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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the twelve weeks ended March 28, 1998.
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to
___________.
Commission File #1-8513
SAFETY-KLEEN CORP.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-6090019
- ------------------------------- ---------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
One Brinckman Way, Elgin, Illinois 60123-7857
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code 847/697-8460
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 __
Shares of common stock outstanding at March 28, 1998 were 60,101,962.
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
PART I. FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended January 3, 1998.
In the opinion of management, these statements contain all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly the
financial position as of March 28, 1998 and January 3, 1998, results of
operations and comprehensive income for the twelve week periods ended March 28,
1998 and March 22, 1997 and cash flows for the twelve week periods ended March
28, 1998 and March 22, 1997. The 1998 interim results reported herein may not
necessarily be indicative of the results of operations for the full year 1998.
1
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts are in thousands except per share data)
ASSETS
MARCH 28, 1998 JANUARY 3, 1998
Current assets:
Cash and cash equivalents $ 30,458 $ 11,202
Trade accounts receivable, less
allowances of $7,977 and $7,634,
respectively 134,183 131,092
Inventories 51,849 51,339
Deferred tax assets 10,177 10,694
Prepaid expenses and other 20,662 20,099
--------- ---------
Total current assets 247,329 224,426
--------- ---------
Equipment at customers and
components, at cost, less
accumulated depreciation of
$44,853 and $44,928, respectively 130,569 127,631
Property, plant and equipment, at
cost, less accumulated
depreciation of $393,379 and
$384,422, respectively 497,128 502,110
Intangible assets, at cost, less
accumulated amortization of
$73,524 and $95,568, respectively 143,017 144,536
Other assets 37,092 36,003
--------------- ----------------
$1,055,135 $1,034,706
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term debt $213,000 $ 37
Trade accounts payable 78,053 75,284
Accrued salaries, wages and
employee benefits 28,096 29,769
Other accrued expenses 24,343 28,343
Insurance reserves 12,855 12,614
Accrued environmental liabilities 8,376 8,382
Income taxes payable 1,049 1,014
--------------- ---------------
Total current liabilities 365,772 155,443
--------------- ---------------
Long-term debt - 214,234
--------------- ---------------
Deferred tax liabilities 67,259 65,607
--------------- ---------------
Accrued environmental liabilities 31,436 32,888
--------------- ---------------
Other liabilities 37,760 37,067
--------------- ---------------
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 60,101,962 and
59,191,462 shares, respectively) 6,010 5,919
Additional paid-in capital 231,175 212,504
Retained earnings 342,868 338,318
Cumulative translation adjustments (27,145) (27,274)
--------------- ---------------
552,908 529,467
--------------- ---------------
$1,055,135 $1,034,706
=============== ===============
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollar amounts are in thousands except per share data)
Twelve Weeks Ended
----------------------------
March 28, March 22,
1998 1997
----------- ------------
Revenue $241,777 $220,230
Operating costs and expenses 181,781 164,084
Selling and administrative expenses 34,552 32,575
----------- ------------
Operating income 25,444 23,571
Interest income (408) (227)
Interest expense 3,612 4,361
Merger related costs 5,997 -
----------- ------------
Earnings before income taxes 16,243 19,437
Income taxes 6,286 7,599
----------- ------------
Net earnings $ 9,957 $ 11,838
=========== ============
Earnings per common share:
Basic $0.17 $0.20
Diluted $0.16 $0.20
=========== ============
Cash dividends per common share $0.09 $0.09
=========== ============
The accompanying notes are an integral part of these financial statements.
