------------------------------------------------------------------------------------
787,190 788,556
Less accumulated depreciation and amortization 233,971 203,599
- -------------------------------------------------------------------------------------------------------------------
553,219 584,957
- -------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS, AT COST
Goodwill 80,913 86,756
Other 63,055 68,663
- -------------------------------------------------------------------------------------------------------------------
143,968 155,419
Less accumulated amortization 37,254 27,884
- -------------------------------------------------------------------------------------------------------------------
106,714 127,535
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Prepaid taxes, net 72,194 17,244
Other 6,501 7,581
- -------------------------------------------------------------------------------------------------------------------
78,695 24,825
- -------------------------------------------------------------------------------------------------------------------
$995,378 $1,006,446
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 888 $ 429
Trade accounts payable 58,417 59,895
Accrued salaries, wages and employee benefits 20,988 21,380
Other accrued expenses 46,033 45,142
Restructure liability 21,742 -
Income taxes payable 1,347 14,142
- -------------------------------------------------------------------------------------------------------------------
149,415 140,988
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT PORTION 288,633 300,724
- -------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 61,540 58,845
- -------------------------------------------------------------------------------------------------------------------
RESTRUCTURE LIABILITY 62,431 -
- -------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES 70,695 13,794
- -------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 9)
SHAREHOLDERS' EQUITY
Preferred stock ($.10 par value; authorized 1,000,000 shares; none issued) - -
Common stock ($.10 par value; authorized 300,000,000 shares;
issued and outstanding 57,683,756 shares and 57,668,498 shares, respectively 5,768 5,767
Additional paid-in capital 183,612 183,286
Retained earnings 194,261 316,374
Cumulative translation adjustments (20,977) (13,332)
- -------------------------------------------------------------------------------------------------------------------
362,664 492,095
- -------------------------------------------------------------------------------------------------------------------
$995,378 $1,006,446
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' EQUITY
Safety-Kleen Corp. and Subsidiaries
For The Years Ended January 1, 1994, January 2, 1993 and December 28, 1991
<TABLE>
<CAPTION>
TOTAL COMMON ADDITIONAL CUMULATIVE
SHAREHOLDERS' STOCK $.10 PAID-IN RETAINED TRANSLATION
EQUITY PAR VALUE CAPITAL EARNINGS ADJUSTMENTS
- -----------------------------------------------------------------------------------------------
(Expressed in thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 29, 1990 $ 429,833 $5,672 $161,487 $ 256,937 $ 5,737
Net earnings 51,551 - - 51,551 -
Cash dividends (18,195) - - (18,195) -
Stock options exercised and
related tax benefits 3,973 23 3,950 - -
Change in cumulative
translation adjustments (3,541) - - - (3,541)
- -----------------------------------------------------------------------------------------------
Balance at December 28, 1991 463,621 5,695 165,437 290,293 2,196
Net earnings 45,637 - - 45,637 -
Cash dividends (19,556) - - (19,556) -
Stock options exercised and
related tax benefits 6,118 27 6,091 - -
Stock issued for businesses
acquired 11,803 45 11,758 - -
Change in cumulative
translation adjustments (15,528) - - - (15,528)
- -----------------------------------------------------------------------------------------------
Balance at January 2, 1993 492,095 5,767 183,286 316,374 (13,332)
Net (loss) (101,346) - - (101,346) -
Cash dividends (20,767) - - (20,767) -
Stock options exercised and
related tax benefits 327 1 326 - -
Change in cumulative
translation adjustments (7,645) - - - (7,645)
Balance at January 1, 1994 $362,664 $5,768 $183,612 $ 194,261 $(20,977)
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Safety-Kleen Corp. and Subsidiaries
For The Years Ended January 1, 1994, January 2, 1993 and December 28, 1991
<TABLE>
<CAPTION>
FISCAL YEAR
- --------------------------------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(101,346) $ 45,637 $ 51,551
- --------------------------------------------------------------------------------------------------------
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation of equipment at customers and property 65,808 63,714 51,235
Amortization of intangible and other assets 15,673 12,011 9,068
Provisions for doubtful accounts receivable 6,822 7,053 6,921
Change in deferred income tax assets and liabilities, net (85,856) (5,193) 3,820
Write-down of non-current assets due to restructuring 88,028 - -
Other 10,332 8,812 3,219
(Increase) Decrease in assets,
net of effects from business acquisitions:
Short term investments - - 2,833
Trade accounts receivable (4,601) (3,323) (17,492)
Inventories 3,800 4,009 (6,860)
Prepaid expenses and other (2,205) (121) (255)
Increase (Decrease) in liabilities,
net of effects from business acquisitions:
Trade accounts payable and accrued expenses (1,312) 15,265 (2,409)
Restructure reserve 84,173 - -
Other liabilities 56,901 1,543 (718)
- --------------------------------------------------------------------------------------------------------
Total adjustments 237,563 103,770 49,362
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 136,217 149,407 100,913
- --------------------------------------------------------------------------------------------------------
Cash flows used in investing activities:
Equipment at customers additions (20,846) (15,361) (20,904)
Property additions (74,991) (128,127) (147,589)
Payment for business acquisitions, net of cash acquired (2,414) (4,928) (46,137)
Other assets additions, net (18,557) (16,594) (8,697)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (116,808) (165,010) (223,327)
- --------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit agreements (11,634) 40,655 126,124
Proceeds from stock option exercises 326 6,089 3,899
Cash paid for dividends (20,767) (19,556) (18,195)
- --------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (32,075) 27,188 111,828
- --------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (524) (1,003) 175
- --------------------------------------------------------------------------------------------------------
Increase (Decrease) in cash and cash equivalents (13,190) 10,582 (10,411)
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 30,565 19,983 30,394
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 17,375 $ 30,565 $ 19,983
========================================================================================================
- --------------------------------------------------------------------------------------------------------
Supplemental Information:
- --------------------------------------------------------------------------------------------------------
Cash paid during the year for:
Interest (net of amount capitalized) $ 10,375 $ 13,053 $ 12,205
Income taxes $ 18,603 $ 33,556 $ 28,639
- --------------------------------------------------------------------------------------------------------
Consideration given up and liabilities
assumed in business acquisitions $ 4,823 $ 30,630 $ 68,894
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Safety-Kleen Corp. and Subsidiaries
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company and
its subsidiaries after elimination of all significant intercompany balances and
transactions. The Company's fiscal year ends on the Saturday closest to
December 31. Fiscal year 1992 has fifty-three weeks while fiscal years 1993
and 1991 have fifty-two weeks.
