Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ---------------------
COMMISSION FILE NUMBER: 0-9787
REPUBLIC INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 73-1105145
(State of Incorporation) (IRS Employer Identification No.)
200 EAST LAS OLAS BOULEVARD
SUITE 1400
FT. LAUDERDALE, FLORIDA 33301
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 627-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01
(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 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. [ ]
On March 21, 1996, the registrant had 81,044,571 outstanding shares of
Common Stock, $.01 par value, and at such date, the aggregate market value of
the shares of Common Stock held by non-affiliates of the registrant was
approximately $1,630,879,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of Registrant's Proxy Statement relative to the
1996 Annual Meeting of Stockholders.
Part IV - Portions of previously filed reports and registration
statements.
2
INDEX
Page
Number
PART 1.
-------
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 12
ITEM 3. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
PART II.
--------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 15
ITEM 6. SELECTED FINANCIAL DATA 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 43
PART III.
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 43
ITEM 11. EXECUTIVE COMPENSATION 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 43
PART IV.
---------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS
ON FORM 8-K 43
2
3
PART I.
ITEM 1. BUSINESS
INTRODUCTION
Republic Industries, Inc. (the "Company," formerly Republic Waste
Industries, Inc.) is a diversified services company, which, through its
subsidiaries, primarily provides integrated solid waste disposal, collection
and recycling services to public and private sector customers. As of December
31, 1995, the Company owns or operates thirteen solid waste landfills with five
located in Texas, two in California and one each in Florida, Michigan, North
Carolina, South Carolina, Indiana and North Dakota with approximately 1,483
permitted acres and total available permitted disposal capacity of
approximately 59.1 million in-place cubic yards. The Company also currently
provides collection service to over 780,000 residential, commercial and
industrial customers, primarily in areas surrounding its landfill sites noted
above and certain areas of Georgia, Maine, New Hampshire, and Virginia and
throughout Florida. In addition, the Company provides related environmental
services including consulting and analysis, remediation and other technical
services.
The Company, through certain recently acquired businesses, also is
engaged in the electronic security services business, which consists of the
sale, installation and maintenance of electronic security systems for
commercial and residential use as well as the continuous electronic monitoring
of installed security systems. Currently, the Company monitors over 127,000
businesses and residences predominately in Florida and Colorado.
In August 1995, following a special meeting of the Company's
stockholders, the Company appointed a new management team consisting of H.
Wayne Huizenga as Chairman of the Board and Chief Executive Officer, Harris W.
Hudson as President and a Director, Gregory K. Fairbanks as Executive Vice
President and Chief Financial Officer, and John J. Melk as a Director. Michael
G. DeGroote, former Chairman, Chief Executive Officer and President, was named
Vice Chairman of the Board, and Donald E. Koogler resigned as a Director but
remained as Executive Vice President and Chief Operating Officer. This new
management team is implementing an aggressive growth strategy for the Company.
The Company's strategy is to aggressively grow as a diversified
services company by acquiring and integrating existing solid waste collection,
disposal and recycling businesses, and by expanding its recently acquired
electronic security services business by internal growth and by making
additional acquisitions in that industry. Further, the Company currently
anticipates expanding the Company's operations outside of solid waste
management, electronic security services and related lines of business.
Management also plans to augment its growth strategy by expanding its existing
facilities and increasing marketing efforts related to securing additional
long-term contracts and additional volumes at its existing operations. See
"Acquisitions" for a further discussion.
In 1994, the Company discontinued its hazardous waste services
business through the distribution in April 1995 of that business segment to the
Company's stockholders (the "Distribution"). See "Discontinued Operations"
under the heading "Results of Operations" of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
The Company was incorporated in Oklahoma in November 1980 and in
May 1991 changed its state of domicile from Oklahoma to Delaware by means of a
merger. The Company changed its name to Republic Industries, Inc. from Republic
Waste Industries, Inc. on November 28, 1995. The Company's common stock, $.01
par value per share, ("Common Stock") trades on the Nasdaq National Market tier
of the Nasdaq Stock Market ("Nasdaq") under the symbol "RWIN."
ACQUISITIONS
ACQUISITION STRATEGY
The Company will continue its strategy of growing as a diversified
services company by acquiring and integrating existing solid waste companies
and recycling businesses, and electronic security services businesses.
Further, management anticipates making acquisitions to expand the Company's
operations outside of solid waste management, electronic security services and
related lines of business, resulting in a more diversified company. Management
intends to evaluate various types of industries which generally are capital
intensive, fragmented and have relatively high profit margins or substantial
opportunities for growth, seek out strategic acquisition opportunities in such
industries and grow rapidly in such industries through further acquisitions,
consolidation and internal growth.
3
4
In expanding its solid waste operations, management anticipates
focusing on acquiring waste collection companies that are in markets which can
utilize the Company's existing landfill facilities, as well as in markets with
attractive third party disposal fees. The Company also may consider acquiring
landfills with significant permitted disposal capacity and certain levels of
contracted waste volume. In addition, the Company may focus on what it believes
will be the growing number of municipalities seeking to sell landfills, form
joint ventures or offer management contracts to operate landfills in response
to the growing technical and capital resources required by increasingly
stringent federal, state and local regulations.
The Company generally targets acquisitions in markets where it will
be, or the prospects are favorable to increase its market share to become, a
significant provider of integrated waste services in that market. The Company
seeks to acquire companies which have long-term contracts for solid waste
collection and hauling services in high growth markets. However, the Company is
not limited to these target market criteria, and as opportunities are
identified, the Company may acquire solid waste operations throughout North
America.
In expanding its electronic security operations, the Company's
primary goal is to grow its customer base in the residential segment of the
business. The Company will target markets where it will be, or the prospects
are favorable to increase its market share to become, a significant provider of
electronic security services. The Company seeks to acquire security companies
in high growth markets with strong recurring monthly revenues derived from
monitoring services. In addition, the Company will seek to achieve economies of
scale by acquiring security companies with accounts that can be monitored
through the Company's existing central monitoring stations. The Company intends
to retain local management and sales personnel, where appropriate.
The Company uses internal acquisition teams, its contacts in the
solid waste management and electronic security services industries and its
environmental service capabilities to identify, evaluate and acquire waste
management companies and electronic security services businesses in attractive
markets. Acquisition candidates are evaluated by the Company's internal
acquisition teams based on stringent criteria in a comprehensive process which
includes operational, legal and financial due diligence reviews.
RECENT ACQUISITIONS
Acquisitions Completed Subsequent to December 31, 1995. In March
1996, the Company acquired substantially all of the assets of Mid-American
Waste Systems of Georgia, Inc. and affiliates ("Mid-American Georgia") for a
purchase price of approximately $52,000,000. At closing, the Company issued an
aggregate of 1,700,000 shares of Common Stock valued at approximately
$46,750,000 and will settle the remaining balance within 60 days using
additional Common Stock or cash. Mid-American Georgia owns and operates a
landfill, provides solid waste collection and recycling services to commercial,
residential and industrial customers, and operates two transfer stations, in
certain areas of the greater metropolitan Atlanta, Georgia area. The
acquisition of Mid-American Georgia will be accounted for under the purchase
method of accounting.
In February 1996, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Incendere, Inc. and certain waste
companies (collectively, "Schaubach") controlled by Dwight C. Schaubach.
Schaubach provides solid waste collection and recycling services to
residential, commercial and industrial customers in southeastern Virginia and
eastern North Carolina and provides transportation of medical waste throughout
the Mid-Atlantic states.
In February 1996, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of certain electronic security
companies known as Denver Burglar Alarm ("Denver Alarm"). Denver Alarm
provides installation, monitoring and maintenance services to residential and
commercial customers in Denver, Fort Collins, Boulder, Colorado Springs and
Pueblo, Colorado.
The Company issued an aggregate of 2,914,452 shares of Common Stock
for Schaubach and Denver Alarm both of which will be accounted for as pooling of
interests business combinations.
Acquisitions Completed During the Year Ended December 31, 1995. In
November 1995, the Company acquired, in a merger transaction, all of the
outstanding shares of capital stock of certain affiliated companies known as
Scott Security Systems ("Scott"). Scott provides electronic security
monitoring and maintenance to residential accounts in Jacksonville, Orlando
and Tallahassee, Florida,
4
5
as well as other metropolitan areas in the southeastern United States,
including Charlotte, North Carolina, Savannah, Georgia and Nashville,
Tennessee.
In November 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Fennell Container Company, Inc.
and affiliates (collectively, "Fennell"). Fennell provides waste collection,
recycling and environmental services to commercial, industrial and residential
customers in and around Charleston and Greenville, South Carolina, and also
owns a landfill which is in the final stages of construction and is scheduled
to begin accepting waste under its new permit in mid-1996.
In November 1995, the Company acquired, in a merger transaction,
all of the outstanding shares of capital stock of Garbage Disposal Service,
Inc. ("GDS"). GDS provides solid waste collection and recycling services for
commercial, residential and industrial customers throughout western North
Carolina.
In November 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of J.C. Duncan Company, Inc. and
affiliates (collectively, "Duncan"). Duncan provides solid waste collection
and recycling services to approximately 300,000 residential, commercial and
industrial customers in the Dallas-Fort Worth metropolitan area and throughout
west Texas, and also operates two landfills.
In October 1995, the Company acquired, in a merger transaction, all
of the outstanding shares of capital stock of Southland Environmental Services,
Inc. ("Southland"). Southland, through its subsidiaries, provides solid waste
collection services to residential, commercial and industrial customers in and
around Jacksonville, Florida, owns and operates a construction and demolition
landfill, and provides composting and recycling services.
In October 1995, the Company acquired, in a merger transaction, all
of the outstanding shares of capital stock of United Waste Service, Inc.
("United"). United provides solid waste collection, transfer and recycling
services in the Atlanta, Georgia metropolitan area and services both
residential and commercial customers.
In August 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Kertz Security Systems, Inc. and
Kertz Security Systems II, Inc. (collectively, "Kertz"). Kertz provides
electronic security monitoring and maintenance to residential and commercial
customers predominantly in the South Florida, Tampa and Orlando areas.
The Company issued an aggregate of 18,127,984 shares of Common
Stock for the acquisitions of Scott, Fennell, GDS, Duncan, Southland, United
and Kertz (collectively, the "Pooled Entities") which were accounted for as
pooling of interests business combinations.
In August 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Hudson Management Corporation and
Envirocycle, Inc. (collectively, "HMC") in exchange for an aggregate of
8,000,000 shares of Common Stock. HMC, as the third largest solid waste
management company in Florida, provides solid waste collection and recycling
services to commercial, industrial and residential customers. The acquisition
of HMC has been accounted for under the purchase method of accounting.
See Note 2 of Notes to Consolidated Financial Statements for
further discussion of business combinations.
OPERATIONS
CONTINUING OPERATIONS
Currently, the Company has organized its continuing operations into
two general industry segments: (1) solid waste services and (2) electronic
security services.
SOLID WASTE SERVICES
The Company's solid waste operations primarily consist of
collection, landfill, recycling and related environmental services.
5
6
Collection. The Company's solid waste collection operations are of
two types: industrial and commercial/residential. The Company's strategy is to
acquire collection operations within the service areas of its landfills, such
that the operations can provide a steady stream of solid waste to its
landfills, and in areas with stable, attractive third party disposal fees. The
Company provides collection service to over 780,000 residential, commercial and
industrial customers.
In its industrial collection operations, the Company supplies its
customers with large waste containers known as "roll-off" containers. The
Company collects the roll-off containers on a set schedule, and transports the
waste to a landfill. Services are provided to individual facilities on a
contract basis with terms ranging from a single pickup to a one-year term.
The Company's commercial and residential collection operations
involve the curbside collection of refuse from small containers into collection
vehicles for transport to landfills. Commercial customers generally are
serviced pursuant to individual contracts which are for periods of up to five
years. Residential households generally are serviced pursuant to contracts with
municipal governments for collection in the municipality. The Company's
contracts generally are secured by competitive bids (see " Competition" under
the heading "Operations"). The Company currently provides commercial and
residential collection services in certain areas of California, Florida,
Georgia, Indiana, Maine, New Hampshire, North Carolina, North Dakota, South
Carolina, Virginia and Texas.
Landfills. The Company owns or operates thirteen solid waste
landfills with approximately 1,483 permitted acres and total available
permitted disposal capacity of approximately 59.1 million cubic in-place yards
as of December 31, 1995. The in-place capacity of the Company's landfills is
subject to change based on engineering factors and requirements of regulatory
authorities. Certain of the landfills accept nonhazardous special waste,
including utility ash, asbestos and contaminated soils. The majority of the
Company's landfill revenues are derived from long-term integrated disposal and
collection contracts with industrial customers and municipalities and disposal
contracts with certain third party collection companies. The following table
provides certain information regarding these landfills as of December 31, 1995:
Unused
Total Permitted Permitted
Landfill Name Markets Served Acreage Acreage Acreage
------------- -------------- ------- ------- -------
Anderson . . . . . . . . . . . . . . . . . . . . Northern California 1,200 150 100
C&T Regional . . . . . . . . . . . . . . . . . . Rio Grande Valley, Texas 194 94 55
Cleveland Container . . . . . . . . . . . . . . . Southwest North Carolina 169 116 86
Republic/CSC . . . . . . . . . . . . . . . . . . North Central Texas 254 254 195
Republic/Imperial . . . . . . . . . . . . . . . . Southern California 160 120 89
Republic/Maloy . . . . . . . . . . . . . . . . . East Central Texas 389 270 204
Taymouth . . . . . . . . . . . . . . . . . . . . Central Michigan 138 43 19
Wabash Valley . . . . . . . . . . . . . . . . . . Northeast Indiana 103 56 16
St. John's . . . . . . . . . . . . . . . . . . . North Central North Dakota 150 40 33
Nine Mile Road . . . . . . . . . . . . . . . . . Northeast Florida 80 25 17
San Angelo . . . . . . . . . . . . . . . . . . . West Texas 283 283 133
Presidio . . . . . . . . . . . . . . . . . . . . West Texas 10 10 6
Pepperhill . . . . . . . . . . . . . . . . . . . Southeast South Carolina 37 22 22
----- ----- ---
3,167 1,483 975
===== ===== ===
Each of the Company's existing landfill sites have the potential
for expanded disposal capacity beyond the currently permitted acreage. The
Company monitors the availability of permitted airspace at each of its
landfills and evaluates whether to pursue expansion at a given landfill based
on estimated future waste volumes, remaining capacity and likelihood of
obtaining expansion. Each of the Company's landfills currently has adequate
permitted capacity; however, the Company is currently seeking to expand
permitted capacity at its Wabash Valley and Nine Mile Road landfills in
connection with favorable design modifications.