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollar amounts are in thousands)
Twelve Weeks Ended
----------------------------
March 28, March 22,
1998 1997
----------- ------------
Net earnings $ 9,957 $11,838
Unrealized foreign currency translation
adjustments 129 (7,197)
---------- ------------
Comprehensive income $10,086 $ 4,641
========== ============
==============================================================================
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts are in thousands)
Twelve Weeks Ended
Mar. 28, Mar. 22,
1998 1997
------------ ------------
Cash flows from operating activities:
Net earnings $9,957 $11,838
Depreciation and amortization 19,046 17,658
All other operating activities (net) 1,534 (10,856)
------------ ------------
Net cash provided by operating activities $30,537 $18,640
------------ ------------
Cash flows used in investing activities:
Equipment at customers and
component additions (8,709) (4,857)
Property, plant and equipment additions (5,686) (6,992)
Business acquisitions and other (5,963) (8,399)
------------ ------------
Net cash used in investing activities (20,358) (20,248)
------------ ------------
Cash flows from (used in) financing activities:
Net borrowings (payments) (1,271) 9,387
Proceeds from stock option exercises 15,763 362
Cash dividends paid (5,406) -
------------ ------------
Net cash from (used in) financing
activities 9,086 9,749
------------ ------------
Effect of exchange rate changes on cash (9) (164)
------------ ------------
Net increase in cash and cash equivalents 19,256 7,977
Cash and cash equivalents at beginning of year 11,202 10,648
------------ ------------
Cash and cash equivalents at end of the $30,458 $18,625
reporting period
============ ============
Supplemental disclosures of cash paid during the reporting period:
Interest (net of amount capitalized) $7,491 $7,298
============ ============
Income taxes paid (net of refunds received $119 $774
============ ============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MERGER RELATED COSTS
On August 8, 1997, the Company's Board of Directors ("Board") initiated
a process to review strategic alternatives including the sale of all or part
of the Company. On November 20, 1997, the Board approved a merger agreement
with SK Parent Corp. (a Delaware corporation owned equally by Phillips
Services Corp., affiliates of Apollo Management, L.P. and affiliates of
Blackstone Partners III, L.L.C.) but subsequently was unable to gain the
necessary shareholder approval for the agreement. The Board then terminated
the merger agreement with SK Parent and began negotiations with Laidlaw
Environmental.
On March 15, 1998, the Board unanimously approved a definitive merger
agreement ("Merger Agreement") with Laidlaw Environmental which provides for
an exchange offer followed by a back-end merger. By April 7, 1998, Laidlaw
Environmental had acquired a total of 55,751,582 shares which were validly
tendered under the exchange offer and constituted approximately 93% of the
outstanding shares of Safety-Kleen. A special shareholder meeting has been
scheduled for May 18, 1998 to vote on approval of the merger.
During the first twelve weeks of 1998, the Company incurred $6.0
million of costs in conjunction with this process.
2. EARNINGS PER SHARE
The weighted average number of common shares outstanding for the twelve
weeks ended March 28, 1998 and March 22, 1997 were as follows (in thousands):
1998 1997
--------- ---------
Weighted average number of shares outstanding - basic 59,652 58,258
Dilutive effect of stock options and warrants 1,479 162
--------- --------
Weighted average number of common shares
outstanding - diluted 61,131 58,420
========= =========
The Company had additional stock options of 309,525 and 2,370,103 shares
at March 28, 1998 and March 22, 1997, respectively, which were not included in
the computation of diluted earnings per share because the options' exercise
price was greater than the average market price of the common share.
5
<PAGE>
3. COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 130 on "Reporting Comprehensive Income" which requires companies to
report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners in a financial statement for the
period in which they are recognized. The Company has selected to present
separate Consolidated Statements of Comprehensive Income following the
Consolidated Statements of Earnings. The prior year has been restated to conform
to the SFAS No. 130 requirements.
4. INVENTORIES
The Companies inventories consist of the following (expressed in
thousands):
March 28, 1998 January 3, 1998
------------------ --------------------
Oil $12,878 $12,759
Solvent, Drums and Other 38,971 38,580
------------------ --------------------
Total $51,849 $51,339
================== ====================
LIFO inventories at March 28, 1998 and January 3, 1998 were $5.9 and $5.5
million, respectively. Under the FIFO method of accounting (which approximates
current or replacement cost), inventories would have been $0.4 million higher at
March 28, 1998 and January 3, 1998.