Equipment at Customers and Related Depreciation
Equipment at customers is capitalized at manufactured or purchased cost.
Depreciation is computed using the straight-line method commencing when the
units are placed in service.
Property and Related Depreciation
Land, buildings and improvements, leasehold improvements, machinery and
equipment, and autos and trucks are capitalized at cost. Depreciation is
computed principally using the straight-line method.
Intangible Assets and Related Amortization
Goodwill consists primarily of the cost of acquired businesses in excess of
market value of net assets acquired. Other intangible assets consist primarily
of costs to obtain customers, regulatory operating permits and computer
software. Goodwill is amortized using the straight-line method over 40 years.
Amortization of other intangible assets is computed using the straight-line
method over the expected life of the related intangible asset, which principally
ranges from 3 years to 15 years.
Environmental Remediation Costs and Liabilities
In 1993 the Company recorded a $50 million pre-tax charge for a change in
estimate for remediation costs relating to all operating and previously-closed
sites prior to conducting detailed individual site investigations to ascertain
the existence and extent of contamination. The Company reviews the adequacy of
its liability for environmental remediation on a periodic basis and records
additional costs and liabilities accordingly.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are based on the average shares of common
stock outstanding during each year and common stock equivalents of stock
options, if dilutive.
Statement of Cash Flows
Short-term investments with original maturities of 90 days or less are
considered to be cash equivalents for purposes of the Consolidated Statements of
Cash Flows and Consolidated Balance Sheets. Cash flows associated with items
intended as hedges of identifiable transactions are classified in the same
categories as the cash flows of the items being hedged.
Reclassifications
Certain prior year amounts have been reclassified to be consistent with current
year presentation.
2 ACQUISITIONS
All acquisitions made during the three fiscal years ended January 1, 1994 were
accounted for using the purchase method and, accordingly, their operating
results have been included in the Company's Consolidated Statements of
Operations only since the respective dates of acquisition. The acquisitions
were not material either individually or in the aggregate.
3 SEGMENT INFORMATION
The Company and its subsidiaries operate in the United States, the Commonwealth
of Puerto Rico, Canada and in seven European countries consisting of the United
Kingdom, the Republic of Ireland, France, Belgium, Italy, Germany, and Spain.
The Company also operated in Portugal during 1991 and 1992. Spain and Portugal
were operated as fifty percent owned joint ventures until
32
<PAGE>
September of 1992. In September of 1992, the Spanish Joint Venture became a
wholly-owned subsidiary of the Company and the Company sold its interest in the
Portuguese Joint Venture. A summary of certain data with respect to these
operations for the fiscal years ended January 1, 1994, January 2, 1993 and
December 28, 1991, is presented below.
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------
<S> <C> <C> <C>
(Expressed in thousands)
- ------------------------------------------------------------------
REVENUE
United States and Puerto Rico $ 665,592 $ 656,266 $571,925
Canada 50,442 57,003 64,626
Europe 79,474 81,273 58,450
- ------------------------------------------------------------------
Consolidated $ 795,508 $ 794,542 $695,001
==================================================================
TOTAL ASSETS
United States and Puerto Rico $ 770,389 $ 785,737 $711,082
Canada 76,763 70,383 72,669
Europe 148,226 150,326 120,073
- ------------------------------------------------------------------
Consolidated $ 995,378 $1,006,446 $903,824
==================================================================
NET EARNINGS (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLES
United States and Puerto Rico $ (84,454) $ 43,221 $ 49,779
Canada (4,693) 3,214 3,652
Europe (12,199) (1,098) (1,880)
- ------------------------------------------------------------------
Consolidated $(101,346) $ 45,337 $ 51,551
==================================================================
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLES
United States and Puerto Rico $ - $ (1,786) $ -
Canada - - -
Europe - 2,086 -
- ------------------------------------------------------------------
Consolidated $ - $ 300 $ -
==================================================================
NET EARNINGS (LOSS)
United States and Puerto Rico $ (84,454) $ 41,435 $ 49,779
Canada (4,693) 3,214 3,652
Europe (12,199) 988 (1,880)
- ------------------------------------------------------------------
Consolidated $(101,346) $ 45,637 $ 51,551
==================================================================
</TABLE>
The Company operates primarily in one business segment providing generators of
hazardous and non-hazardous liquid wastes with liquid recovery services.