Recycling. Management believes that recycling has and will
continue to become an increasingly important component of most major market's
solid waste management plans as a result of the public's increasing
environmental
6
7
awareness and expanding federal and state regulations pertaining to waste
recycling. The Company currently provides recycling services through most of
its collection subsidiaries and has six recycling facilities located in
Florida, Georgia, South Carolina and North Carolina. The services provided by
the Company's collection subsidiaries include the curbside collection of
recyclable waste, and the provision of a variety of recycling services,
including the segregated collection of cardboard boxes and construction debris
for resale to paper manufacturers and others. In Florida, Georgia, South
Carolina and North Carolina, the Company receives certain types of commercial
and industrial solid waste, which is sorted at its facilities into recyclable
materials and non-recyclable waste; the recyclable materials are repackaged and
sold to third parties and the non-recyclable waste is disposed of at landfills
or incinerators. The Company also recycles yard waste and timber by-products in
Dallas and Houston, Texas and Jacksonville, Florida by composting these
materials and selling the end product to nurseries, landscape architects and
homeowners for landscape and gardening mulch.
Environmental Services. The Company provides selected
environmental remediation services relating to the cleanup and containment of
actual or threatened releases of hazardous materials into the environment on
both a planned and emergency basis. The Company's solid waste division provides
these services through three subsidiaries, Environmental Specialists, Inc.
("ESI") in Kansas City, Missouri, Laughlin Environmental, Inc. ("Laughlin") in
Houston, Texas and Fenn-Vac, Inc. in North Charleston, South Carolina. ESI and
Fenn-Vac, Inc. are EPA-approved emergency response contractors and provide
hazardous spill cleanup and other special services on a contract basis.
Laughlin provides a broad range of environmental services including remediation
and other technical services.
ELECTRONIC SECURITY SERVICES
The Company, through certain recently acquired businesses, is
engaged in the electronic security services business, which consists of the
sale, installation and maintenance of electronic security systems for
commercial and residential use, as well as the continuous electronic monitoring
of installed security systems. The Company sells and installs modern electronic
devices in its customers' businesses and residences to provide detection of
events, such as intrusion or fire. The Company purchases from various
manufacturers the components of the systems it sells, installs and maintains.
The products and services marketed in the electronic security services industry
by the Company and others range from basic residential systems that provide
entry and fire detection to sophisticated commercial systems incorporating
closed circuit television systems and access control. Detection systems may be
continuously monitored by centralized monitoring stations which are linked to
the customer through telephone lines. The Company operates two central
monitoring stations in Florida and one in Colorado, from which it monitors
over 127,000 businesses and residences predominantly in Florida and Colorado by
local and long distance telephone lines. Upon detecting an intrusion or other
event at a customer's business or residence, the central monitoring station
calls the customer and, if necessary, the local police, fire, ambulance or
other authorities.
DISCONTINUED OPERATIONS
On April 26, 1995, the Company completed the Distribution of its
hazardous waste services segment. The hazardous waste services segment of the
Company's business has been accounted for as a discontinued operation and,
accordingly, the accompanying Consolidated Financial Statements of the Company
for periods presented prior to the Distribution have been retroactively
restated to report separately the net assets and operating results of these
discontinued operations. For further discussion of the Distribution, see
"Discontinued Operations" under the heading "Results of Operations" of
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 9 of Notes to Consolidated Financial Statements included
herein.
SALES AND MARKETING
For solid waste services, the Company's sales and marketing
strategy is to provide full service environmental management to its customers.
The Company targets potential customers of all sizes from small quantity
generators to large "Fortune 500" companies, as well as municipalities.
In expanding its electronic security operations, the Company's
primary goal is to grow its customer base in the residential segment of the
business. The Company will target markets where it will be, or the prospects
are favorable to increase its market share to become, a significant provider
of electronic security services.
7
8
The Company believes in providing quality services which will
enable it to maintain high levels of recurring revenue from its customers. The
Company derives its business from a broad customer base which the Company
believes will enable it to experience stable growth. Marketing efforts focus on
continuing and increasing business with existing customers, as well as
attracting new customers.
CUSTOMERS
The Company's sales efforts are directed toward establishing and
maintaining business relationships with residences and businesses in areas in
which the Company operates, which have ongoing requirements for one or more of
the Company's services. During 1995, no one customer individually comprised
more than 10% of the total revenue of the Company.
REGULATION
The collection and disposal of solid waste, operation of landfills
and rendering of related environmental services are subject to federal, state
and local requirements which regulate health, safety, the environment, zoning
and land-use. Operating permits are generally required for landfills and
certain collection vehicles, and these permits are subject to revocation,
modification and renewal. Federal, state and local regulations vary, but
generally govern disposal activities and the location and use of facilities and
also impose restrictions to prohibit or minimize air and water pollution. In
addition, governmental authorities have the power to enforce compliance with
these regulations and to obtain injunctions or impose fines in the case of
violations, including criminal penalties. These regulations are administered by
the EPA and various other federal, state and local environmental, health and
safety agencies and authorities, including the Occupational Safety and Health
Administration of the U.S. Department of Labor.
The Company strives to conduct its operations in compliance with
applicable laws and regulations, but believes that in the existing climate of
heightened legal, political and citizen awareness and concerns, companies in
the waste management and environmental services industry, including the
Company, may be faced with fines and penalties and the need to expend funds for
remedial work and related activities at landfills and other facilities. The
Company has established a reserve to cover any potential fines, penalties and
costs which management believes will be adequate. While such amounts expended
in the past or anticipated to be expended in the future have not had and are
not expected to have a materially adverse effect on the Company's financial
condition or operations, the possibility remains that technological, regulatory
or enforcement developments, the results of environmental studies or other
factors could materially alter this expectation.
The Company's operation of landfills subjects it to certain
operating, monitoring, site maintenance, closure and post-closure obligations.
In order to construct, expand and operate a landfill, one or more construction
or operating permits, as well as zoning approvals, must be obtained. These
operating permits and zoning approvals are difficult and time-consuming to
obtain, and the issuance of such permits and approvals often is opposed by
neighboring landowners and local and national citizens' groups. Once obtained,
the operating permits may be subject to periodic renewal and are subject to
modification and revocation by the issuing agency. In connection with the
Company's acquisition of existing landfills, it often may be necessary to
expend considerable time, effort and money to bring the acquired facilities
into compliance with applicable requirements and to obtain the permits and
approvals necessary to increase their capacity.
Governmental authorities have the power to enforce compliance with
regulations and permit conditions and to obtain injunctions or impose fines in
case of violations. Citizens' groups may also bring suit for alleged
violations. During the ordinary course of its operations, the Company may from
time to time receive citations or notices from such authorities that its
operations are not in compliance with applicable environmental or health or
safety regulations. Upon receipt of such citations or notices, the Company
will work with the authorities to attempt to resolve the issues raised. Failure
to correct the problems to the satisfaction of the authorities could lead to
monetary or criminal penalties, curtailed operations or facility closure.
Federal Regulation. The following summarizes the primary
environmental and safety-related federal statutes of the United States of
America affecting the business of the Company:
(1) The Solid Waste Disposal Act ("SWDA"), as amended by the
Resource Conservation and Recovery Act of 1976, as amended
("RCRA"). SWDA and its implementing regulations establish a
framework for regulating the
8
9
handling, transportation, treatment and disposal of hazardous and
nonhazardous solid wastes. They also require states to develop
programs to ensure the safe disposal of solid wastes in sanitary
landfills.
Subtitle D of RCRA establishes a framework for regulating the
disposal of municipal solid wastes. In the past, the Subtitle D
framework has left the regulation of municipal waste disposal
largely to the states. On October 9, 1991, however, the EPA
promulgated a final rule which imposes minimum federal
comprehensive solid waste management criteria and guidelines,
including location restrictions, facility design and operating
criteria, closure and post-closure requirements, financial
assurance standards, groundwater monitoring requirements and
corrective action standards, many of which have not commonly been
in effect or enforced in connection with municipal solid waste
landfills.
All Subtitle D regulations are now in effect, except for the
financial assurance requirements which the EPA has deferred to
April 1, 1997. All of the Company's planned landfill expansions or
new landfill development projects have been engineered to meet or
exceed Subtitle D requirements. Operating and design criteria for
existing operations have been modified to comply with these new
regulations. Compliance with the Subtitle D regulations has
resulted in increased costs and, may in the future, require
expenditures in addition to other costs normally associated with
the Company's waste management activities.
(2) The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"). CERCLA, among other
things, provides for the cleanup of sites from which there is a
release or threatened release of a hazardous substance into the
environment. CERCLA imposes liability for the costs of cleanup and
for damages to natural resources upon: (a) any person who currently
owns or operates a facility or site from which there is a release or
threatened release of hazardous substances; (b) any person who
owned or operated such a facility or site at the time hazardous
substances were disposed of; (c) any person who by contract,
agreement or otherwise, arranged for the disposal or treatment (or
for transport for disposal or treatment) of hazardous substances
owned or processed by such person at such facility or site and (d)
any person who accepts or accepted hazardous substances for
transport for treatment or disposal at such a facility or site
selected by such person. Under the authority of CERCLA and its
implementing regulations, detailed requirements apply to the manner
and degree of remediation of facilities and sites where hazardous
substances have been or are threatened to be released into the
environment.
Among other things, CERCLA authorizes the federal government
either to remediate sites at which hazardous substances were
disposed of and have been or are threatened to be released into the
environment, or to order (or offer an opportunity to) persons
potentially liable for the cleanup of the hazardous substances to
do so. In addition, CERCLA requires the EPA to establish a National
Priorities List ("NPL") of sites at which hazardous substances have
been or are threatened to be released and which require
investigation or cleanup.
Liability under CERCLA is not dependent upon the intentional
disposal of "hazardous wastes." It can be founded upon the release
or threatened release, even as a result of unintentional and
non-negligent action, of thousands of "hazardous substances,"
including very small quantities of such substances. More than 20%
of the sites on the NPL are solid waste landfills which ostensibly
never received any "hazardous wastes." Thus, even if the Company's
landfills have never received "hazardous wastes" as such, it is
possible that one or more hazardous substances may have come to be
located at its landfills. Because of the extremely broad definition
of "hazardous substances," the same is true of other industrial
properties with which the Company has been, or may become,
associated. If there is a release or threatened release of
hazardous substances from a facility where the Company is an owner
or operator, the Company could be liable under CERCLA for the cost
of cleaning up such hazardous substances at the sites and for
damages to natural resources, even if those substances were
deposited at the Company's facilities before the Company acquired
or operated them. CERCLA liability may also attach to the Company
with regard to non-Company owned or operated facilities where the
Company arranged for disposal or treatment of hazardous substances
at, or transportation of hazardous substances to, such a facility,
or where the Company was the waste transporter who selected such
facility for treatment or disposal of hazardous substances. The
costs of a CERCLA cleanup can be very expensive. Given the
difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on the
Company's business and financial condition. For a further
discussion, see "Liability Insurance and Bonding".
9
10
(3) The Federal Water Pollution Control Act of 1972 (the
"Clean Water Act"). The Clean Water Act establishes a framework
for regulating the discharge of pollutants from a variety of
sources, including solid waste disposal sites, into streams, rivers
and other waters. Whenever point source runoff from the Company's
landfills is to be discharged into surface waters, the Act requires
the Company to apply for and obtain discharge permits, conduct
sampling and monitoring and, under certain circumstances, reduce
the quantity of pollutants in those discharges. In 1990, the EPA
published new storm water discharge regulations which require
landfills to apply for a storm water discharge permit unless they
are covered under a storm water general permit promulgated by the
agency. The new storm water discharge regulations also require a
permit for certain construction activities, which may affect the
Company's operations. If a landfill or transfer station discharges
wastewater through a sewage system to a publicly-owned treatment
works ("POTW"), the facility must comply with discharge limits
imposed by the POTW. In addition, states may adopt groundwater
protection programs under the Clean Water Act or Safe Drinking
Water Act that could affect solid waste landfills.
(4) The Clean Air Act. The Clean Air Act establishes a
framework for the federal, state and local regulation of the
emission of air pollutants. These regulations may impose emission
limitations and monitoring and reporting requirements on various of
the Company's operations, including landfills and refuse
collection trucks owned by the Company. The Clean Air Act
Amendments, which were enacted into law at the end of 1990,
resulted in the imposition of stringent requirements on many
activities that were previously largely unregulated, such as
emissions of solvents used in small parts in degreasing baths in
the Company's vehicle maintenance shops, as well as imposing more
stringent requirements on, among others, motor vehicle emissions.
On March 12, 1996, the EPA enacted a final rule implementing
standards of performance for new municipal solid waste landfills
and emission guidelines for existing municipal solid waste
landfills. The new rule was enacted to require certain municipal
solid waste landfills to control emissions to the level achievable
by the best demonstrated system of continuous emission reduction.