5. DEBT
The Company reclassified all outstanding long-term debt to short term as
all debt will be paid off in 1998 as a consequence of change of control
provisions included in the Company's credit agreements. These provisions were
triggered by the acquisition of 93% of the Company's outstanding common stock,
in April of 1998 by Laidlaw Environmental.
6. INTERIM REPORTING PERIODS
The Company's interim reporting periods are twelve weeks each for the
first three reporting periods of the year, and sixteen and seventeen weeks for
the fourth reporting period of 1998 and 1997, respectively.
6
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT DISCLOSURE
THIS REPORT CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS, INCLUDING
FINANCIAL, OPERATING AND OTHER PROJECTIONS. THERE ARE MANY FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, SUCH AS: DEVELOPMENTS RELATED TO THE
MERGER AGREEMENT AND THE INTEGRATION OF SAFETY-KLEEN'S BUSINESS AND OPERATIONS
WITH THOSE OF LAIDLAW ENVIRONMENTAL; ADOPTION OF NEW ENVIRONMENTAL LAWS AND
REGULATIONS AND CHANGES IN THE WAY SUCH LAWS AND REGULATIONS ARE INTERPRETED AND
ENFORCED; GENERAL BUSINESS CONDITIONS, SUCH AS THE LEVEL OF COMPETITION, CHANGES
IN DEMAND FOR THE COMPANY'S SERVICES AND THE STRENGTH OF THE ECONOMY IN GENERAL;
AND, PRICES FOR PETROLEUM BASED PRODUCTS. THESE AND OTHER FACTORS ARE DISCUSSED
IN THIS REPORT AND OTHER DOCUMENTS THE COMPANY HAS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's working capital decreased from $69.0 million at January 3,
1998 to a negative $118.4 million at March 28, 1998. The Company reclassified
approximately $213.0 million of debt from long-term to short-term as all debt
will be paid off as a consequence of change of control provisions included in
the Company's credit agreements. The provisions were triggered by the Laidlaw
Environmental Services, Inc. ("Laidlaw Environmental") acquisition of 93% of the
Company's common stock in April of 1998. It is the intention of Laidlaw
Environmental that the debt of Safety-Kleen will be paid off by the use of
additional borrowings under its own long-term credit facilities. Year-to-date
capital spending for equipment at customers and property, plant and equipment
additions totaled $14.4 million. These expenditures were mainly financed by
internally generated cash. The Company's total debt, including both long-term
and short-term debt, at March 28, 1998 decreased by $1.3 million from 1997
fiscal year-end.
The Company's total debt to total capital ratio was 27.8% at March 28,
1998 and 28.8% at January 3, 1998. The Company expects its total debt to total
capital ratio to change significantly from its current level as a result of the
completion of the merger.
8
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE TWELVE WEEK PERIODS ENDED
MARCH 28, 1998 AND MARCH 22, 1997
REVENUE
Revenue for the twelve weeks ended March 28, 1998 was $242 million, up $22
million, or 10%, from the comparable period last year.
Revenue derived from the Company's North American and European operations
during the twelve weeks ended March 28, 1998 and March 22, 1997 was as follows:
THOUSANDS OF DOLLARS
Percentage
Increase
MARCH 28, 1998 MARCH 22, 1997 (DECREASE)
North America
Industrial Services $ 76,793 $ 65,386 17%
Automotive/Retail Repair Services 62,960 59,317 6%
Oil Recovery Services 33,140 32,858 1%
Other Services 42,587 37,249 14%
--------------- ---------------
Total North America 215,480 194,810 11%
Europe 26,297 25,420 3%
--------------- ---------------
Consolidated $241,777 $220,230 10%
=============== ===============
NORTH AMERICAN INDUSTRIAL SERVICES. The Company's North American
Industrial Services revenue for the current reporting period includes $42.5
million from the Fluid Recovery Service, which represents an $8.2 million, or
24%, increase over the comparable period of 1997. Approximately $4.5 million of
the revenue increase is from the expansion of the Company's new Technical Field
Services program introduced in early 1997. Waste drum service revenues increased
approximately $2.4 million of which two thirds is due to price and one third is
due to volume. The remaining revenue increase largely resulted from increased
absorbent sales.