4 INVENTORIES
The Company's inventories consist primarily of solvent, oil, allied products
(carried at lower of cost or market), and supplies. LIFO inventories at January
1, 1994 and January 2, 1993, were $4.7 million and $8.0 million, respectively.
Under the FIFO method of accounting (which approximates current or replacement
cost) inventories would have been $1.8 million and $4.5 million higher,
respectively.
5 FINANCIAL ARRANGEMENTS AND LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1994 1993
- ------------------------------------------------------------
<S> <C> <C>
(Expressed in thousands)
- ------------------------------------------------------------
9.25% Senior Notes due in 1999 $100,000 $100,000
Unsecured notes payable to banks
under financing agreements:
Revolving lines of credit 120,576 113,387
Uncommitted lines of credit 61,557 78,146
Other 7,388 9,620
- ------------------------------------------------------------
289,521 301,153
Less-current portion 888 429
- ------------------------------------------------------------
Total long-term debt $288,633 $300,724
============================================================
</TABLE>
The long-term debt as of January 1, 1994 is due as follows:
In thousands
- ------------------------------------------------------------
1995 $ 43,140
1996 $ 15
1997 $143,759
1998 $ 869
1999 and thereafter $100,850
The $100 million of 9.25% Senior Notes ("the Notes") due September, 1999,
specify that, upon the occurrence of a credit agency rating decline below
"investment grade", either in conjunction with a change in control or as a
result of other events as defined in the Notes, each holder of the Notes has the
option to require the Company to purchase all or any part of such holder's Notes
at a price equal to 100% of the principal amount plus accrued interest.
In May, 1992, the Company executed interest rate swap agreements that
effectively convert $100 million of fixed rate borrowings into variable rate
obligations. These swap agreements expire in September, 1999. In April, 1993,
the Company executed an interest rate swap agreement that converted these $100
million variable rate obligations to a fixed rate. This agreement expires in
September, 1996. The effect of these swaps reduces the interest rate on the
Notes from 9.25% to 7.08% through September, 1996. At that time the interest
reverts to a variable rate. The variable rate is based on the U.S. Dollar
London Interbank Offered Rate (LIBOR) determined at 6-month intervals.
Subsequent to January 1, 1994, the Company intends to combine its existing $100
million revolving credit term loan facility and its $80 million revolving credit
facility into one revolving credit agreement. The existing agreements provide
for interest rates to be determined at the time of borrowing based on a choice
of formulas as specified in
33
<PAGE>
the agreements. A facility fee based on the Company's credit ratings is paid on
the total amount of the lines of credit. At January 1, 1994, $75 million of
borrowings were outstanding at an average interest rate of 3.5%.
At January 1, 1994, the Company had uncommitted lines of credit totalling $130
million. Borrowings under these lines were $62 million at an average interest
rate of 3.5%.
The Company has the ability to convert other bank borrowings to its revolving
credit facilities. Since the committed facilities extend beyond 1994 and the
Company intends to renew these obligations, $143 million of the loans payable to
banks have been classfied as long-term debt.
The Company's German subsidiary has two revolving credit agreements totalling 91
million Deutschmarks (U.S. $52 million) that extend credit until June, 1995. The
interest rate determined at the time of each borrowing is LIBOR plus 0.5%. A
commitment fee of 0.125% per annum is paid quarterly on the unused portion of
the facility. At January 1, 1994, 74 million Deutschmarks ($43 million U.S.) of
borrowings were outstanding under these facilities at an average interest rate
of 6.5% (prior to the effect of the interest rate swap described below).
In May, 1992, the Company's German subsidiary executed an interest rate swap
agreement which expires in May, 1997. The interest rate on DM 70 million (U.S.
$40 million) was swapped from rates based on 6-month DM LIBOR to rates based on
6-month U.S. Dollar LIBOR. At January 1, 1994, the effective interest rate was
5.9%.
The interest rate swap agreements have been entered into with major financial
institutions which are expected to fully perform under the terms of the
agreements. The Company monitors the credit ratings of these counterparties and
considers the risk of default to be remote.
At January 1, 1994, the fair value of the three swap agreements noted above was
approximately $2.7 million less than the Company's carrying value. This fair
value is determined by obtaining quotes from brokers who regularly deal in these
types of financial instruments. These interest rate swaps have resulted in a
net savings of $6.7 million since their inception.
The Company's credit agreements include provisions, among others, relative to
maintenance of working capital and interest coverage ratios. The Company has
obtained waivers of the interest coverage ratio requirement for the fourth
interim period, 1993. The noncompliance was a result of the restructuring and
special charges that the Company recorded in 1993 and is more fully described in
Note 10 to the Consolidated Financial Statements. The Company expects to be in
compliance with all loan provisions as of the next reporting period.
6 CAPITAL STOCK
Preferred Stock
The Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock, par value $.10 per share, at such time or times, in such
series, and with such designations and features thereof as it may determine,
including rate of dividend, redemption provisions and prices, conversion
conditions and prices and voting rights. No shares of preferred stock have been
issued.
Stock Split
In March, 1991, the Company effected a three-for-two stock split recorded in the
form of a stock dividend. All references to the number of common share and per
common share amounts below have been restated to reflect the split.