The new source performance standards established by the final rule
apply to municipal landfills that began construction or
modification, or first began to accept waste, on or after May 30,
1991. The enactment of this new rule will affect the Company's
existing landfill operations, and may result in increased costs at
these facilities.
(5) The Occupational Safety and Health Act of 1970 (the "OSH
Act"). The OSH Act authorizes the Occupational Safety and Health
Administration to promulgate occupational safety and health
standards. Various of these standards, including standards for
notices of hazardous chemicals and the handling of asbestos, apply
to the Company's operations.
State Regulation. Each state in which the Company operates has its
own laws and regulations governing solid waste disposal, water and air
pollution and, in most cases, releases and cleanup of hazardous substances and
liability for such matters. The states also have adopted regulations governing
the design, operation, maintenance and closure of landfills and transfer
stations. The Company's facilities and operations are likely to be subject to
many, if not all, of these types of requirements. In addition, the Company's
collection and landfill operations may be affected by the trend in many states
toward requiring the development of waste reduction and recycling programs. For
example, several states have enacted laws that will require counties to adopt
comprehensive plans to reduce, through waste planning, composting, recycling or
other programs, the volume of solid waste deposited in landfills. Additionally,
laws and regulations restricting the disposal of yard waste in solid waste
landfills have recently been promulgated in several states. Legislative and
regulatory measures to mandate or encourage waste reduction at the source and
waste recycling also are under consideration by Congress and the EPA.
Finally, with regard to its transportation operations, the Company
is subject to the jurisdiction of the Interstate Commerce Commission and is
regulated by the Department of Transportation and by regulatory agencies in
each state. Various states have enacted, or are considering enacting, laws
that restrict the disposal within the state of solid or hazardous wastes
generated outside the state. In May 1994, the Supreme Court ruled that local
flow control ordinances were an impermissible burden to interstate commerce,
and therefore, were unconstitutional. In response to the Supreme Court's
ruling, Congress is attempting to enact a national comprehensive flow control
bill. The national solid waste flow control bill, which was approved by the
Senate in May of 1995, is currently under consideration by the House Commerce
Committee. If the national solid waste flow control bill is enacted, and state
laws restricting the interstate disposal of solid
10
11
waste are passed and upheld, such legislation could adversely affect the
Company's waste collection, transportation, and treatment and disposal
operations.
"False" Alarm Ordinances. The Company believes that approximately
95% of alarm activations that result in the dispatch of police or fire
department personnel are not emergencies, and thus are "false" alarms.
Recently, a trend has emerged on the part of local governmental authorities to
consider or adopt various measures aimed at reducing the number of "false"
alarms. Such measures include (i) subjecting alarm monitoring companies to
fines or penalties for transmitting "false" alarms, (ii) licensing individual
alarm systems and the revocation of such licenses following a specified number
of "false" alarms, (iii) imposing fines on alarm subscribers for "false"
alarms, (iv) imposing limitations on the number of times the police will
respond to alarms at a particular location after a specified number of "false"
alarms, and/or (v) requiring further verification of an alarm signal before the
police will respond. Enactment of such measures could adversely affect the
Company's electronic security services business and operations.
COMPETITION
Competition in the Solid Waste Industry. The waste management
industry is highly competitive and requires substantial amounts of capital.
Entry into the industry and ongoing operations within the industry require
substantial technical, managerial and financial resources. The solid waste
industry in North America is currently dominated by three solid waste
companies: WMX Technologies, Inc., Browning-Ferris Industries, Inc. and Laidlaw
Inc. Competition in the solid waste industry also comes from a number of
regional solid waste companies. Some of the Company's competitors have
significantly larger operations and greater resources than the Company. In each
of its solid waste market areas, the Company competes for landfill business on
the basis of disposal fees (commonly known as "tipping fees"), geographical
location and quality of operations. The Company's ability to obtain landfill
business may be limited by the fact that some major collection companies also
own or operate landfills to which they send their waste.
Further, alternatives to landfill disposal (such as recycling,
composting and waste-to-energy) are increasingly competing with landfills.
There also has been an increasing trend at the state and local levels to
mandate waste reduction at the source and to prohibit the disposal of certain
types of wastes, such as yard wastes, at landfills. This may result in the
volume of waste going to landfills being reduced in certain areas, which may
affect the Company's ability to operate its landfills at their full capacity
and/or affect the prices that can be charged for landfill disposal services. In
addition, most of the states in which the Company operates landfills have
adopted plans or requirements which set goals for specified percentages of
certain solid waste items to be recycled. To the extent these are not yet in
place, these recycling goals will be phased in over the next few years.
In its collection business, in addition to national and regional
firms and numerous local companies, the Company may compete with those
municipalities that maintain waste collection or disposal operations. These
municipalities may have financial advantages due to the availability of tax
revenues and tax-exempt financing. The Company competes for collection accounts
primarily on the basis of price and the quality of its services. From time to
time, competitors may reduce the price of their services in an effort to expand
market share or to win a competitively bid municipal contract.
Competition in the Electronic Security Services Industry. The
security alarm industry is highly competitive and highly fragmented. The
Company's electronic security services business competes with several large
national companies, as well as smaller regional and local companies, in all of
its operations. Certain of the Company's competitors have greater financial and
other resources than the Company. Furthermore, new competitors are continuing
to enter the industry and the Company may encounter additional competition from
such future industry entrants.
LIABILITY INSURANCE AND BONDING
The nature of the Company's solid waste management business exposes
it to a significant risk of liability for legal damages arising out of its
operations. Such potential liability could involve, for example, claims for
cleanup costs, personal injury, property damage or damage to the environment in
cases where the Company may be held responsible for the escape of harmful
materials; claims of employees, customers or third parties for personal injury
or property damage occurring in the course of the Company's operations; or
claims alleging negligence or professional errors or omissions in the planning
or performance of work. The Company could also be subject to fines and civil
and criminal penalties in connection with alleged violations of regulatory
requirements. Because of the nature and scope of the possible damages,
liabilities imposed in environmental litigation can be significant. Although
the Company strives to operate safely and prudently and has
11
12
substantial general and automobile liability insurance coverage, no assurance
can be given that the Company will not be exposed to uninsured liabilities
which would have a material adverse effect on its financial condition. The
majority of the Company's solid waste operations have environmental liability
insurance subject to certain limitations and exclusions with limits in excess
of those required by permit regulations; however, there is no assurance that
such limits would be adequate in the event of a major loss, nor is there
assurance that the Company will continue to carry environmental liability
insurance should market conditions in the insurance industry make such coverage
cost prohibitive. The Company carries commercial general liability insurance,
automobile liability insurance, workers' compensation and employer's liability
insurance and umbrella policies to provide excess limits of liability over the
underlying limits contained in the commercial general liability, automobile
liability and employer's liability policies, as well as property insurance.
In the normal course of business, the Company may be required to
post a performance bond or a bank letter of credit in connection with municipal
residential collection contracts, the operation, closure or post-closure of
landfills, certain remediation contracts and certain environmental permits.
Bonds issued by surety companies operate as a financial guarantee of the
Company's performance. To date, the Company has satisfied financial
responsibility requirements for regulatory agencies by making cash deposits,
obtaining bank letters of credit or by obtaining surety bonds.
EMPLOYEES
As of March 1996, the Company employed approximately 4,090 persons,
32 of whom were covered by collective bargaining agreements. The management of
the Company believes that it has good relations with its employees.
SEASONALITY
The Company's solid waste operations can be adversely affected by
extended periods of inclement weather, such as rain or snow, which could delay
the collection and disposal of waste, reduce the volume of waste generated or
delay the expansion of the Company's landfill sites.
GEOGRAPHICAL CONCENTRATION
The existing subscriber base of the Company's electronic security
system business is geographically concentrated in certain metropolitan areas of
Florida and Colorado. Accordingly, their performance may be adversely
affected by regional or local economic conditions, regulation or other factors.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located at 200 East Las
Olas Boulevard, Suite 1400, Fort Lauderdale, Florida in leased premises.
Certain of the property and equipment of the Company and its subsidiaries are
subject to liens securing payment of portions of the Company's and its
subsidiaries' indebtedness. The Company and its subsidiaries also lease certain
of their offices and equipment. See Note 7 of Notes to Consolidated Financial
Statements for additional information with respect to leased properties.
ITEM 3. LEGAL PROCEEDINGS
GENERAL CORPORATE PROCEEDINGS
G.I. Industries, Inc. On May 3, 1991, the Company filed an action
against GI Industries, Inc. ("GI"), Manuel Asadurian, Sr. and Mike Smith in the
United States District Court for the Central District of California (the
"Court"). The Company requested a declaratory judgment that it did not
anticipatorily breach a merger agreement (the "Merger Agreement") between the
Company and GI and that the Merger Agreement had been properly terminated. The
Company also sought to recover $600,000 from GI, plus interest and costs, with
respect to a certain financial guaranty provided by the Company in 1990 for
the benefit of GI. In response to the Company's action, GI filed a
counterclaim alleging that the Company breached the Merger Agreement and that
it had suffered damages in excess of $16,000,000. In August 1993, the Court
rendered a ruling in favor of the Company which GI appealed. In March 1995, the
United States Court of Appeals for the Ninth Circuit at Pasadena, California
(the "Court of Appeals") reversed in part
12
13
and vacated in part the August 1993 decision and remanded the case for further
proceedings. The Court has commenced proceedings that may lead to a trial on
damages.
Subsequent to the commencement of the Company's litigation in this
matter, GI filed for protection under Chapter 11 of the Bankruptcy Code. The
Company is a secured creditor and anticipates a complete recovery of the
$600,000 it is owed from GI, plus interest and costs.
Western Waste Industries, Inc. Western Waste Industries, Inc.
("Western") filed an action against the Company and others on July 20, 1990 in
the District Court of Harris County, Texas alleging various causes of action
including interference with business relations and is seeking $24,000,000 in
damages. The lawsuit stems from Western's attempts to acquire Best Pak
Disposal, Inc. The case is currently scheduled for trial in May 1996.
The Company is also a party to various other general corporate
legal proceedings which have arisen in the ordinary course of its business.
While the results of these matters, as well as matters described above, cannot
be predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's business or consolidated financial position; however,
unfavorable resolution of each matter individually or in the aggregate could
affect the consolidated results of operations for the quarterly periods in
which they are resolved.
ENVIRONMENTAL MATTERS
Imperial Landfill Filter Waste Issue. In 1992, the Company
received notices from Imperial County, California (the "County") and the
Department of Toxic Substances Control ("DTSC," a department under the
California EPA) which alleged that spent filter elements (the "Filters")
from geothermal power plants which had been deposited at the Company's Imperial
Landfill for approximately five years were classified as hazardous waste under
California environmental regulations. Under United States EPA regulations, the
Filters are not deemed hazardous waste because waste associated with the
production of geothermal energy is exempt from the federal classification of
hazardous waste under 40 CFR Part 261.4(b)(5).
The Company is currently conducting active discussions with all
appropriate California regulatory agencies in order to obtain a variance under
California regulations to reclassify the Filters as a special waste so they may
be left in the landfill. If this occurs, the State, regional and local
regulatory agencies may nevertheless require that the affected area of the
landfill be capped and closed. In the event that the variance is not granted,
remedial measures may be required based on the Filters' classification as a
California hazardous waste. One of those measures could include the removal of
the Filters or the closure of a portion of the landfill.
Management is currently unable to determine (i) whether the waste
will ultimately be classified as hazardous, (ii) if so, what action, if any,
will be required as a result of this issue, or (iii) what liability, if any,
the Company will have as a result of this inquiry. In January 1994, the
Company filed suit in the United States District Court for the Southern
District of California against the known past and present owners and operators
of the geothermal power plants, the Ormesa I, IE, IH and II plants in
Holtville, California, for all losses, fines and expenses the Company incurs
associated with the resolution of this matter, including loss of airspace at
the landfill, alleging claims for (i) CERCLA response costs recovery, (ii)
13
14
intentional misrepresentation, (iii) negligent misrepresentation, (iv)
negligence, (v) strict liability, (vi) continuing trespass, (vii) nuisance,
(viii) breach of contract and (ix) breach of implied covenant of good faith and
fair dealing. The Company seeks to recover actual expenses and punitive
damages. Discovery in this matter has been stayed until November 1996, at which
time the Company expects to be able to quantify more accurately the level of
damages it has suffered. The Company believes it will prevail, but no amounts
have been accrued for any recovery of damages.
Imperial Landfill Permit. One of the Company's landfills, the
Imperial Landfill, currently exceeds its permitted daily tonnage capacity and
is involved in negotiations with the California Integrated Waste Management
Board regarding expansion of its daily tonnage capacity. Imperial Landfill
received a notice of violation regarding this issue in late 1989 and has since
applied for a modification of its permit to increase the allowed daily tonnage
from 50 tons up to a maximum of 1,000 tons. Temporary written approval has been
given by Imperial County, California and the California Integrated Waste
Management Board for the Company to operate the landfill and for the landfill
to receive in excess of 50 tons per day while the permit modification is being
reviewed.
The Company is also a party to various other environmental
proceedings related to its solid waste services operations which have arisen in
the ordinary course of its business. Although it is possible that losses
exceeding amounts already recorded may be incurred upon the ultimate resolution
of these matters, as well as the matters described above, management believes
that such losses, if any, will not have a material adverse effect on the
Company's business or consolidated financial position; however, unfavorable
resolution of each matter individually or in the aggregate could affect the
consolidated results of operations for the quarterly periods in which they are
resolved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were approved by written consent of a
majority of the Company's stockholders in lieu of a special meeting as of
November 28, 1995:
Number of Shares of Common Stock
Matter Granting Written Consent
- ---------------------------------------------------------- --------------------------------------------
1. Adoption of amendment to the Company's
Certificate of Incorporation to change the
Company's name from Republic Waste
Industries, Inc. to Republic Industries, Inc. 32,190,716
2. Adoption of amendment to the Company's
Certificate of Incorporation to establish
annual terms for members of the Board of
Directors. 32,190,716
3. Adoption of amendments to the Company's
1995 Non-Employee Director Stock Option Plan. 32,190,716
4. Adoption of amendments to previously issued
Director's Warrants to purchase Common Stock. 32,190,716
14
15
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on Nasdaq under the
symbol "RWIN" since September 1990. The following table sets forth, for the
periods indicated, the high and low prices for the Common Stock as quoted on
Nasdaq.