The North American Industrial Parts Cleaner Service accounts for the
remaining $34.3 million of revenue, which represents an increase of $3.3
million, or 10%, from the comparable period of 1997. The 10% revenue increase
consisted of a 5% increase due to price and a 5% increase due to volume.
9
<PAGE>
NORTH AMERICAN AUTOMOTIVE/RETAIL REPAIR SERVICES. The continued expansion
of the Vacuum Services business that was introduced during the second half of
1996 increased revenue by $3.5 million. Automotive Parts Cleaning revenue
recognized in the first twelve weeks of 1998 was unchanged from the comparable
period of 1997 as an increase of 4% due to price was offset by a 4% volume
decline.
NORTH AMERICAN OIL RECOVERY SERVICES. Revenues increased by $0.3 million,
or 1%. Used oil collection pricing increased revenues by $0.7 million and oily
water revenues increased by $0.9 million primarily due to volume. Fuel oil
revenues declined $1.3 million substantially due to volumes resulting from lower
seasonal demand. A drop of approximately 7% in the per gallon average price of
base and blended lube oil from the comparable period of 1997 resulted in a
revenue decline of $1.3 million. This price decline was completely offset by a
21% volume increase in blended lube oil sales.
NORTH AMERICAN OTHER SERVICES. Revenue from Other Services during the
current reporting period increased $5.3 million, or 14%, from the comparable
period of 1997. Imaging Services accounted for $3.1 million of the increase
attributable mainly to increased precious metal sales. The Company's service
revenue from its Integrated Customer Compliance Services increased by $1.3
million due mainly to an acquisition made during the fourth interim period of
1997. The remaining increase reflects improved pricing in the Company's paint
refinishing business and improved volume in the Company's dry cleaning business.
EUROPE. European revenues of $26.3 million were up $0.9 million, or 3%,
from the comparable period of 1997. The impact of foreign currency exchange
rates reduced European revenue in the current period by approximately $1.5
million, or 6% from 1997. All major businesses showed increases in local
currency revenue.
OPERATING COSTS AND EXPENSES
Operating costs and expenses as a percentage of revenue were 75.2% in the
current reporting period, compared to 74.5% for the first interim period of
1997. The increase in the operating cost percentage reflects lower margins
earned on the newer businesses, such as Technical Field Services, Vacuum,
Imaging, and Integrated Customer Compliance Services.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased by 6% due mainly to higher
employee related costs. Despite this increase, selling and administrative
expenses decreased from 14.8% of revenue in the first interim period of 1997 to
14.3% of revenue in the same period of 1998 as revenues increased at a greater
rate than selling and administrative expenses.
INTEREST EXPENSE
Interest expense decreased $0.7 million to $3.6 million during the current
reporting period due primarily to lower borrowings.
10
<PAGE>
MERGER RELATED COSTS
On August 8, 1997, the Company's Board of Directors ("Board") initiated
a process to review strategic alternatives including the sale of all or part
of the Company. On November 20, 1997, the Board approved a merger agreement
with SK Parent Corp. (a Delaware corporation owned equally by Phillips
Services Corp., affiliates of Apollo Management, L.P. and affiliates of
Blackstone Partners III, L.L.C.) but subsequently was unable to gain the
necessary shareholder approval for the agreement. The Board then terminated
the merger agreement with SK Parent and began negotiations with Laidlaw
Environmental.