Stock Option and Employee Stock Purchase Plans
The Company has the following stock option and employee stock purchase plans:
1. The 1985 and 1993 Stock Option Plans (The "Option Plans")
2. The 1988 Non-Qualified Stock Option Plan for Outside Directors (The
"Directors' Plan")
3. The Employee Stock Purchase Plan (the "ESPP")
Under the Option Plans, options to purchase up to 5,937,500 shares (of which
2,750,000 shares were authorized under the 1993 Stock Option Plan) of the
Company's common stock may be granted to officers and other key employees at a
price of 100% of the quoted market price at date of grant. Options granted
under the Option Plans may be either Incentive Stock Options or Non-Qualified
Stock Options. Stock appreciation rights (SARs) may be granted in conjunction
with Non-Qualified Stock Options whereby the grantee may surrender exercisable
Non-Qualified Options and receive a cash payment equal to the difference between
the option price and the market value of the common stock on the exercise date.
Incentive Options, Non-Qualified Options and SARs become exercisable at such
time or times, and are subject to such conditions, as determined at the time
of grant by the Compensation Committee of the Board of Directors.
34
<PAGE>
Under the Directors' Plan, options to purchase up to 300,000 shares of the
Company's common stock may be granted to outside Directors at a price of 100% of
the quoted market price at the date of grant. Under the terms of the Directors'
Plan, options to purchase 15,000 shares were automatically granted effective
February 5, 1988, to each of the seven outside Directors serving on the board at
that date. Any new outside Director elected or appointed after February 5,
1988, would also be granted an option to purchase 15,000 shares of the Company's
common stock upon taking office. The Directors' Plan also provides that a
second option to purchase 15,000 shares be granted to each outside Director on
the fifth anniversary of the initial grant of options to such Director if such
Director is still serving on the Board at that time. Options are exercisable
25% annually, on a cumulative basis, starting one year from date of grant and
terminating ten years after the grant date.
Under the ESPP, a total of 1,500,000 shares of the Company's common stock may be
purchased by employees of the Company and designated subsidiaries, through
payroll deductions, at 90% of the quoted market price for the date preceding the
date of grant. Employees with less than six months of service or who hold
options under the Option Plans are not eligible to participate in this Plan.
A summary of the status of the Company's stock option plans for the three fiscal
years ended January 1, 1994, is presented below.
<TABLE>
<CAPTION>
Available
Price for Future
Shares Range Exercisable Grants
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding Options
@ 12/29/90 1,825,701 $15.55-$27.42 630,005 2,722,518
1991 Activity:
Granted 518,814 $23.85-$32.25
Exercised (259,731) $15.55-$29.59
Cancelled (54,961) $18.58-$32.00
- ------------------------------
Outstanding Options
@ 12/28/91 2,029,823 $17.08-$32.25 990,435 2,258,665
1992 Activity:
Granted 429,080 $26.33-$28.13
Exercised (282,698) $17.08-$29.59
Cancelled (99,445) $18.58-$32.00
- ------------------------------
Outstanding Options
@ 1/2/93 2,076,760 $17.08-$32.25 1,134,476 1,929,030
1993 Activity:
Authorized 2,750,000
Granted 879,101 $13.50-$24.00
Exercised (15,258) $17.33-$19.42
Cancelled (212,188) $17.33-$32.00
- ------------------------------
Outstanding Options
@ 1/1/94 2,728,415 $13.50-$32.25 1,447,846 4,012,117
==============================
</TABLE>
Shareholders' Rights Plan
Pursuant to a plan adopted by the Company in December, 1988, each share of the
Company's common stock carries the right to buy one share of the Company's
common stock at a price of $73.33 per share. The rights will expire on November
21, 1998, unless earlier redeemed by the Company. The rights will become
exercisable if a person becomes an "acquiring person" by acquiring 20% of the
Company's common stock or announces a tender offer that would result in such
person owning 20% or more of the Company's common stock. If someone becomes an
acquiring person (except pursuant to certain cash tender offers for all shares),
the holder of each right (other than rights owned by the acquiring person) will
be entitled to purchase common stock of the Company having a market value of
twice the exercise price of the right. In addition, if the Company is acquired
in a merger or other business combination transaction in which the Company's
common stock is exchanged for cash or securities, or 50% or more of its
consolidated assets or earning power are sold, each holder (other than the
acquiring person) will have the right to purchase common stock of the acquiring
company having a market value of twice the exercise price. The rights may be
redeemed by the Company, at a price of 0.67 cent per right, at any time prior to
anyone becoming an acquiring person.
7 PENSION AND EMPLOYEE BENEFIT PLANS
The Company has noncontributory pension plans covering substantially all full-
time employees in the United States. Domestic pension costs are funded in
compliance with ERISA requirements. Employees become eligible to participate,
generally, after completing one year of service.
The Company's consolidated pension costs for fiscal years 1993, 1992 and 1991
were $7.2 million, $4.0 million, and $3.4 million, respectively. The 1993
pension costs include $2.4 million incurred in conjunction with a restructuring
plan more fully described in Management's Discussion and Analysis of Financial
Condition and Results of Operations - Restructuring and Special Charges on page
26.