Quarter Ended High Low
------------- ----------- ---------
1994:
March 31 $ 3 9/16 $ 2 3/4
June 30 . . . . . . . . . . . . 3 1/2 2 11/16
September 30 . . . . . . . . . 3 9/16 3
December 31 . . . . . . . . . 4 3 1/4
1995:
March 31 . . . . . . . 4 1/16 3 1/8
June 30 . . . . . . . . . . . 13 5/8 3 3/16
September 30 . . . . . . . . . 26 1/16 13
December 31 . . . . . . . . . 36 1/8 20
On March 21, 1996, the closing price of Common Stock as reported by
Nasdaq was $29.125 per share. The number of record holders of the Common Stock
as of March 21, 1996, was 2,087.
Effective February 16, 1996, the Company voluntarily delisted the
Common Stock from the Toronto Stock Exchange (the "TSE") due to a lack of
trading volume on the TSE.
Since commencement of operations as a waste management and
environmental services company in December 1989, other than distributions to
former stockholders of acquired companies, the Company has not declared or paid
any cash dividends on its Common Stock and the Board of Directors does not
currently anticipate that the Company will pay cash dividends on its Common
Stock at any time in the foreseeable future.
15
16
ITEM 6. SELECTED FINANCIAL DATA
The following Selected Financial Data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations", the Company's Consolidated Financial Statements and Notes
thereto and other financial information included elsewhere in this Form 10-K.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
INCOME STATEMENT DATA: 1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(In thousands, except per share data)
Revenue . . . . . . . . . . . . . . . . . . . . . $ 260,315 $ 187,111 $154,301 $134,440 $ 117,711
Income (loss) from continuing operations
before income taxes . . . . . . . . . . . . . . $ 36,684 $ 18,271 $ (1,286) $ 9,048 $ 6,055
Income (loss) from continuing operations . . . . $ 23,212 $ 14,432 $ (2,473) $ 6,962 $ 4,167
Earnings (loss) per common and common
equivalent share from continuing operations . . $ 0.35 $ 0.32 $ (0.05) $ 0.16 $ 0.11
Weighted average common and
common equivalent shares . . . . . . . . . . . 65,785 45,545 45,636 44,479 37,373
DECEMBER 31,
--------------------------------------------------------
BALANCE SHEET DATA: 1995 1994 1993 1992 1991
----- ----- ----- ----- -----
(In thousands)
Working capital (deficiency) . . . . . . . . . . $142,891 $ (7,184) $ 1,226 $ 2,992 $ 14,885
Short-term debt, including current
maturities of long-term debt . . . . . . . . . $ - $ 10,035 $ 9,913 $ 9,222 $ 7,874
Long-term debt, net of current maturities . . . . $ - $ 37,995 $ 41,596 $ 30,086 $ 27,565
Stockholders' equity . . . . . . . . . . . . . . $436,387 $ 109,830 $ 96,305 $ 120,376 $ 119,426
Total assets . . . . . . . . . . . . . . . . . . $542,050 $ 242,365 $ 203,873 $ 190,068 $ 180,394
See Notes 2, 5, 9 and 10 of Notes to Consolidated Financial
Statements for discussion of business combinations, various equity
transactions, the Distribution of the hazardous waste services segment and
restructuring charges and their effect on comparability of year-to-year data.
See Item 5 "Market for Registrant's Common Equity and Related Stockholder
Matters" for a discussion of the Company's dividend policy.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Item 6
"Selected Financial Data" and the Company's Consolidated Financial Statements
and the Notes thereto.
BUSINESS COMBINATIONS
The Company's strategy is to aggressively grow its solid waste
services business by acquiring and integrating existing solid waste collection,
disposal and recycling businesses, and to expand its recently acquired
electronic security services business by internal growth and by making
additional acquisitions in that industry. Further, the Company currently
anticipates expanding its operations outside of solid waste management,
electronic security services and related lines of business, resulting in a more
diversified Company. The Company makes its decision to acquire or invest in
businesses based on financial and strategic considerations.
16
17
Businesses acquired through December 31, 1995 and accounted for under
the pooling of interests method of accounting have been included retroactively
in the financial statements as if the companies had operated as one entity
since inception. Businesses acquired through December 31, 1995 and accounted
for under the purchase method of accounting are included in the financial
statements from the date of acquisition.
ACQUISITIONS COMPLETED DURING THE YEAR ENDED DECEMBER 31, 1995
In August 1995, the Company merged with Kertz, which provides
electronic security monitoring and maintenance predominantly in the South
Florida area. In October 1995, the Company merged with United and Southland.
United provides solid waste collection, transfer and recycling services in the
Atlanta, Georgia metropolitan area, and Southland provides solid waste
collection services in the Northeast Florida area. In November 1995, the
Company merged with Duncan, GDS, Fennell and Scott. Duncan provides solid waste
collection and recycling services in the Dallas-Fort Worth metropolitan area
and throughout west Texas and also operates two landfills. GDS provides solid
waste collection and recycling services throughout western North Carolina.
Fennell is a full-service solid waste management company, providing services in
and around Charleston and Greenville, South Carolina and also owns a landfill.
Scott is an electronic security alarm company, providing monitoring and
maintenance services in Jacksonville, Orlando and Tallahassee, Florida, and
other metropolitan areas in the southeastern United States, including
Charlotte, North Carolina; Savannah, Georgia and Nashville, Tennessee. The
Company issued an aggregate of 18,127,984 shares of Common Stock for the
acquisitions of Kertz, United, Southland, Duncan, GDS, Fennell, and Scott
(collectively, the "Pooled Entities"). The acquisitions of the Pooled Entities
were accounted for under the pooling of interests method of accounting and,
accordingly, the Consolidated Financial Statements have been restated as if the
Company and the Pooled Entities had operated as one entity since inception.
In August 1995, the Company acquired all of the outstanding shares of
capital stock of HMC. The purchase price paid by the Company was approximately
$72,800,000 and consisted of 8,000,000 shares of Common Stock. HMC, as the
third largest solid waste management company in Florida, provides solid waste
collection and recycling services to commercial, industrial and residential
customers. This acquisition, as well as several other minor business
combinations from January 1, 1993 to December 31, 1995, have been accounted for
under the purchase method of accounting.
ACQUISITIONS COMPLETED SUBSEQUENT TO DECEMBER 31, 1995
In March 1996, the Company acquired substantially all of the assets of
Mid-American Georgia for a purchase price of approximately $52,000,000. At
closing, the Company issued an aggregate of 1,700,000 shares of Common Stock
valued at approximately $46,750,000 and will settle the remaining balance
within 60 days using additional Common Stock or cash. Mid-American Georgia
owns and operates a landfill, provides solid waste collection and recycling
services to commercial, residential and industrial customers, and operates two
transfer stations, in certain areas of the greater metropolitan Atlanta,
Georgia area. The acquisition of Mid-American Georgia will be accounted
for under the purchase method of accounting.
In February 1996, the Company acquired, in merger transactions, all of
the outstanding shares of capital stock of Schaubach. Schaubach provides solid
waste collection and recycling services to residential, commercial and
industrial customers in southeastern Virginia and eastern North Carolina and
provides transportation of medical waste throughout the Mid-Atlantic states.
In February 1996, the Company acquired, in merger transactions, all of
the outstanding shares of capital stock of Denver Alarm. Denver Alarm provides
installation, monitoring and maintenance services to residential and commercial
customers in Denver, Fort Collins, Boulder, Colorado Springs and Pueblo,
Colorado.
The Company issued an aggregate of 2,914,452 shares of Common Stock to
acquire Schaubach and Denver Alarm both of which will be accounted for as
pooling of interests business combinations.
For further discussion of the Company's business combinations and
acquisition strategy, see "Acquisitions" under the heading "Item 1. Business"
and Note 2 of Notes to Consolidated Financial Statements.
17
18
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
In 1994, the Company pursued a plan to exit the hazardous waste
services segment of the environmental industry. The plan provided for the
combination of the Company's hazardous waste services segment, Republic
Environmental Systems, Inc. ("RESI") and the distribution of the stock of RESI
to the Company's stockholders in 1995. The following discussion excludes the
operational activity and results of the hazardous waste services segment of the
Company, which have been included in the accompanying Consolidated Financial
Statements for all periods presented as discontinued operations.
Revenue
The Company's revenue from its collection operations consists of fees
from residential, commercial and industrial customers. The Company's revenue
from landfill operations is comprised primarily of tipping fees charged to
third parties. The Company's revenue from its electronic security services
business results from monitoring contracts for security systems and fees
charged for the sale and installation of such systems.
The following table presents revenue data from the Company's different
industry segments for the years ended December 31:
1995 1994 1993
---- ---- ----
Solid waste services . . . . . . . . . . . . $226,815 $161,237 $133,711
Electronic security services . . . . . . . . 33,500 25,874 20,590
-------- --------- --------
$260,315 $187,111 $154,301
======== ========= ========
The increase in revenue from the solid waste services segment for 1995
is primarily a result of the acquisition of HMC and other businesses, as well
as internal growth and increased volume at existing operations. The increase
for 1994 is primarily attributable to internal growth. The increases in
revenue from the electronic security services segment for 1995 and 1994 are
principally a result of an aggressive expansion plan targeted at generating new
monitoring business.
Operating Costs and Expenses
Cost of operations for the Company's collection operations is variable
and includes disposal, labor, fuel and equipment maintenance costs. Landfill
cost of operations includes most daily operating expenses, the legal and
administrative costs of ongoing environmental compliance, costs of capital for
cell development and accruals for closure and post-closure costs. Certain
direct landfill development costs, such as engineering, upgrading, cell
construction and permitting costs, are capitalized and depleted based on
consumed airspace. All indirect landfill development costs, such as executive
salaries, general corporate overhead, public affairs and other corporate
services are expensed as incurred. Cost of operations for the Company's
electronic security services business primarily consists of the labor and
equipment associated with the sale, installation and monitoring of security
systems.
The following table sets forth the Company's total cost of operations
and selling, general and administrative expenses as percentages of total
revenue for the years ended December 31:
1995 1994 1993
---- ---- ----
Cost of operations . . . . . . . . . . 65% 66% 68%
Selling, general and administrative . . 21% 22% 25%
Cost of operations was $169,559,000, $123,877,000 and $104,720,000 for
the years ended December 31, 1995, 1994 and 1993, respectively. The increases
are consistent with the increases in revenue for such periods. The decreases in
cost of operations as a percentage of revenue for the years ended December 31,
1995 and 1994 are primarily a result of price increases and the implementation
of cost reduction measures.
18
19
Selling, general and administrative expenses were $54,133,000,
$41,730,000 and $38,854,000 for the years ended December 31, 1995, 1994 and
1993, respectively. These increases primarily reflect the growth of the
Company's business through the acquisition of HMC and other businesses. The
decreases in selling, general and administrative expenses as a percentage of
revenue for the years ended December 31, 1995 and 1994 are largely due to the
Company's continued commitment to reduce and control such expenses by
implementing efficiencies within the Company's administrative functions.
Restructuring and Unusual Charges
In 1993, the Company recorded restructuring and unusual charges of
$10,040,000 based on the Company's reevaluation of its solid waste operations.
As a result of this reevaluation, the Company decided to terminate certain
contracts, close one of its facilities due to low waste volumes and abandon its
permitting effort at another facility because of limited market opportunity in
that area and delays in the permitting process. The write-off of property and
equipment and accumulated permitting costs associated with these facilities
were included in these restructuring and unusual charges. In addition, the
Company also reevaluated its exposure related to litigation and environmental
matters and provided additional accruals for the costs to defend or settle
certain litigation and environmental matters. For further discussion of the
restructuring and unusual charges, see Note 10 of Notes to Consolidated
Financial Statements.
Interest and Other Income
Interest and other income increased to $5,691,000 in 1995 from
$989,000 in 1994 due to the increase in the Company's cash investments resulting
from the proceeds from sales of Common Stock. For further discussion of the
sales of Common Stock, see "Liquidity and Capital Resources" and Note 5 of
Notes to Consolidated Financial Statements.
Interest Expense
Interest expense was $5,630,000, $4,222,000 and $2,685,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The increases are
primarily due to higher average outstanding borrowings used to fund internal
growth. All of the Company's outstanding borrowings were repaid during the
latter half of 1995.
Income Taxes
The Company's income tax provision for 1995 and 1994 was partially
offset by certain tax reserve adjustments resulting from tax planning
strategies employed by the Company, such as combining entities to reduce state
income taxes, claiming tax credits not previously claimed, recapturing taxes
previously paid by acquired companies and adjustments for the resolution of tax
matters in amounts more favorable than those originally estimated.
Additionally, the Company's 1994 income tax provision was offset by a decrease
in the valuation allowance related to the expected realization of deferred tax
assets generated as a result of restructuring and unusual charges incurred in
the fourth quarter of 1993. The valuation allowance was recorded in 1993 due
to the uncertainty surrounding the future utilization of such deferred tax
assets. For further discussion of income taxes, see Note 4 of Notes to
Consolidated Financial Statements.