On March 15, 1998, the Board unanimously approved a definitive merger
agreement ("Merger Agreement") with Laidlaw Environmental which provides for
an exchange offer followed by a back-end merger. By April 7, 1998, Laidlaw
Environmental had acquired a total of 55,751,582 shares which were validly
tendered under the exchange offer and constituted approximately 93% of the
outstanding shares of Safety-Kleen. A special shareholder meeting has been
scheduled for May 18, 1998 to vote on approval of the merger.
During the first twelve weeks of 1998, the Company incurred $6.0
million of costs in conjunction with this process. In 1998, the Company
anticipates incurring approximately $140-160 million of total costs related
to the process. This total cost consists primarily of: $75 million
associated with terminating the merger agreement with SK Parent ("Termination
Costs"); compensation expenses associated principally with the cash-out of
the stock option plans and Employee Stock Purchase Plan as outlined in the
Merger Agreement; and investment banking fees and legal fees associated with
the process. These estimated costs do not include any severance related
costs incurred as a result of the integration of the Company and Laidlaw
Environmental.
During the first three weeks of April 1998, the Company made the
specified payments to all applicable option holders and Employee Stock
Purchase Plan participants and the Termination Costs.
INCOME TAXES
The Company's effective income tax rate was 38.7% for the twelve weeks
ended March 28, 1998 and 39.1% for the comparable period of 1997. The drop in
the effective tax rate in 1998 is due to the timing of certain additional tax
benefits received in 1998 that were not received during the comparable period of
1997.
ACCOUNTING CHANGES
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 on "Reporting Comprehensive Income" for the first interim period of 1998
and has restated prior periods to conform with SFAS No. 130 requirements. The
Company is required to adopt SFAS No. 131 on "Disclosures About Segments of an
Enterprise and Related Information" beginning with the 1998 year-end financial
statements. The expected impact of the adoption of this standard will not be
material.
11
<PAGE>
YEAR 2000
The Company is currently in the process of evaluating its information
technology infrastructure for the Year 2000 compliance. The Company does not
expect that the cost to modify its information technology infrastructure to be
Year 2000 compliant will be material to its financial condition or results of
operations. The Company does not anticipate any material disruption in its
operations as a result of any failure by the Company to be in compliance. The
Company does not currently have any information concerning the Year 2000
compliance status of its suppliers and customers. In the event that any of the
Company's significant suppliers or customers do not successfully and timely
achieve Year 2000 compliance, the Company's business or operations could be
adversely affected.
12
<PAGE>
PART II.
Item 1. LEGAL PROCEEDINGS
The Company's goal is to fully comply with all environmental regulations,
however, as a consequence of its business operations, the Company will likely
incur governmental fines and penalties from time to time. 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 often the result of varying interpretations of
the applicable requirements. Generally, these proceedings result from routine
inspections conducted by federal and state regulatory agencies.
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, governmental authorities may seek fines and/or penalties
from the Company which exceed $100,000 in each case. In these cases, the
governmental authorities may allege, among other things, that 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 or waste handling violations. Seven such proceedings
against the Company were pending or known to be contemplated by governmental
authorities at March 28, 1998.
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. 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.
Based on its past experience and its knowledge of pending cases, the
Company believes it is unlikely that its actual liability for 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 with respect to any particular environmental
claim will prove to be larger than anticipated and accrued for 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.
13
<PAGE>
On April 19, 1996, the U.S. Environmental Protection Agency ("EPA")
published its proposed Hazardous Waste Combustor Rule. This proposed rule will
set emissions standards for incinerators, cement kilns and lightweight aggregate
kilns that burn hazardous waste. As proposed, these standards would require
cement kilns, who are major outlets for the Company's waste-derived fuels, to
make capital improvements which would increase the cost of burning such fuels in
cement kilns. However, due to the complexity of the proposed rule, the lengthy
adoption process to which it is subject, and the likelihood that the rule will
undergo changes prior to its adoption, the effect of the final rule is unknown.