The following table sets forth the domestic plans' combined funded status at
January 1, 1994, and January 2, 1993:
35
<PAGE>
<TABLE>
<CAPTION>
January 1, 1994 January 2, 1993
- -------------------------------------------------------------------
(Expressed in thousands)
- -------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligation:
Vested benefits $ 27,700 $19,198
Nonvested benefits 4,674 1,685
- -------------------------------------------------------------------
Accumulated benefit obligation 32,374 20,883
Effect of projected compensation
levels 18,851 13,442
- -------------------------------------------------------------------
Projected benefit obligation 51,225 34,325
Plan assets at fair value 33,645 28,878
- -------------------------------------------------------------------
Projected benefit obligation
greater than plan assets (17,580) (5,447)
Unrecognized net loss 13,036 3,446
Unrecognized net assets to be
amortized over 16-20 years (99) (368)
Unrecognized prior service cost 315 579
- -------------------------------------------------------------------
Unfunded accrued pension cost
recognized in the
Consolidated Balance Sheets $ (4,328) $(1,790)
- -------------------------------------------------------------------
</TABLE>
The Plans' assets consist of cash, cash equivalents, equity funds, pooled funds
of real estate, common stock of the Company and a group annuity contract. Net
periodic pension cost for the Company's domestic plans in 1993, 1992 and 1991
includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------
(Expressed in thousands)
- -----------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 3,374 $ 2,499 $ 2,192
Interest on projected
benefit obligation 3,339 2,818 2,338
Actual return on plan assets (2,034) (2,243) (1,826)
Charges due to restructuring 2,376 - -
Net amortization and deferral (1,007) (33) 9
- -----------------------------------------------------------
Net periodic pension cost $ 6,048 $ 3,041 $ 2,713
===========================================================
</TABLE>
Actuarial assumptions used to determine the projected benefit obligation and the
expected net periodic pension costs were:
<TABLE>
<CAPTION>
1993 1992 1991
- --------------------------------------------------------------
<S> <C> <C> <C>
Projected Benefit Obligation Assumptions:
Discount rates 7.25% 8.75% 8.75%
Rates of increase in
compensation levels 5.0% 6.0% 6.0%
Net Periodic Pension Cost Assumption:
Expected long-term rate of
return on assets 10.0% 10.0% 10.0%
</TABLE>
The Company also has pension plans covering employees of its Canadian and
British subsidiaries. Those plans are funded by purchase of insurance contracts
and units in a managed fund invested in stocks, fixed income securities and real
estate. Vested benefits are fully funded. The Company's foreign subsidiaries are
not required to report under ERISA and do not otherwise determine the actuarial
value of accumulated plan benefits as disclosed above for the Company's domestic
pension plans. These plans do not have a material effect on the Company's
financial condition or results of operations.
Under the Safety-Kleen Corp. Savings and Investment Plan eligible employees may
make contributions, up to a certain limit, to the Plan on a tax-deferred basis
under Section 401(k) of the Internal Revenue Code of 1986. The Company may, at
its discretion, make matching contributions out of its profits for the year. The
Company did not make a matching contribution in 1993. The Company's expense for
contributions was $1.1 million in 1992, and $0.1 million in 1991.
The Company offers a post-retirement medical insurance plan to its domestic
employees retiring prior to the normal retirement age of 65. Retirees are
eligible to continue this medical coverage until age 65. The plan is currently
unfunded and retirees electing this coverage are required to pay a premium for
the insurance.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 106
on accounting for employees' post-retirement benefits during the fourth quarter
of 1992 retroactive to the beginning of the year. This statement requires the
accrual of the cost of providing post-retirement health care coverage over the
active service period of the employee. Prior to 1992, these costs were charged
to operating expenses in the year paid and were immaterial. The Company elected
to immediately recognize the accumulated liability in 1992.
The following table reconciles the funded status of the plan to the accrued
post-retirement benefit cost recognized in the Consolidated Balance Sheets at
January 1, 1994, and January 2, 1993:
<TABLE>
<CAPTION>
January 1, 1994 January 2, 1993
- ------------------------------------------------------------------------
(Expressed in thousands)
- ------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement
benefit obligation (APBO):
Retirees, beneficiaries
and dependents $ 1,626 $ 600
Active employees 6,345 4,100
- ------------------------------------------------------------------------
7,971 4,700
- ------------------------------------------------------------------------
Plan asset at fair value - -
- ------------------------------------------------------------------------
APBO greater than plan assets (7,971) (4,700)
- ------------------------------------------------------------------------
Unrecognized net loss 1,567 -
- ------------------------------------------------------------------------
Accrued post-retirement benefit cost $(6,404) $(4,700)
- ------------------------------------------------------------------------
APBO discount rate assumption 7.25% 8.75%
</TABLE>
Net periodic post-retirement benefit cost for 1993 of $1,805,000 included
$735,000 for service cost of benefits earned, $489,000 for interest cost on the
APBO; and $581,000 for one-time curtailment charge due to the restructuring. Net
periodic benefit costs for 1992 were not material.
36
<PAGE>
The health care cost trend was assumed to be 11% in 1994 decreasing steadily to
an ultimate trend of 4.5% in 1998.
If the health care cost trend rate increases one percent for all future years,
the accumulated post-retirement benefit obligation as of January 1, 1994, would
have increased 17.1%. The effect of this change on the aggregate of the service
cost and interest cost for 1993 would be an increase of 21.3%.
The Company also adopted SFAS No. 112 on accounting for post-employment benefits
during 1993. The effect of adopting this change was not material.
8 INCOME TAXES
The components of earnings before income taxes consisted of the following for
each of the last three fiscal years.