ENVIRONMENTAL AND LANDFILL MATTERS
The Company provides for accrued environmental and landfill costs
which include landfill site closure and post-closure costs. Landfill site
closure and post-closure costs include costs to be incurred for final closure
of the landfills and costs for providing required post-closure monitoring and
maintenance of landfills. These costs are accrued based on consumed airspace.
The Company estimates its future cost requirements for closure and post-closure
monitoring and maintenance for its solid waste facilities based on its
interpretation of the technical standards of the EPA's Subtitle D regulations.
These estimates do not take into account discounts for the present value of
such total estimated costs. Environmental costs are accrued by the Company
through a charge to income in the appropriate period for known and anticipated
environmental liabilities.
The Company periodically reassesses its methods and assumptions used
to estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the
19
20
effects of inflation, changes in operating climates in the regions in which the
Company's facilities are located and the expectations regarding costs of
securing environmental services.
DISCONTINUED OPERATIONS
In July 1994, the Company announced the contemplation of a plan to
exit the hazardous waste services segment of the environmental industry, and in
October 1994, the Board of Directors authorized management to pursue the plan,
subject to final approval from the Board of Directors and the resolution of
certain legal and financial requirements. The plan provided for the
combination of the Company's hazardous waste services operations in its
wholly-owned subsidiary, RESI, and the distribution of the stock of RESI to the
stockholders of record of the Company.
In February 1995, the Board of Directors approved the plan of
distribution, and on April 26, 1995, the Company's stockholders received one
share of RESI's common stock for every five shares of Common Stock owned of
record on April 21, 1995. The Company has had no direct ownership interest in
RESI since the Distribution. The hazardous waste services segment of the
Company's business has been accounted for as a discontinued operation, and
accordingly, the accompanying Consolidated Financial Statements of the Company
for 1994 and 1993 have been restated to report separately the net assets and
operating results of these discontinued operations. For further discussion of
the Distribution, see Note 9 of Notes to Consolidated Financial Statements.
SEASONALITY
The Company's solid waste operations can be adversely affected by
extended periods of inclement weather, such as rain or snow, which could delay
the collection and disposal of waste, reduce the volume of waste generated or
delay the expansion of the Company's landfill sites. The Company's electronic
security services operations are not materially impacted by seasonality.
LIQUIDITY AND CAPITAL RESOURCES
As previously discussed, the Company will continue to pursue
acquisitions in the solid waste, electronic security services and other
selected industries and anticipates financing acquisitions with the proceeds
from the equity transactions mentioned below as well as through the issuance of
Common Stock. Management believes that the Company currently has sufficient
cash and access to the financial markets to fund current operations and make
acquisitions. However, substantial additional capital may be necessary to
fully implement the Company's aggressive acquisition program. Accordingly, the
Company replaced its existing credit facility in December 1995 with a
substantially larger credit facility of $250,000,000, the proceeds from which
will be used, among other things, to make acquisitions and to expand the
Company's operations. However, there can be no assurance that any additional
financing will be available, or, in the event that it is, that it will be
available in the amounts or terms acceptable to the Company.
CASH FLOWS FROM OPERATING ACTIVITIES
The Company's net cash flows from operating activities increased
slightly during 1995 as a result of an increase in operating cash generated by
its ongoing business. The Company used its operating cash flows during 1995 to
repay existing indebtedness and make capital expenditures. The Company has in
the past made capital expenditures from cash on hand and operating cash flows
and anticipates continuing to do so in 1996.
CASH FLOWS FROM INVESTING ACTIVITIES
The Company made capital expenditures of approximately $48,885,000
during 1995 which included the purchase of new fixed assets, normal replacement
of older property and the expansion of landfill sites. The Company also made
expenditures of approximately $15,980,000 during 1995 related to the expansion
of its electronic security services business through new installations and
acquisitions of subscriber accounts. Management anticipates continuing to make
capital expenditures for new equipment, upgrading existing equipment and
facilities, the construction of new airspace and the installation of new
security systems. The Company expects that these expenditures may increase in
the future due to the internal growth of the Company and business combinations.
20
21
CASH FLOWS FROM FINANCING ACTIVITIES
In August 1995, the Company issued and sold an aggregate of 8,350,000
shares of Common Stock and warrants to purchase an additional 16,700,000 shares
of Common Stock to Mr. Huizenga, Westbury (Bermuda) Ltd. (a Bermuda corporation
controlled by Michael G. DeGroote), Harris W. Hudson, and certain of their
assigns for an aggregate purchase price of approximately $37,500,000. The
warrants are exercisable at prices ranging from $4.50 to $7.00 per share. In
August 1995, the Company issued and sold an additional 1,000,000 shares of
Common Stock each to Mr. Huizenga and John J. Melk, for $13.25 per share for
aggregate proceeds of approximately $26,500,000.
In July 1995, the Company sold 5,400,000 shares of Common Stock in a
private placement transaction for $13.25 per share resulting in net proceeds of
approximately $69,000,000 after deducting expenses, fees and commissions. In
September 1995, the Company sold 5,000,000 shares of Common Stock in an
additional private placement transaction for $20.25 per share resulting in net
proceeds of approximately $99,000,000.
As a result of these transactions, the Company received approximately
$232,000,000 in cash, a portion of which was used to repay all outstanding
borrowings resulting in no long-term debt outstanding at December 31, 1995.
FINANCIAL CONDITION
The Company believes that its financial condition is very strong and
that it has the financial resources necessary to meet its anticipated financing
needs. In addition to cash provided by operating activities and proceeds from
the sales of Common Stock, the Company has availability under its new credit
facility to fund internal growth and take advantage of acquisition
opportunities.
WORKING CAPITAL
Working capital at December 31, 1995 amounted to $142,891,000 as
compared to a deficit of ($7,184,000) at December 31, 1994. The increase in
working capital is primarily the result of cash proceeds received from the
sales of Common Stock. The Company believes working capital may decline in
1996 to lower levels as additional capital is used for the continued growth and
expansion of the Company's business.
Accounts receivable at December 31, 1995 were $32,780,000 as compared
to $21,610,000 at December 31, 1994. The increase is primarily attributed to
the acquisition of HMC and internal growth within the Company.
Other current assets, which consists primarily of inventory and notes
receivable, were $10,980,000 at December 31, 1995 as compared to $5,043,000 at
December 31, 1994. The increase is due primarily to the acquisition of HMC.
Accounts payable and accrued liabilities were $33,791,000 at December
31, 1995 as compared to $21,452,000 at December 31, 1994. The increase is
primarily due to the acquisition of HMC and the internal growth of the
Company's business.
Deferred revenue consists primarily of proceeds from the factoring of
electronic security monitoring contracts by one of the Company's acquired
security businesses. The use of factoring was discontinued by the Company
subsequent to the date of acquisition. The current portion of deferred revenue
amounted to $23,532,000 at December 31, 1995 as compared to $12,255,000 at
December 31, 1994. The increase is primarily due to new installations of
electronic security devices and related monitoring contracts.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net amounted to $187,461,000 at December 31,
1995 as compared to $134,506,000 at December 31, 1994. The increase is
attributed primarily to the acquisition of HMC and increased capital
expenditures resulting from internal growth and expansion.
21
22
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET
Investment in subscriber accounts, net represents capitalized direct
labor and material costs associated with the installation of new electronic
security systems and the cost of acquired subscriber accounts. Investment in
subscriber accounts, net increased $17,347,000 during 1995 due to growth in
electronic security system installations and acquisitions of subscriber
accounts.
INTANGIBLE ASSETS, NET
Intangible assets, net increased $84,266,000 during 1995 as a result
of the acquisition of HMC and other businesses during the year.
NET ASSETS OF DISCONTINUED OPERATIONS
Net assets of discontinued operations decreased to zero at December
31, 1995 from $20,292,000 at December 31,1994 due to the spin-off of the
hazardous waste services segment which was consummated in April 1995. For
further discussion of the spin-off, see Note 9 of Notes to Consolidated
Financial Statements.
LONG-TERM DEBT, INCLUDING CURRENT MATURITIES AND NOTES PAYABLE
Long-term debt, including current maturities and notes payable
decreased from $48,030,000 at December 31, 1994 to zero at December 31, 1995
due to the payoff of debt from the cash proceeds of sales of Common Stock.
STOCKHOLDERS' EQUITY
Stockholders' equity increased $326,557,000 during 1995 primarily due
to the sales of Common Stock and the acquisition of HMC and other businesses.
22
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accountants
24
Consolidated Balance Sheets as of December 31, 1995 and 1994
25
Consolidated Statements of Operations for Each of the Three Years Ended
December 31, 1995 26
Consolidated Statements of Stockholders' Equity for Each of the
Three Years Ended December 31, 1995 27
Consolidated Statements of Cash Flows for Each of the Three Years Ended
December 31, 1995 28
Notes to Consolidated Financial Statements 29
Financial Statement Schedule II, Valuation and Qualifying Accounts and Reserves,
For Each of the Three Years Ended December 31, 1995 45
23
24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets of
Republic Industries, Inc. (a Delaware corporation, formerly Republic Waste
Industries, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and the schedule 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 Republic
Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 26, 1996.
24
25
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
-----------------------------
ASSETS 1995 1994
---- ----
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 159,753 $ 10,031
Accounts receivable, less allowance for doubtful accounts of
$1,846 and $1,055, respectively . . . . . . . . . . . . . . . . . 32,780 21,610
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 3,251 2,559
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 10,980 5,043
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . 206,764 39,243
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 187,461 134,506
Investment in subscriber accounts, net of accumulated amortization
of $11,446 and $6,977, respectively . . . . . . . . . . . . . . . . . . . 41,540 24,193
Intangible assets, net of accumulated amortization of $7,356 and $3,212,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,871 15,605
Net assets of discontinued operations . . . . . . . . . . . . . . . . . . . . - 20,292
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,414 8,526
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 542,050 $ 242,365
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,007 $ 11,777
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 18,784 9,675
Current portion of deferred revenue . . . . . . . . . . . . . . . . 23,532 12,255
Current maturities of long-term debt and notes payable . . . . . . - 10,035
Current portion of accrued environmental and landfill costs . . . . 2,925 1,404
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 3,625 1,281
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . 63,873 46,427
Long-term debt and notes payable, net of current maturities . . . . . . . . . - 37,995
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . 18,012 20,353
Accrued environmental and landfill costs, net of current portion . . . . . . 8,386 8,244
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,359 11,510
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,033 8,006
---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 105,663 132,535
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01 per share; 5,000,000 shares
authorized; none issued . . . . . . . . . . . . . . . . . . . . . . - -
Common stock, par value $0.01 per share; 350,000,000 and
100,000,000 shares authorized, respectively; 76,056,483 and
45,313,715 issued, respectively . . . . . . . . . . . . . . . . . 760 453
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 398,485 105,586
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 37,142 4,464
Notes receivable arising from stock purchase agreements . . . . . . - (673)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 436,387 109,830
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . $ 542,050 $ 242,365
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
25
26
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
---------------------------------------------
1995 1994 1993
---- ---- ----
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,315 $ 187,111 $ 154,301
Expenses:
Cost of operations . . . . . . . . . . . . . . . . 169,559 123,877 104,720
Selling, general and administrative . . . . . . . 54,133 41,730 38,854
Restructuring and unusual charges . . . . . . . . - - 10,040
----------- ---------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . . 36,623 21,504 687
Interest and other income . . . . . . . . . . . . . . . . . 5,691 989 712
Interest expense . . . . . . . . . . . . . . . . . . . . . (5,630) (4,222) (2,685)
----------- ---------- ----------
Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 36,684 18,271 (1,286)
Income tax provision . . . . . . . . . . . . . . . . . . . 13,472 3,839 1,187
----------- ---------- ----------
Income (loss) from continuing operations . . . . . . . . . 23,212 14,432 (2,473)
Discontinued operations:
Income (loss) from discontinued operations, net of
income tax benefit of $193, $0 and $210,
respectively . . . . . . . . . . . . . . . . . . . (293) 2,684 (14,579)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 22,919 $ 17,116 $ (17,052)
=========== ========== ==========
Primary earnings (loss) per common and common equivalent
share:
Continuing operations . . . . . . . . . . . . . . $ 0.37 $ 0.32 $ (0.05)
Discontinued operations . . . . . . . . . . . . . - 0.06 (0.32)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . $ 0.37 $ 0.38 $ (0.37)
=========== ========== ==========
Fully diluted earnings (loss) per common and common
equivalent share:
Continuing operations . . . . . . . . . . . . . . $ 0.35 $ 0.32 $ (0.05)
Discontinued operations . . . . . . . . . . . . . - 0.06 (0.32)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . $ 0.35 $ 0.38 $ (0.37)
=========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
26
27
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Notes
Receivable
Arising
Retained From
Additional Earnings Stock
Common Paid-In (Accumulated Purchase
Stock Capital Deficit) Agreements
--------- ---------- -------------- ------------
BALANCE AT DECEMBER 31, 1992 . . . . . . $ 454 $ 102,463 $ 12 ,398 $ (673)
Contributions to capital from pooled
entities . . . . . . . . . . . . . . - 2,890 - -
Distributions to former stockholders
of acquired companies . . . . . . - - (3,078) -
Other . . . . . . . . . . . . . . . . - (679) (418) -
Net loss . . . . . . . . . . . . . . . - - (17,052) -
------ ---------- ----------- --------
BALANCE AT DECEMBER 31, 1993 . . . . . . 454 104,674 (8,150) (673)
Distributions to former stockholders
of acquired companies . . . . . . . - - (4,520) -
Other . . . . . . . . . . . . . . . . (1) 912 18 -
Net income . . . . . . . . . . . . . . - - 17,116
------ ---------- ----------- --------
BALANCE AT DECEMBER 31, 1994 . . . . . . 453 105,586 4,464 (673)
Sales of common stock . . . . . . . . 208 231,823 - -
Stock issued in acquisitions . . . . 86 82,897 - -
Exercise of stock options and -
warrants, including tax benefit
of $4,068 . . . . . . . . . . . . . 14 13,360 -
Payments received on notes . . . . . . - - - 673
Reclassification of additional paid-in
capital to effect the spin-off . . . - (36,305) 36,305 -
Spin-off of Republic Environmental
Systems, Inc. . . . . . . . . . . . - - (23,579) -
Distributions to former stockholders
of acquired companies . . . . . . . - - (3,079) -
Other . . . . . . . . . . . . . . . . (1) 1,124 112 -
Net income . . . . . . . . . . . . . - - 22,919 -
------- ---------- ----------- --------
BALANCE AT DECEMBER 31, 1995 . . . . . $ 760 $ 398,485 $ 37,142 $ -
======= ========== =========== ========
The accompanying notes are an integral part of these consolidated financial
statements.