The South Coast Air Quality Management District ("SCAQMD"), the air
district for the greater Los Angeles, California area, has amended its rule
setting the allowable volatile organic compound ("VOC") content of materials
used for remote reservoir repair and maintenance cleaning. The amended rule
will, in effect, ban remote reservoir parts cleaning with solutions containing
VOCs in excess of fifty grams per liter as of January 1, 1999, except in certain
applications. Substantially all of the Company's parts cleaners currently placed
with SCAQMD customers utilize solvents containing VOCs in excess of fifty grams
per liter. The Company offers aqueous parts cleaning systems which meet the 1999
SCAQMD requirements and is working with its SCAQMD customers to identify which
customers will need to convert their solvent parts cleaners to an alternative
cleaning solvent or solution prior to January 1, 1999. In addition, the Company
will continue to actively work with the SCAQMD to identify appropriate
exemptions and develop alternatives to the 1999 VOC limits for materials used
for remote reservoir parts cleaning. The Company expects other Clean Air Act
nonattainment municipalities to consider adopting similar rules.
In September 1997, the Company discovered that its East Chicago, Indiana
main feed tank had become contaminated with polychlorinated biphenyls ("PCBs")
resulting in approximately 4 million gallons of contaminated oil. The Company
immediately notified the EPA and the Indiana Department of Environmental
Management ("IDEM") of the problem. The Company believes that the IDEM and EPA
will allow it to treat this contaminated material on-site. If the IDEM or EPA
determine that off-site treatment is required, the cost of such treatment could
be material to the results of operations in that period.
14
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant. (1)
3.2 Bylaws of the Registrant. (2)
4.1 Supplemental Indenture dated April 21, 1998 between
Safety-Kleen Corp. and the Chase Manhattan Bank, executed
in connection with the Company's 9.25% Senior Notes due
September 15, 1999.
10.1 Waiver dated March 31, 1998 to the Amended and Restated
Credit Agreement dated March 25, 1994, among the Chase
Manhattan Bank, N.A., the Northern Trust Company, the NBD
Bank, N.A. and the First National Bank of Chicago.
27 Financial Data Schedule (EDGAR filing only).
(b) Reports on Form 8-K
None.
- -------------------
1 Previously filed and incorporated herein by reference from the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 28, 1991.
2 Previously filed and incorporated herein by reference from the
Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended
September 9, 1995.
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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 on this 4th day of May, 1998.
SAFETY-KLEEN CORP.
/s/ ANDREW A.CAMPBELL
Andrew A. Campbell
Sr. Vice President - Chief Financial
Officer
/s/ CLIFFORD J. SCHULZ
Clifford J. Schulz
Controller - Chief Accounting Officer
16
Exhibit 4.1
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
April 21, 1998; between Safety-Kleen Corp., a Wisconsin corporation (the
"Company") and the Chase Manhattan Bank, as trustee (the "Trustee").
WHEREAS, the Company and the Trustee are parties to that certain
indenture, dated as of August 15, 1989 (the "Indenture") (together with the
terms of a resolution of the Board of Directors of the Company dated September
20, 1989), pursuant to which the Company's 9 1/4% Notes due September 15, 1999
(the "Notes") were issued;
AND WHEREAS, Section 902 of the Indenture provides that the Company
when authorized by a board resolution and the Trustee may amend the Indenture
with the written consent of the Holders (as defined in the Indenture) of not
less than a majority in principal amount of the Outstanding Securities (as
defined in the Indenture);
AND WHEREAS, LES, Inc. ("LESI"), a wholly-owned subsidiary of
Laidlaw Environmental Services, Inc., issued an Offer to Purchase and Consent
Solicitation Statement dated April 7, 1998 (the "Offer to Purchase") to, among
other things, solicit consents of the Holders to the Proposed Amendments (as
defined in the Offer to Purchase);
AND WHEREAS, Holders of at least a majority in aggregate principal
amount of the Outstanding Securities have given and not withdrawn their consent
to the Proposed Amendments and LESI has notified the Depositary (as defined in
the Offer to Purchase) that it has accepted all the Securities validly tendered
for purchase and payment pursuant to the Offer to Purchase;
AND WHEREAS, the entry into this Supplemental Indenture by the
parties hereto is in all respects authorized by the provisions of the Indenture,
the Company has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel with respect to such authorization and all things necessary to make
this Supplemental Indenture a valid agreement of the Company in accordance with
its terms have been done.