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------
(Expressed in thousands)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(137,043) $73,234 $78,451
Foreign (31,566) 1,058 4,898
- ------------------------------------------------------------------------------
$(168,609) $74,292 $83,349
==============================================================================
</TABLE>
Effective December 29, 1991 the Company adopted SFAS No. 109 on accounting for
income taxes. This adoption resulted in an increase in net earnings of $3.2
million or $.06 per share for the cumulative effect of prior years' income. The
effect of the adoption on income for the year ended January 2, 1993, was not
material.
Under SFAS No. 109, deferred tax assets and liabilities are computed based on
the difference between the financial statement and income tax bases of assets
and liabilities using the enacted tax rates. The provisions (benefits) for
income taxes include the following:
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------
(Expressed in thousands)
- ------------------------------------------------------------------------------
CURRENT
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 878 $24,468 $20,161
State 1,361 5,877 4,926
Commonwealth of Puerto Rico (1,726) - 393
Foreign - 1,646 2,687
DEFERRED
Federal (2,871) 5,364 5,045
Foreign (15,841) 2,725 1,481
PREPAID
Federal (35,926) (1,130) (1,715)
State (8,340) - -
Commonwealth of Puerto Rico (5,657) (5,361) -
Foreign 859 (4,634) (1,180)
- ------------------------------------------------------------------------------
Total provision (benefit) $(67,263) $28,955 $31,798
==============================================================================
</TABLE>
The following table reconciles the statutory U.S. federal income tax rate to the
Company's consolidated effective tax rate:
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. federal tax rate (35.0%) 34.0% 34.0%
Increase (decrease) resulting from:
Provision for state income tax,
net of federal benefit (2.9) 5.3 3.9
Difference in foreign statutory rates (3.3) (1.6) 0.1
Puerto Rico Commonwealth tax
and U.S. federal tax exemption, net - (0.6) (2.0)
Other 1.3 1.9 2.2
- ------------------------------------------------------------------------------
Effective tax rate (39.9%) 39.0% 38.2%
==============================================================================
</TABLE>
Temporary differences and carry forwards which give rise to deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
January 1, 1994 January 2, 1993
- ------------------------------------------------------------------------------
(Expressed in thousands)
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets-current
Environmental reserves $ 1,628 $ 1,580
Insurance reserves 6,551 5,275
Other 2,348 1,555
- ------------------------------------------------------------------------------
Total deferred tax assets - current 10,527 8,410
- ------------------------------------------------------------------------------
Deferred tax assets - non-current
Restructuring charges
not currently deductible 37,084 -
Net operating loss (NOL)
carry forwards of subsidiaries 16,233 18,845
Environmental reserves 21,113 1,613
Valuation allowance (4,560) (6,083)
Other 2,324 2,869
- ------------------------------------------------------------------------------
Total deferred tax assets
non-current 72,194 17,244
- ------------------------------------------------------------------------------
Total deferred tax assets $ 82,721 $ 25,654
==============================================================================
Deferred tax liabilities
Restructuring and special charges $ 14,061 $ -
Depreciation (62,338) (51,190)
Tax lease agreements (7,682) (7,496)
Other (5,581) (159)
- ------------------------------------------------------------------------------
Total deferred tax liabilities $(61,540) $(58,845)
==============================================================================
</TABLE>
37
<PAGE>
The following summarizes the detail of the deferred income tax provision
(benefit) for 1991, which has not been restated for the adoption of SFAS No.
109:
<TABLE>
<CAPTION>
1991
- --------------------------------------------------------------
(Expressed in thousands)
- --------------------------------------------------------------
<S> <C>
Federal
Depreciation $ 6,443
Tax lease agreements (1,398)
Other (1,715)
- --------------------------------------------------------------
Total Federal 3,330
- --------------------------------------------------------------
Foreign 301
- --------------------------------------------------------------
Total deferred tax (benefit) $ 3,631
==============================================================
</TABLE>
The NOLs that have no expiration total approximately $9.9 million or 61% of the
total NOLs available to the Company. The remaining NOLs of approximately $6.3
million consist of NOLs with expiration dates as follows:
<TABLE>
<CAPTION>
In Thousands
- ------------------------------------------------------
<S> <C>
1994 $ 633
1995 $1,911
1996 $1,107
1997 $ 862
1998 $ 184
1999 $1,302
2000 $ 301
</TABLE>
The Company has recorded a valuation allowance of approximately $4.6 million for
unrealized NOLs that may expire before the Company is able to utilize such NOLs.
The valuation allowance account balance of $4.6 million represents approximately
72% of the NOLs that are due to expire as compared to a valuation allowance
percentage of approximately 54% of the NOLs due to expire at the end of 1992.
The valuation account balance activity is summarized in the table below.
<TABLE>
<CAPTION>
1993
- -------------------------------------------------------------
(Expressed in thousands)
- -------------------------------------------------------------
<S> <C>
Balance - beginning of year $6,100
Increase (Decrease):
Change in German tax rate (300)
Adjust valuation balances (905)
Cumulative translation adjustment (335)
- -------------------------------------------------------------
Balance - end of year $4,560
=============================================================
</TABLE>
9 OTHER ACCRUED EXPENSES AND LIABILITIES, COMMITMENTS AND CONTINGENT LIABILITIES
The Company operates a large number of hazardous waste facilities for the
collection and processing of hazardous and non-hazardous liquid wastes and is
subject to extensive and expansive regulation by Federal, state and local
authorities.