27
28
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
-----------------------------------------------------
1995 1994 1993
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Income (loss) from continuing operations . . . . . . . . $ 23,212 $ 14,432 $ (2,473)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing operations:
Restructuring and unusual charges . . . . . . . . . . - - 10,040
Depreciation, depletion and amortization . . . . . . . 20,999 18,130 14,435
Provision for doubtful accounts . . . . . . . . . . 1,204 721 811
Provision for accrued environmental and
landfill costs . . . . . . . . . . . . . . . . . . 400 377 215
Gain on the sale of equipment . . . . . . . . . . . . (347) (285) (148)
Changes in assets and liabilities, net of effects
from business acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . (5,582) (3,403) (2,765)
Prepaid expenses and other assets . . . . . . . . . . (3,273) (395) (2,307)
Accounts payable and accrued liabilities . . . . . . . (549) 2,263 (52)
Income taxes payable . . . . . . . . . . . . . . . . . 2,326 712 (772)
Deferred revenue and other liabilities . . . . . . . (13,593) (11,040) (2,801)
-------- -------- -------
Net cash provided by continuing operations . . . . . . 24,797 21,512 14,183
-------- -------- -------
CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . (261) (736) (4,360)
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired . . . . . . (6,962) (4,776) (5,664)
Purchases of property and equipment . . . . . . . . . . (48,885) (21,217) (12,109)
Investment in subscriber accounts . . . . . . . . . . . (15,980) (17,512) (9,569)
Other . . . . . . . . . . . . . . . . . . . . . . . . . - (819) (2,233)
-------- -------- --------
Net cash used in investing activities . . . . . . . . . (71,827) (44,324) (29,575)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock . . . . . . . . . . . . . . . . . . 232,031 - -
Exercise of stock options and warrants . . . . . . . . . 9,306 - -
Capital contribution to Republic Environmental
Systems, Inc. . . . . . . . . . . . . . . . . . . . . . (2,520) - -
Payments of long-term debt and notes payable . . . . . . . (83,344) (16,474) (14,552)
Proceeds from long-term debt and notes payable . . . . . . 24,498 19,453 21,414
Proceeds from financing arrangements . . . . . . . . . . 24,747 27,070 15,473
Distributions to former stockholders of acquired
companies . . . . . . . . . . . . . . . . . . . . . . . (3,079) (4,520) (3,078)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (4,626) (1,240) 615
--------- -------- --------
Net cash provided by financing activities . . . . . . . . 197,013 24,289 19,872
--------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 149,722 741 120
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . 10,031 9,290 9,170
--------- -------- --------
END OF PERIOD . . . . . . . . . . . . . . . . . . . . $ 159,753 $ 10,031 $ 9,290
========= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
28
29
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000'S OMITTED IN ALL TABLES EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
accounts of Republic Industries, Inc. (formerly Republic Waste Industries,
Inc.) and its wholly-owned subsidiaries ("Republic" or the "Company"). All
significant intercompany accounts and transactions have been eliminated.
In 1994, the Board of Directors authorized management to pursue a plan to
distribute its hazardous waste services segment, Republic Environmental
Systems, Inc. ("RESI"), to Republic stockholders. Accordingly, as
discussed in Note 9, this segment has been accounted for as a discontinued
operation and the accompanying Consolidated Financial Statements for 1994
and 1993 presented herein have been restated to report separately the net
assets and operating results of these discontinued operations.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously
reported financial statements in order to conform with the financial
statement presentation of the current period.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. The most significant estimates made in the
preparation of the accompanying Consolidated Financial Statements are
estimated future cost requirements for closure and post-closure monitoring
and maintenance for the Company's solid waste facilities and estimated
customer lives utilized in amortizing the investment in subscriber accounts
with respect to the Company's electronic security services segment.
Although the Company believes its estimates are appropriate, changes in
assumptions utilized in preparing such estimates could cause these
estimates to change in the near term.
The accompanying Consolidated Financial Statements include the
financial position and results of operations of Kertz Security Systems II,
Inc. and Kertz Security Systems, Inc. (collectively, "Kertz"), with which
the Company merged in August 1995; United Waste Service, Inc. ("United")
and Southland Environmental Services, Inc. ("Southland"), with which the
Company merged in October 1995; and J.C. Duncan Company, Inc. and
affiliates ("Duncan"), Garbage Disposal Service, Inc. ("GDS"), Fennell
Container Co., Inc. and affiliates ("Fennell") and Scott Security Systems
and affiliates ("Scott"), with which the Company merged in November 1995.
These transactions were accounted for under the pooling of interests method
of accounting and, accordingly, the accompanying Consolidated Financial
Statements have been restated as if the Company and Kertz, United,
Southland, Duncan, GDS, Fennell and Scott (collectively, the "Pooled
Entities") had operated as one entity since inception. See Note 2 for
further discussion of these transactions.
OTHER CURRENT ASSETS. Other current assets consist primarily of
short-term notes receivable and inventories. Inventories consist
principally of equipment parts, compost materials and supplies and are
valued under a method which approximates the lower of cost (first-in,
first-out) or market. At December 31, 1995 and 1994, other current assets
included inventories of $3,794,000 and $3,360,000, respectively.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
Expenditures for major additions and improvements are capitalized, while
minor replacements, maintenance and repairs are charged to expense as
incurred. When property is retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in current operations.
29
30
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company revises the estimated useful lives of property and
equipment acquired through its business acquisitions to conform with its
policies regarding property and equipment. Depreciation is provided over
the estimated useful lives of the assets involved using the straight-line
method. The estimated useful lives are: twenty to forty years for
buildings and improvements, three to fifteen years for vehicles and
equipment and five to ten years for furniture and fixtures.
Landfills are stated at cost and are depleted based on consumed
airspace. Landfill improvements include direct costs incurred to obtain a
landfill permit and direct costs incurred to construct and develop the
site. These costs are depleted based on consumed airspace. No general
and administrative costs are capitalized as landfills and landfill
improvements.
A summary of property and equipment at December 31 is shown below:
1995 1994
---- ----
Land, landfills and improvements . . . . . . . . . . $ 92,909 $ 84,864
Vehicles and equipment . . . . . . . . . . . . . . . 145,034 95,760
Buildings and improvements . . . . . . . . . . . . . 23,512 16,174
Furniture and fixtures . . . . . . . . . . . . . . . 7,907 6,496
--------- --------
269,362 203,294
Less accumulated depreciation, amortization
and depletion . . . . . . . . . . . . . . . . . . (81,901) (68,788)
--------- --------
$ 187,461 $134,506
========= ========
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET. Investment in subscriber
accounts, net consists of capitalized direct labor and material costs
associated with new monitoring contracts installed by the Company's electronic
security services business and the cost of acquired subscriber accounts.
The costs are amortized over periods ranging from eight to twelve
years based on the historical customer attrition rates. The amortization
method applies the attrition rate (converted to an estimated useful life) to
the entire net book value of the account base at the beginning of each period
adjusted for additions and divestitures during the period.
INTANGIBLE ASSETS. Intangible assets consist primarily of the cost of
acquired businesses in excess of the fair value of net tangible assets
acquired. The cost in excess of the fair value of net tangible assets is
amortized over the lesser of the estimated life or forty years on a
straight-line basis. Amortization expense related to intangible assets was
$2,241,000, $1,252,000 and $939,000 in 1995, 1994 and 1993, respectively.
The Company continually evaluates whether events and circumstances
have occurred that may warrant revision of the estimated useful life of
intangible assets or whether the remaining balance of intangible assets should
be evaluated for possible impairment. The Company uses an estimate of the
related undiscounted net income over the remaining life of the intangible
assets in measuring their recoverability.
DEFERRED REVENUE. Deferred revenue consists primarily of proceeds from
the factoring of electronic security monitoring contracts by one of the
Company's acquired security businesses. The use of factoring was discontinued
by the Company subsequent to the date of acquisition. Revenue is recognized
over the period services are provided.
30
31
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS. Accrued environmental and
landfill costs include landfill site closure and post-closure costs. Landfill
site closure and post-closure costs include costs to be incurred for final
closure of the landfills and costs for providing required post-closure
monitoring and maintenance of landfills. These costs are accrued based on
consumed airspace. Estimated aggregate closure and post-closure costs are to
be fully accrued for these landfills at the time that such facilities cease to
accept waste and are closed. Excluding existing accruals at the end of 1995,
approximately $7,871,000 of such costs are to be expensed over the remaining
lives of these facilities. The Company estimates its future cost requirements
for closure and post-closure monitoring and maintenance for its solid waste
facilities based on its interpretation of the technical standards of the United
States Environmental Protection Agency's Subtitle D regulations. These
estimates do not take into account discounts for the present value of such
total estimated costs. Environmental costs are accrued by the Company through
a charge to income in the appropriate period for known and anticipated
environmental liabilities.
The Company periodically reassesses its method and assumptions used to
estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the effects of inflation, changes in operating climates in the
regions in which the Company's facilities are located and the expectations
regarding costs of securing environmental services.
As discussed in Note 7, the Company is involved in litigation and is
subject to ongoing environmental investigations by certain regulatory agencies,
as well as other claims and disputes that could result in additional litigation
which are in the normal course of business.
REVENUE RECOGNITION. The Company recognizes revenue in the period
services are provided or products are sold.
STATEMENTS OF CASH FLOWS. The Company considers all highly liquid
investments with purchased maturities of three months or less to be cash
equivalents. The effect of non-cash transactions related to business
combinations, as discussed in Note 2, and other non-cash transactions are
excluded from the Statements of Cash Flows.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The book values of cash, trade
accounts receivable, trade accounts payable and financial instruments included
in other current assets and other assets approximate their fair values
principally because of the short-term maturities of these instruments. The
fair value of the Company's long-term debt is estimated based on the current
rates offered to the Company for debt of similar terms and maturities. Under
this method the Company's fair value of long-term debt was not significantly
different than the stated value at December 31, 1995 and 1994.
In the normal course of business, the Company has letters of credit,
performance bonds and other guarantees which are not reflected in the
accompanying Consolidated Balance Sheets. The Company's management believes
that the likelihood of performance under these financial instruments is minimal
and expects no material losses to occur in connection with these financial
instruments.
CONCENTRATIONS OF CREDIT RISK. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets in which the Company's services are provided, as well as their
dispersion across many different geographic areas. As a result, at December
31, 1995, the Company does not consider itself to have any significant
concentrations of credit risk.
FUTURE ACCOUNTING PRONOUNCEMENTS. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which requires adoption in 1996. SFAS
No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed. The Company believes the adoption of SFAS No. 121
will not have a material effect on the Company's financial condition or results
of operations. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based
31
32
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Compensation", which requires adoption in 1996. SFAS No. 123 requires that the
Company's financial statements include certain disclosures about stock-based
employee compensation arrangements and permits the adoption of a change in
accounting for such arrangements. Changes in accounting for stock-based
compensation are optional and the Company plans to adopt only the disclosure
requirements in 1996.
2. BUSINESS COMBINATIONS
Businesses acquired through December 31, 1995 and accounted for under
the pooling of interests method of accounting have been included retroactively
in the financial statements as if the companies had operated as one entity
since inception. Businesses acquired through December 31, 1995 and accounted
for under the purchase method of accounting are included in the financial
statements from the date of acquisition.
In August 1995, the Company merged with Kertz, which provides
electronic security monitoring and maintenance predominantly in the South
Florida area. In October 1995, the Company merged with United and Southland.
United provides solid waste collection, transfer and recycling services in the
Atlanta, Georgia metropolitan area, and Southland provides solid waste
collection services in the Northeast Florida area. In November 1995, the
Company merged with Duncan, GDS, Fennell and Scott. Duncan provides solid
waste collection and recycling services in the Dallas-Fort Worth metropolitan
area and throughout west Texas and also operates two landfills. GDS provides
solid waste collection and recycling services throughout western North
Carolina. Fennell is a full-service solid waste management company, providing
services in and around Charleston and Greenville, South Carolina and also owns
a landfill. Scott is an electronic security alarm company, providing monitoring
and maintenance services in Jacksonville, Orlando and Tallahassee, Florida, and
other metropolitan areas in the southeastern United States, including
Charlotte, North Carolina; Savannah, Georgia and Nashville, Tennessee. The
Company issued an aggregate of 18,127,984 shares of the Company's common stock,
$.01 par value per share, ("Common Stock") for the acquisitions of the Pooled
Entities. These acquisitions were accounted for under the pooling of
interests method of accounting and, accordingly, the accompanying Consolidated
Financial Statements have been restated for all periods as if the Company and
the Pooled Entities had operated as one entity since inception.