The parties hereto agree as follows:
1. DEFINITIONS. All capitalized terms used and not otherwise defined
herein have the respective meanings ascribed to such terms in the Indenture.
2. EFFECT. This Supplemental Indenture shall become effective upon
its execution and delivery by the parties hereto. If, after the date hereof, the
Offer to Purchase is terminated or withdrawn, the validly tendered Securities
are not accepted for payment or the Consent Payments (as defined in the
Offer to Purchase) are not
Doc#:DS4:357315.2
<PAGE>
2
made on the Payment Date (as defined in the Offer to Purchase), this
Supplemental Indenture shall no longer be effective.
3. AMENDMENTS.
The Indenture is hereby amended as follows:
(a) the text of Sections 501(5), 704, 801(2), 802, 803, 1004,
1005, 1006 and 1007 of the Indenture is hereby deleted and the words
"[INTENTIONALLY DELETED]" are inserted, in each case, in replacement of
the deleted text;
(b) Section 101 of the Indenture is amended by deleting the
definition of "Sale and Lease-Back Transaction" in its entirety;
(c) Section 901(6) of the Indenture is amended by deleting the
clause "pursuant to the requirements of Section 1005 or otherwise";
(d) the text of Section 905 of the Indenture is hereby deleted
and the words "[INTENTIONALLY DELETED]" are inserted in replacement of the
deleted text; and
(e) Section 1303 of the Indenture is amended by deleting from
the first sentence the clause "under Sections 1004, 1005 and 1006 and" and
deleting from the second sentence the clause "in Sections 1004, 1005 and
1006 and".
4. GOVERNING LAW. This Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New
York.
5. COUNTERPARTS. This Supplemental Indenture may be executed in one
or more counterparts, each of which shall be an original, but all of which
together shall constitute one and the same document.
6. EFFECT ON INDENTURE. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby. Except as expressly
set forth herein, the Indenture is in all respects ratified and confirmed and
all the terms, conditions and provisions thereof shall remain in full force and
effect.
Doc#:DS4:357315.2
<PAGE>
3
IN WITNESS WHEREOF, the parties have executed this Supplemental
Indenture as of the date first written above.
SAFETY-KLEEN. CORP.
By: /s/ SCOTT D. KRILL
----------------------------
Name: Scott D. Krill
Title: Assistant General Counsel
and Secretary
THE CHASE MANHATTAN BANK, as
Trustee
By: /s/ TIMOTHY E. BURKE
-----------------------------
Name: Timothy E. Burke
Title: Second Vice President
Doc#:DS4:357315.2
EXHIBIT 10.1
WAIVER
WAIVER dated as of March 31, 1998 to the AMENDED AND RESTATED CREDIT
AGREEMENT dated as of March 25, 1994 (as heretofore amended, the "CREDIT
AGREEMENT") among SAFETY-KLEEN CORP., the BANKS signatory thereto and THE CHASE
MANHATTAN BANK (successor by merger to The Chase Manhattan Bank, N.A.), as
Agent. Terms defined in the Credit Agreement are used herein as therein defined.