In the ordinary course of conducting its business activities, the Company
becomes involved in judicial and administrative proceedings in which
governmental authorities seek remedial actions and/or fines and penalties. The
Company also has been notified by the EPA that it may be a responsible party at
several National Priority List ("NPL") sites. Generally, these proceedings by
federal and state regulatory agencies have been resolved by negotiation and
settlement. Based on its past experience and its knowledge of pending cases,
the Company believes it is unlikely that the Company's actual liability on the
cases now pending will be materially adverse to the Company's financial
condition. It should be noted, however, that many environmental laws are written
in a way in which the Company's potential liability can be large and it is
always possible that the Company's actual liability on any particular
environmental claim will prove to be larger than anticipated or accrued for by
the Company. It is also possible that expenses incurred in any particular
reporting period for remediation costs or fines, penalties or judgments could
have a material impact on the Company's earnings for that period.
Federal regulations also govern hazardous waste storage tanks and all
underground tanks which are used to store chemicals of the type used by the
Company. The Company is in the process of removing underground storage tanks at
certain of its locations. The Company believes there are instances where costs
may be incurred by the Company to do remedial cleanup work at some of the
Company's operating sites. In 1993 the Company recorded a $50 million pre-tax
special charge ($30 million after-tax or $0.52 per share) for a change in
estimate for remediation costs relating to all operating and previously-closed
sites prior to conducting detailed individual site investigations to ascertain
the existence and extent of contamination. This change results in earlier
recognition of environmental remediation costs and liabilities as compared with
the Company's previous practice, which was to accrue the estimated cost of
remedial cleanup work at the time the need for such work was specifically
identified based on site investigation. The Company's accrued liabilities for
such costs are reflected in current and non-current liabilities in the Company's
Consolidated Balance Sheets as follows:
<TABLE>
<CAPTION>
Jan. 1, 1994 Jan. 2, 1993
- --------------------------------------------------------------
(Expressed in millions)
- --------------------------------------------------------------
<S> <C> <C>
Current Liabilities-
Other accrued expenses $10.7 $12.9
Non-current Liabilities-
Other liabilities 55.8 5.8
Total $66.5 $18.7
==============================================================
</TABLE>
38
<PAGE>
Federal environmental regulations require that the Company demonstrate financial
responsibility for sudden and non-sudden releases, as well as closure and post-
closure liabilities. One manner by which to make this demonstration is through
Environmental Impairment Liability (EIL) insurance coverage. The Company has
EIL insurance coverage which it believes complies with the Federal regulatory
requirements. However, the Company must reimburse the insurance carrier for all
losses and expenses incurred by it under the policy. The Company's income could
be adversely affected in the future if it is unable to obtain risk-transfer EIL
insurance coverage and losses were to be incurred.
The Company leases certain of its branches, vehicles and other equipment. These
leases are accounted for as operating leases. Related rental expenses were
$20.8 million in 1993, $20.3 million in 1992 and $14.7 million in 1991.
Aggregate minimum future rentals are payable as follows:
<TABLE>
<CAPTION>
In Millions
- ------------------------------------------
<S> <C>
1994 $16.1
1995 14.4
1996 11.7
1997 9.5
1998 7.0
Future Years 16.7
- ------------------------------------------
Total $75.4
==========================================
</TABLE>
10 RESTRUCTURING AND SPECIAL CHARGES
During the fourth interim period of 1993 the Company adopted a restructuring
plan based on conversion of its core Parts Cleaner Service to new technology and
other strategic actions. In conjunction with the adoption of this plan, the
Company recorded a special charge of $179 million ($106 million after tax or
$1.84 per share) in the fourth quarter. The pre-tax restructuring charge
includes $93 million of asset write-downs and $86 million of other restructuring
charges.
In addition to the restructuring charges, the Company recorded an additional $50
million special charge ($30 million after-tax or $0.52 per share) representing a
change in estimate for remediation costs. These additional remediation costs
have been estimated prior to conducting detailed individual site investigations
to ascertain the existence and extent of contamination, and are related to all
operating and previously-closed sites.
11 INTERIM RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Earnings (Loss)
Revenue Gross Profit Net Earnings (Loss) Per Share
- ------------------------------------------------------------------------------------------------------------------
Period 1993 1992 1993 1992 1993/1/ 1992/2/ 1993/1/ 1992/2/
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First (12 Weeks) $181,818 $173,939 $ 43,051 $ 47,388 $ 8,635 $12,395 $ 0.15 $0.22
Second (12 Weeks) 189,314 184,099 47,725 52,115 10,487 14,459 0.18 0.25
Third (12 Weeks) 182,047 184,637 43,391 41,940 5,809 6,173 0.10 0.10
Fourth (16 And 17 Weeks) 242,329 251,867 55,526 57,527 (126,277) 12,610 (2.19) 0.22
- ------------------------------------------------------------------------------------------------------------------
Total $795,508 $794,542 $189,693 $198,970 $(101,346) $45,637 $(1.76) $0.79
==================================================================================================================
</TABLE>
/1/ During the fourth interim period the Company recorded restructuring and
special charges of $136 million, net of tax benefits, ($229 million pre-
tax) or $2.36 per share which is more fully described in Note 10 to the
Consolidated Financial Statements and the Management's Discussion and
Analysis of Financial Condition and Results of Operations - Restructuring
and Special Charges on page 26.