Details of the results of operations of the Company and the Pooled
Entities for the periods prior to the combinations are as follows:
Year Ended December 31,
---------------------------------------
1995 1994 1993
--------- --------- ---------
Revenue:
The Company . . . . . . . . . . . . . . . . . . $ 87,167 $ 48,766 $ 41,095
Pooled Entities . . . . . . . . . . . . . . . . 173,148 138,345 113,206
--------- --------- ---------
$ 260,315 $ 187,111 $ 154,301
========= ========= =========
Net income (loss) :
The Company . . . . . . . . . . . . . . . . . . $ 8,794 $ 11,187 $ (18,484)
Pooled Entities . . . . . . . . . . . . . . . . 14,125 5,929 1,432
--------- --------- ---------
$ 22,919 $ 17,116 $ (17,052)
========= ========= =========
In August 1995, the Company acquired all of the outstanding shares of
capital stock of Hudson Management Corporation and Envirocycle, Inc.
(collectively, "HMC"). The purchase price paid by the Company was
approximately $72,800,000 and consisted of 8,000,000 shares of Common Stock.
HMC, as the third largest solid waste management company in Florida, provides
solid waste collection and recycling services to commercial, industrial and
residential customers. This acquisition, as well as several other minor
business combinations from January 1, 1993 to December 31, 1995, have been
accounted for under the purchase method of accounting.
32
33
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's unaudited pro froma consolidated results of operations
for the years ended December 31, assuming the acquisition of HMC had occurred
at the beginning of each of the periods presented are as follows:
1995 1994
---------- ----------
Revenue . . . . . . . . . . . . . . . . . . . . . . . $ 293,516 $ 235,114
========== ==========
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . $ 38,058 $ 21,836
========== ==========
Net income . . . . . . . . . . . . . . . . . . . . . $ 24,064 $ 16,642
========== ==========
Fully diluted earnings per common and common
equivalent share . . . . . . . . . . . . . . . . $ 0.34 $ 0.31
========== ==========
Weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . 70,475 53,545
========== ==========
The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of January 1, 1994.
The preliminary purchase price allocation for the HMC acquisition was
as follows:
Property and equipment . . . . . . . . . . . . . . . $ 16,910
Intangible assets . . . . . . . . . . . . . . . . . . 71,110
Working capital deficiency . . . . . . . . . . . . . (6,602)
Long-term debt assumed . . . . . . . . . . . . . . . (8,618)
---------
Common stock issued . . . . . . . . . . . . . . . . . $ 72,800
=========
In February 1996, the Company acquired all of the outstanding capital
stock of certain electronic security companies known as Denver Burglar Alarm
("Denver Alarm"). Denver Alarm is the oldest independent electronic security
alarm company in the United States and provides installation, monitoring and
maintenance services to approximately 27,000 residential and commercial
accounts throughout Colorado.
In February 1996, the Company acquired Incendere, Inc. and certain
waste companies (collectively, "Schaubach") controlled by Dwight C. Schaubach.
Schaubach provides solid waste collection and recycling services to more than
11,000 residential, commercial, and industrial customers in southeastern
Virginia and eastern North Carolina and provides transportation of medical
waste throughout the Mid-Atlantic states for more than 7,000 customers.
The Company issued an aggregate of 2,914,452 shares of Common Stock to
acquire Schaubach and Denver Alarm, both of which will be accounted for as
pooling of interests business combinations.
33
34
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's unaudited pro forma consolidated results of operations,
assuming the Denver Alarm and Schaubach mergers had been consummated as of
December 31, 1995 are as follows:
Year Ended December 31,
----------------------------------------
1995 1994 1993
--------- -------- ---------
Revenue . . . . . . . . . . . . $295,165 $218,173 $ 182,495
======== ======== =========
Net income (loss) . . . . . . . . . . $ 24,681 $ 19,533 $ (14,910)
======== ======== =========
Fully diluted earnings (loss) per common
and common equivalent share . . . .
$ .36 $ .40 $ (.31)
======== ======== =========
In March 1996, the Company acquired substantially all of the assets of
Mid-American Waste Systems of Georgia, Inc. and affiliates ("Mid-American
Georgia") for a purchase price of approximately $52,000,000. At closing, the
Company issued an aggregate of 1,700,000 shares of Common Stock valued at
approximately $46,750,000 and will settle the remaining balance within 60 days
using additional Common Stock or cash. Mid-American Georgia owns and operates
a landfill, provides solid waste collection and recycling services to
commercial, residential and industrial customers, and operates two transfer
stations, in certain areas of the greater metropolitan Atlanta, Georgia area.
The acquisition of Mid-American Georgia will be accounted for under the
purchase method of accounting.
3. LONG-TERM DEBT AND NOTES PAYABLE
In connection with the equity investment and private placement
transactions, as discussed in Note 5, the Company received approximately
$232,000,000 in cash, a portion of which was used to repay all outstanding
borrowings.
Long-term debt and notes payable at December 31, 1994 consisted of
the following:
Revolving credit facility, secured by the stock of the
Company's subsidiaries, interest at prime or
at a Eurodollar rate plus 1.5%, principal
repaid in 1995 . . . . . . . . . . . . . . . . . . . $ 12,600
Notes to banks and financial institutions, secured by
equipment and other assets, interest ranging
from 6.0% to 12.9%, principal
repaid in 1995 . . . . . . . . . . . . . . . . . . . 28,815
Other notes, secured by equipment and other assets,
interest ranging from 4.0% to 16.93%,
principal repaid in 1995 . . . . . . . . . . . . . . 6,615
---------
$ 48,030
Less current maturities . . . . . . . (10,035)
---------
$ 37,995
=========
In December 1995, the Company entered into a credit agreement (the
"Credit Agreement") with certain banks pursuant to which such banks have agreed
to advance the Company on an unsecured basis an aggregate of $250,000,000 for a
term of 36 months. Outstanding advances, if any, are payable at the expiration
of the 36-month term. At December 31, 1995, the Company had standby letters of
credit of $5,386,000 which reduce availability under this facility. The Credit
Agreement requires, among other items, that the Company maintain certain
financial ratios and comply with certain financial
34
35
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
covenants. Interest is payable monthly and generally determined using either a
competitive bid feature or a LIBOR based rate. As of December 31, 1995, the
Company was in compliance with all covenants under the Credit Agreement.
The Company made interest payments of approximately $5,428,000,
$4,152,000 and $2,422,000 in 1995, 1994 and 1993, respectively.
4. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and
between the tax basis of assets and liabilities and their reported amounts in
the financial statements.
The Company files a consolidated federal income tax return which
includes the operations of the Pooled Entities for periods subsequent to the
dates of the acquisitions. The Pooled Entities each file a "short-period"
federal tax return through their respective acquisition dates. Certain of the
Pooled Entities were subchapter S corporations for income tax purposes prior to
their acquisition by the Company. For purposes of these Consolidated Financial
Statements, federal and state income taxes have been provided as if these
companies had filed subchapter C corporation tax returns for the pre-acquisition
periods, and the current income tax expense is reflected as an increase to
additional paid-in capital. The subchapter S corporation status of these
companies was terminated effective with the closing date of the acquisitions.
The components of the income tax provision related to continuing
operations for the years ended December 31 are shown below:
1995 1994 1993
-------- ------- ---------
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 10,333 $ 3,973 $ 1,664
State . . . . . . . . . . . . . . . . . . . . 944 618 279
-------- ------- -------
11,277 4,591 1,943
Federal deferred . . . . . . . . . . . . . . . . 4,587 2,453 (1,998)
Tax reserve adjustments . . . . . . . . . . . . (2,392) (1,963) -
Change in valuation allowance . . . . . . . . . - (1,242) 1,242
-------- ------- --------
Income tax provision . . . . . . . . . . . . . . $ 13,472 $ 3,839 $ 1,187
======== ======= ========
Net operating loss carryforwards are recognized under SFAS No. 109
unless it is more likely than not that they will not be realized. In 1993, the
Company recorded a $1,242,000 valuation allowance related to the realization of
deferred tax assets generated as a result of the 1993 restructuring and unusual
charges. This valuation allowance was recorded due to the uncertainty
surrounding the future utilization of such deferred tax assets. In 1994, the
valuation allowance was eliminated based on the expected realization of such
deferred tax assets.
In the years immediately following an acquisition, the Company
provides income taxes at the statutory income tax rate applied to pre-tax
income. As part of its tax planning to reduce effective tax rates and cash
outlays for taxes, the Company employs a number of strategies such as combining
entities to reduce state income taxes, claiming tax credits not previously
claimed and recapturing taxes previously paid by acquired companies. At such
time as these reductions in the Company's deferred tax liabilities are
determined to be realizable, the impact of the reduction is recorded as tax
reserve adjustments in the tax provision.
35
36
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
A reconciliation of the statutory federal income tax rate to the
Company's effective tax rate for the years ended December 31 is shown below:
1995 1994 1993
---- ---- ----
Statutory federal income tax rate . . . . . . . 35.0% 34.0% 34.0%
Amortization of goodwill . . . . . . . . . . . 1.3 .5 (11.6)
State income taxes, net of federal benefit . . 2.4 3.0 (30.6)
Tax reserve adjustments . . . . . . . . . . . . (2.3) (10.7) 24.9
Change in valuation allowance . . . . . . . . . - (6.2) (151.1)
Other, net . . . . . . . . . . . . . . . . . . .3 0.4 42.1
---- ----- ------
Effective tax rate . . . . . . . . . . . . . 36.7% 21.0% (92.3%)
==== ===== ======
Components of the net deferred income tax liability at December 31
are shown below:
1995 1994
---- ----
Deferred income tax liabilities:
Book basis in property over tax basis . . . . . . . . . $23,064 $22,930
Deferred costs . . . . . . . . . . . . . . . . . . . . 8,067 8,954
------- -------
31,131 31,884
------- -------
Deferred income tax assets:
Net operating losses . . . . . . . . . . . . . . . . . (3,837) (5,186)
Deferred revenue . . . . . . . . . . . . . . . . . . . (10,353) (11,240)
Accrued environmental and landfill costs . . . . . . . (2,842) (2,761)
Accruals not currently deductible . . . . . . . . . . . (740) (1,187)
------- -------
(17,772) (20,374)
------- -------
Valuation allowance . . . . . . . . . . . . . . . . . . . . - -
------- -------
Net deferred income tax liability . . . . . . . . . . . . . $13,359 $11,510
======= =======
At December 31, 1995, the Company had available federal net operating
loss carryforwards of approximately $11,000,000 which begin to expire in the
year 2006.
The Company made income tax payments of approximately $4,839,000,
$2,278,000 and $1,260,000 in 1995, 1994 and 1993, respectively.
5. STOCKHOLDERS' EQUITY
In August 1995, the Company sold an aggregate of 8,350,000 shares of
Common Stock and warrants to purchase an additional 16,700,000 shares of Common
Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (A Bermuda corporation
controlled by Michael G. DeGroote, former Chairman of the Board, President and
Chief Executive Officer of Republic), Harris W. Hudson, and certain of their
assigns for an aggregate purchase price of $37,500,000. Mr. Huizenga is the
Chairman of the Board and Chief Executive Officer of the Company; Mr. DeGroote
is the Vice Chairman of the Board of the Company and Mr. Hudson is President
and a Director of the Company. The warrants are exercisable at prices ranging
from $4.50 to $7.00 per share. In August 1995, the Company issued and sold an
additional 1,000,000 shares of Common Stock each to Mr. Huizenga and John J.
Melk (a Director of the Company) for $13.25 per share for aggregate proceeds
of approximately $26,500,000.
In July 1995, the Company sold 5,400,000 shares of Common Stock in a
private placement transaction for $13.25 per share, resulting in net proceeds
of approximately $69,000,000 after deducting expenses, fees and commissions.
In
36
37
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 1995, the Company sold 5,000,000 shares of Common Stock in an
additional private placement transaction for $20.25 per share resulting in net
proceeds of approximately $99,000,000.
As a result of the transactions discussed above, the Company received
approximately $232,000,000 in cash proceeds. The Company used a portion of
these proceeds to repay all outstanding borrowings under its revolving line of
credit facility and the debt of the Pooled Entities.
The Company has 5,000,000 authorized shares of preferred stock, $.01
par value per share, none of which are issued or outstanding. The Board of
Directors has the authority to issue the preferred stock in one or more series
and to establish the rights, preferences and dividends.
6. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans under which shares of
Common Stock may be granted to key employees and directors of the Company.
Options granted under the plans are non-qualified and are granted at a price
equal to the fair market value of the Common Stock at the date of grant.
A summary of stock option and warrant transactions for the years ended
December 31 is as follows:
1995 1994 1993
--------- -------- --------
Options and warrants outstanding
at beginning of year . . . . . . . . 3,393 3,197 7,427
Granted . . . . . . . . . . . . . . . . . 22,437 376 1,017
Exercised . . . . . . . . . . . . . . . . (1,402) - -
Canceled . . . . . . . . . . . . . . . . (161) (180) (332)
Expired . . . . . . . . . . . . . . . . . - - (4,915)
------- ------ ------
Options and warrants outstanding at
end of year . . . . . . . . . . . . . 24,267 3,393 3,197
======= ====== ======
Average price of options and warrants
exercised . . . . . . . . . . . . . . $ 8.03 $ - $ -
Average price of options and warrants
outstanding at end of year . . . . . $ 9.54 $ 7.60 $ 7.97
Prices of options and warrants $ 2.50 to $ 2.50 to $ 2.50 to
outstanding at end of year . . . . . $ 31.00 $14.50 $14.50
Vested options and warrants at end of
year . . . . . . . . . . . . . . . . 19,519 1,828 1,400
Options available for future grants at
end of year . . . . . . . . . . . . . 2,172 2,849 2,845
7. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS. On May 3, 1991, the Company filed an action
against G.I. Industries, Inc. ("GI"), Manuel Asadurian, Sr. and Mike Smith in
the United States District Court for the Central District of California (the
"Court"). The Company requested a declaratory judgment that it did not
anticipatorily breach a merger agreement (the "Merger Agreement") between the
Company and GI and that the Merger Agreement had been properly terminated. The
Company also sought to recover $600,000 from GI, plus interest and costs, with
respect to a certain financial guaranty provided by the Company in 1990 for the
benefit of GI. In response to the Company's action, GI filed a counterclaim
alleging that the Company breached the Merger Agreement and that it had
suffered damages in excess of $16,000,000. In August 1993, the Court rendered
a ruling in favor of the Company which
37
38
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
GI appealed. In March 1995, the United States Court of Appeals
for the Ninth Circuit (the "Court of Appeals") vacated the August 1993 decision
and remanded the case for further proceedings. The Court has commenced
proceedings that may lead to a trial on damages.