WHEREAS, the Company has requested that the Banks waive any Event of
Default under Sections 9.01(c) and (j) of the Credit Agreement which may result
from the acquisition of the Borrower's common stock by LES Acquisition, Inc.
pursuant to that certain Agreement and Plan of Merger dated as of March 16, 1998
between the Borrower and Laidlaw Environmental Services, Inc.;
WHEREAS, the Required Banks are agreeable to such request;
NOW, THEREFORE, the parties hereto agree as follows:
1. WAIVER. For the period commencing on the date hereof and ending on the
earlier of (i) June 30, 1998 and (ii) the date on which the merger of LES
Acquisition, Inc. and the Borrower (the "Merger) is consummated pursuant to
that certain Agreement and Plan of Merger dated as of March 16, 1998 between the
Borrower, LES Acquisition, Inc. and Laidlaw Environmental Services, Inc., the
Banks hereby waive any Event of Default which may occur under Section
9.01(c)(i) (as the result of non-compliance with Section 7.08 of the Credit
Agreement) or 9.01(j) of the Credit Agreement as the result of the Merger.
2. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants that: (a) the representations and warranties contained in Article 5 of
the Credit Agreement are true and correct on the date hereof as though made on
the date hereof, except in Section 5.05, the date specified as January 2, 1993
should be deleted and replaced with January 2, 1997 and the dates specified as
September 11, 1993 should be deleted and replaced with September 11, 1997; and
(b) after giving effect to this Waiver, no Default or Event of Default has
occurred and is continuing.
3. EFFECT OF WAIVER. This Waiver does not constitute a waiver of any other
provision of the Credit Agreement or a waiver of any right, power or privilege
of the Banks or the Agent or of any future compliance with Sections 7.08 or any
other provision of the Credit Agreement. On and after the date this Waiver
becomes effective in accordance with Section 4 hereof, each reference in the
Credit 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 shall mean the
Credit Agreement as amended by this Amendment. The Credit Agreement, as amended
by this Waiver, is and shall continue to be in full force and effect and is
hereby ratified and confirmed in all respects.
4. MISCELLANEOUS. This Waiver (i) may be executed in one or more
counterparts by the parties hereto, (ii) shall become effective when
counterparts hereof have been executed by the parties, and (iii) SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
SAFETY-KLEEN CORP.
By /s/ LAURENCE M. RUDNICK
----------------------------
Name: Laurence M. Rudnick
Title: Treasurer
<PAGE>
THE CHASE MANHATTAN BANK,
as a Bank and as Agent
By /s/ KAREN M. SHARF
-----------------------------
Name: Karen M. Sharf
Title: Vice President
THE NORTHERN TRUST COMPANY
By /s/ MICHELLE M. TETEAK
-----------------------------
Name: Michelle M. Teteak
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ BARRY P. LITWIN
------------------------------
Name: Barry P. Litwin
Title: Senior Vice President
NBD BANK (Successor to NBD Bank, N.A.)
By /s/ BARRY P. LITWIN
-------------------------------
Name: Barry P. Litwin
Title: Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CORPORATION'S BALANCE SHEETS AND CONSOLIDATED STATEMENT OF
EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000086135
<NAME> SAFETY-KLEEN CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> MAR-28-1998
<CASH> 30,458
<SECURITIES> 0
<RECEIVABLES> 142,160
<ALLOWANCES> 7,977
<INVENTORY> 51,849
<CURRENT-ASSETS> 247,329
<PP&E> 890,507
<DEPRECIATION> 393,379
<TOTAL-ASSETS> 1,055,135
<CURRENT-LIABILITIES> 365,772
<BONDS> 0
0
0
<COMMON> 6,010
<OTHER-SE> 546,898
<TOTAL-LIABILITY-AND-EQUITY> 1,055,135
<SALES> 0
<TOTAL-REVENUES> 241,777
<CGS> 0
<TOTAL-COSTS> 181,781
<OTHER-EXPENSES> 40,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,612
<INCOME-PRETAX> 16,243
<INCOME-TAX> 6,286
<INCOME-CONTINUING> 9,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,957
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.16
</TABLE>