/2/ During the first interim period of 1992, the Company adopted SFAS No. 109
on accounting for income taxes. The cumulative prior years' effect of SFAS
No. 109 increased net earnings by $3.2 million or $.06 per share. The
first interim period of 1992 has also been restated to reflect the
retroactive adoption of SFAS No. 106 on accounting for post-retirement
benefits. The cumulative prior years' effect of SFAS No. 106 reduced net
earnings by $2.9 million or $.05 per share.
39
<PAGE>
BOARD OF DIRECTORS
Donald W. Brinckman, Founder, Chairman and Chief
Executive Officer, Safety-Kleen Corp.
John G. Johnson Jr., President and Chief Operating Officer,
Safety-Kleen Corp.
Kenneth L. Block, Chairman Emeritus, A. T. Kearney, Inc.
(international management consulting firm)
Richard T. Farmer, Chairman and Chief Executive Officer,
Cintas Corporation (uniform manufacturer and supplier)
Russell A. Gwillim, Chairman Emeritus, Safety-Kleen Corp.
Egdar D. Jannotta, Managing Partner,
William Blair & Company (investment banking firm)
Karl G. Otzen, President, Gerhard & Company
(product development consulting firm)
Paul D. Schrage, Senior Executive Vice President,
McDonald's Corporation (restaurant franchiser
and operator)
W. Gordon Wood, Retired Vice President,
Safety-Kleen Corp.
OFFICERS
Donald W. Brinckman, Founder, Chairman, Chief
Executive Officer and Director
John G. Johnson Jr., President, Chief Operating
Officer and Director
Hyman K. Bielsky, Senior Vice President General Counsel
Robert J. Burian, Senior Vice President Human Resources
Michael H. Carney, Senior Vice President Marketing
Joseph Chalhoub, Senior Vice President Processing,
Engineering and Oil Recovery
David A. Dattilo, Senior Vice President Sales and Service
Scott E. Fore, Senior Vice President Environment,
Health and Safety
F. Henry Habicht II, Senior Vice President
Strategic/Environmental Planning
William P. Kasko, Senior Vice President Operations
and Information
Robert W. Willmschen Jr., Senior Vice President
Finance and Secretary
Glenn R. Casbourne, Vice President Engineering
Wallace K. Louder, Vice President Information Systems
Clark J. Rose, Vice President Technical Services
Laurence M. Rudnick, Treasurer
John Rycombel, Controller
40
<PAGE>
CORPORATE DATA
Corporate Office
Safety-Kleen Corp., 1000 North Randall Road,
Elgin, IL 60123,
Telephone: 708/697-8460
Auditors
Arthur Andersen & Co., 33 W. Monroe Street,
Chicago, IL 60603.
Registrar and Transfer Agent
First Chicago Trust Company of New York,
Post Office Box 2500, Jersey City, NJ 07303
Annual Meeting
The Annual Meeting of Shareholders of Safety-Kleen Corp.
will be held at 10:00 a.m., Friday, May 13, 1994, at
The Westin Hotel, O'Hare, 6100 River Road,
Rosemont, IL 60018.
Stock Listing
Safety-Kleen stock is traded on the New York
Stock Exchange.
Stock Symbol SK
Form 10-K
Safety-Kleen's Annual Report to the Securities and
Exchange Commission on Form 10-K is available, on
request, from Safety-Kleen's Corporate Secretary.
Shareholder Dividend Reinvestment Plan
Safety-Kleen offers a dividend reinvestment plan for
shareholders of record. Further information may be
obtained from the Company's Registrar and Transfer
Agent as follows:
First Chicago Trust Company of New York
Post Office Box 2598
Jersey City, NJ 07303
Telephone: (800) 446-2617
MARKET AND DIVIDEND INFORMATION
The Company's common stock is traded on the New York
Stock Exchange. The approximate number of record
holders of the Company's common stock at January 1, 1994
was 7,283.
The following table shows the range of common stock
prices and cash dividends for the calendar quarters
indicated. The quotations represent the high and low
prices on the New York Stock Exchange as reported by
The Wall Street Journal.
<TABLE>
<CAPTION>
1993 1992
______________________________________________________
Cash Cash
Prices Dividends Prices Dividends
High Low Paid High Low Paid
<S> <C> <C> <C> <C> <C> <C>
March 31 $24.75 $20.00 $0.09 $28.75 $22.63 $0.085
June 30 21.13 16.13 0.09 30.38 24.13 0.085
September 30 18.00 14.38 0.09 30.75 26.38 0.085
December 31 18.13 13.13 0.09 32.25 23.25 0.085
_________________________________________________________________________
$0.36 $0.340
_________________________________________________________________________
_________________________________________________________________________
</TABLE>
The Company has continuously paid quarterly cash
dividends since March, 1979. The Company expects to
continue its policy of paying regular cash dividends,
although there is no assurance as to future dividends, as
they are dependent upon future earnings, capital
requirements, financial condition of the Company and
other factors.
(C) 1994 Printed in U.S.A. Printed on recycled paper.
Safety-Kleen Corp. is an Equal Opportunity Employer m/f
41
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Management
of Safety-Kleen Corp.:
As independent public accountants, we hereby consent to the incorporation of
our reports included in or incorporated by reference to this Form 10-K, into
the Company's previously filed Registration Statements on Form S-8 (File
No. 2-97490, File No. 2-67421, File No. 33-34892, File No. 33-51396 and File
No. 2-97196) and on Form S-3 (File No. 22-806, File No. 33-18043, File No.
33-15010, File No. 33-27174, File No. 33-30519, File No. 33-35008 and File
No. 33-44715.
/s/ ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994