Subsequent to the commencement of the Company's litigation in this
matter, GI filed for protection under Chapter 11 of the Bankruptcy Code. The
Company is a secured creditor and anticipates a complete recovery of the
$600,000 it is owed from GI, plus interest and costs.
Western Waste Industries, Inc. ("Western") filed an action against the
Company and others on July 20, 1990 alleging various causes of action including
interference with business relations and seeks $24,000,000 in damages. The
lawsuit stems from Western's attempts to acquire Best Pak Disposal, Inc. This
case is currently scheduled for trial in May 1996.
The Company's solid waste and environmental services activities are
conducted in the context of a developing and changing statutory and regulatory
framework, aggressive government enforcement and a highly visible political
environment. Governmental regulation of the waste management industry requires
the Company to obtain and retain numerous governmental permits to conduct
various aspects of its operations. These permits are subject to revocation,
modification or denial. The costs and other capital expenditures which may be
required to obtain or retain the applicable permits or comply with applicable
regulations could be significant.
In 1992, the Company received notices from Imperial County, California
(the "County") and the California Department of Toxic Substances Control
("DTSC") that spent filter elements (the "Filters") from geothermal power
plants, which had been deposited at the Company's Imperial Landfill for
approximately five years, were classified as hazardous waste under California
environmental regulations. Under United States EPA regulations, the Filters
are not deemed hazardous waste as they are associated with the production of
geothermal energy.
The Company is currently conducting active discussions with all
appropriate California regulatory agencies in order to obtain a variance under
California regulations to reclassify the Filters as a special waste so they
may be left in the landfill. If this occurs, the State, regional and local
regulatory agencies may nevertheless require that the affected area of the
landfill be capped and closed. In the event that the variance is not granted,
remedial measures may be required based on the Filters' classification as a
California hazardous waste. One of those measures could include the removal
of the Filters or the closure of a portion of the landfill.
Management is currently unable to determine (i) whether the waste will
ultimately be classified as hazardous, (ii) if so, what action, if any, will be
required as a result of this issue or (iii) what liability, if any, the Company
will have as a result of this inquiry. In January 1994, the Company filed suit
against the known past and present owners and operators of the geothermal power
plants for all losses, fines and expenses the Company incurs associated with
the resolution of this matter,
38
39
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
including loss of airspace at the landfill, in the United States District Court
for the Southern District of California, alleging claims for CERCLA response
costs recovery and intentional misrepresentation among other claims. The
Company seeks to recover actual expenses and punitive damages. Discovery in
this mattter has been stayed until November 1996, at which time the Company
expects to be able to quantify more accurately the level of damages it has
suffered. The Company believes it will prevail, but no amounts have been
accrued for any recovery of damages.
While the results of the legal and environmental proceedings described
above and other proceedings which arose in the normal course of business cannot
be predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's results of operations or consolidated financial
position. However, unfavorable resolution of each matter individually or in
the aggregate could affect the consolidated results of operations for the
quarterly periods in which they are resolved.
LEASE COMMITMENTS. The Company and its subsidiaries lease portions of
their premises and certain equipment under various operating lease agreements.
At December 31, 1995, total minimum rental commitments becoming payable under
all operating leases are as follows:
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 1,769
1997 . . . . . . . . . . . . . . . . . . . . . . . $ 1,189
1998 . . . . . . . . . . . . . . . . . . . . . . . $ 659
1999 . . . . . . . . . . . . . . . . . . . . . . . $ 384
2000 . . . . . . . . . . . . . . . . . . . . . . . $ 119
Thereafter . . . . . . . . . . . . . . . . . . . . $ 94
Total rental expense incurred under operating leases was $3,990,000, $3,318,000
and $2,344,000 in 1995, 1994 and 1993, respectively.
8. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the
combined weighted average number of common shares and common share equivalents
outstanding which include, where appropriate, the assumed exercise or
conversion of warrants and options. In computing earnings per common and
common equivalent share, the Company currently utilizes the modified treasury
stock method and in the prior years used the treasury stock method. When using
the modified treasury stock method, the proceeds from the assumed exercise of
all warrants and options are assumed to be applied to first purchase 20% of the
outstanding common stock, then to reduce outstanding indebtedness and the
remaining proceeds are assumed to be invested in U.S. government securities or
commercial paper.
39
40
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The computations of weighted average common and common equivalent
shares used in the calculation of primary and fully diluted earnings per share
for the years ended December 31 are presented below :
1995 1994 1993
-------- -------- -------
Primary:
Common shares outstanding . . . . . . . . . . . . . . 76,056 45,314 45,476
Common equivalent shares . . . . . . . . . . . . . . . 26,552 82 160
Weighted average treasury shares purchased . . . . . . (7,101) 149 -
Effect of using weighted average common and common
equivalent shares outstanding . . . . . . . . . . (33,150) - -
------- ------ ------
62,357 45,545 45,636
======= ====== ======
Fully diluted:
Common shares outstanding . . . . . . . . . . . . . . 76,056 45,314 45,476
Common equivalent shares . . . . . . . . . . . . . . . 26,552 82 160
Weighted average treasury shares purchased . . . . . . (3,823) 149 -
Effect of using weighted average common and common
equivalent shares outstanding. . . . . . . . . . . (33,000) - -
------- ------ ------
65,785 45,545 45,636
======= ====== ======
9. DISCONTINUED OPERATIONS
In 1994, the Company announced the contemplation of a plan to spin-off
RESI, its hazardous waste services segment. This segment of the Company's
business has been accounted for as a discontinued operation and, accordingly,
the Company restated its Consolidated Financial Statements presented prior to
that date to report separately the operating results of these discontinued
operations. In April 1995, Republic stockholders received one share of common
stock of RESI for every five shares of Common Stock of Republic owned on April
21, 1995 in connection with the spin-off of RESI. Approximately 5,400,000 RESI
shares were distributed to Republic stockholders (the "Distribution"). Revenue
of the discontinued operations of RESI was $12,148,000, $46,599,000 and
$61,617,000 in 1995, 1994 and 1993, respectively. The net income (loss) of the
discontinued operations of RESI was ($ 293,000), $2,684,000 and ($14,579,000)
in 1995, 1994 and 1993, respectively.
In connection with the Distribution, the Company entered into a
distribution agreement with RESI which sets forth the terms of the
Distribution. Under this agreement, Republic contributed the intercompany
balance to RESI's equity at the date of the Distribution. In April 1995,
Republic contributed approximately $2,500,000 to RESI to repay RESI's
indebtedness and to provide working capital to RESI. Additionally, the Company
reclassified approximately $36,300,000 to retained earnings from additional
paid-in capital to effect the spin-off under Delaware law. As a result of
these transactions, the Company's equity at the date of the Distribution was
reduced by approximately $23,600,000.
10. RESTRUCTURING AND UNUSUAL CHARGES
In the fourth quarter of 1993, the Company recorded restructuring and
unusual charges of $10,040,000 based on the Company's reevaluation of each of
its solid waste operations. As a result of this reevaluation, the Company
decided to close one of its facilities due to low waste volumes and abandon
its permitting effort at another facility because of limited market opportunity
in that area and delays in the permitting process. In accordance with industry
standards, the Company
40
41
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
provides for closure and post-closure over the life of a facility.
Accordingly, the Company fully provided for these costs on the closed facility.
The provision for closure and post-closure and the write-off of property and
equipment and accumulated permitting costs associated with these facilities
totaled $6,600,000. In conjunction with the reevaluation, the Company also
decided to terminate certain contracts and employees. Costs related to
employee relocations and terminations and other contract terminations totaled
$1,200,000. In addition, the Company also reevaluated its exposure related to
litigation and environmental matters and provided additional accruals
aggregating $2,200,000 for the costs to defend or settle certain litigation and
environmental matters.
11. OPERATIONS BY INDUSTRY SEGMENT
The Company is a diversified services company which primarily provides
integrated solid waste disposal, collection and recycling services to public
and private sector customers through residential, commercial and industrial
service. The Company also is engaged in the electronic security services
business, which consists of the sale, installation and maintenance of
electronic security systems for commercial and residential use as well as the
continuous electronic monitoring of installed security systems.
The following tables present financial information regarding the
Company's different industry segments for the years ended December 31:
1995 1994 1993
---------- ---------- ----------
Revenue:
Solid waste services . . . . . . . . . . . . . $ 226,815 $ 161,237 $ 133,711
Electronic security services . . . . . . . . . 33,500 25,874 20,590
--------- --------- ---------
$ 260,315 $ 187,111 $ 154,301
========= ========= =========
Operating income (loss):
Solid waste services . . . . . . . . . . . . . $ 31,503 $ 22,661 $ 3,376
Electronic security services . . . . . . . . . 5,120 (1,157) (2,689)
--------- --------- ---------
$ 36,623 $ 21,504 $ 687
========= ========= =========
Depreciation, depletion and amortization:
Solid waste services . . . . . . . . . . . . . $ 16,162 $ 14,161 $ 12,229
Electronic security services . . . . . . . . . 4,837 3,969 2,206
--------- --------- ---------
$ 20,999 $ 18,130 $ 14,435
========= ========= =========
Capital expenditures and investment in subscriber accounts:
Solid waste services . . . . . . . . . . . . . $ 47,561 $ 20,592 $ 11,104
Electronic security services . . . . . . . . . 17,304 18,137 10,574
--------- --------- ---------
$ 64,865 $ 38,729 $ 21,678
========= ========= =========
Assets:
Solid waste services . . . . . . . . . . . . . $ 503,308 $ 193,079 $ 172,248
Electronic security services . . . . . . . . . 38,742 28,994 14,753
Net assets of discontinued operations . . . . . - 20,292 16,872
---------- --------- ---------
$ 542,050 $ 242,365 $ 203,873
========== ========= =========
41
42
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is an analysis of certain items in the Consolidated
Statements of Operations by quarter for 1995 and 1994.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
Revenue 1995 $ 54,481 $ 60,593 $ 70,133 $ 75,108
1994 $ 42,189 $ 46,483 $ 48,047 $ 50,392
Gross profit 1995 $ 19,203 $ 20,739 $ 21,460 $ 29,354
1994 $ 14,085 $ 14,771 $ 16,731 $ 17,647
Income from continuing 1995 $ 3,794 $ 3,917 $ 4,916 $ 10,585
operations 1994 $ 2,252 $ 3,681 $ 4,459 $ 4,040
Net income 1995 $ 4,302 $ 3,917 $ 4,916 $ 9,784
1994 $ 2,106 $ 4,508 $ 5,447 $ 5,055
Earnings per share from 1995 $ 0.08 $ 0.09 $ 0.07 $ 0.11
continuing operations 1994 $ 0.05 $ 0.08 $ 0.10 $ 0.09
42
43
44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III.
The information required by Items 10, 11, 12 and 13 of Part III will
be set forth in the Proxy Statement of the Company relating to the 1996 Annual
Meeting of Stockholders and is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements of the Company are set forth in Part II,
Item 8.
(2) Financial Statement Schedule II, Valuation and Qualifying
Accounts and Reserves, for each of the three years ended
December 31, 1995 is submitted herewith.
(3) Exhibits - (See the Index to Exhibits included elsewhere herein).
(b) Form 8-K dated October 17, 1995 relating to the Company's merger
with Southland Environmental Services, Inc. and the reporting of
certain financial information for registration statement purposes.
Form 8-K dated October 31, 1995 relating to the Company's Merger
Agreements and pending mergers with Garbage Disposal Service, Inc.,
J.C. Duncan Company, Inc. and its affiliates, and Fennell Container
Co., Inc. and related companies.
Form 8-K/A dated November 30, 1995 reporting the consummation of the
mergers with J.C. Duncan Company, Inc., Garbage Disposal Service,
Inc., Fennell Container Co., Inc. and Scott Security Systems.
Form 8-K dated February 14, 1996 relating to the Company's Merger
Agreements and pending mergers with The Denver Fire Reporter and
Protective Co. and the Schaubach Companies.
Form 8-K/A dated February 27, 1996 reporting the consummation of the
mergers with The Denver Fire Reporter and Protective Co. and the
Schaubach Companies.
43
45
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.
REPUBLIC INDUSTRIES, INC.
By:/s/ H. WAYNE HUIZENGA
-------------------------------
H. Wayne Huizenga
Chairman of the Board and
Chief Executive Officer
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 and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- -----
/s/ H. Wayne Huizenga Chairman of the Board and March 28, 1996
- -------------------------------- Chief Executive Officer
H. Wayne Huizenga (Principal Executive Officer)
/s/ Harris W. Hudson President and Director March 28, 1996
- --------------------------------
Harris W. Hudson
/s/ Gregory K. Fairbanks Executive Vice President and March 28, 1996
- -------------------------------- Chief Financial Officer
Gregory K. Fairbanks (Principal Financial Officer)
/s/ Michael R. Carpenter Vice President and Corporate Controller March 28, 1996
- -------------------------------- (Principal Accounting Officer)
Michael R. Carpenter
/s/ Michael G. DeGroote Vice Chairman of the Board March 28, 1996
- --------------------------------
Michael G. DeGroote
/s/ J.P. Bryan Director March 28, 1996
- --------------------------------
J.P. Bryan
/s/ Rick L.Burdick Director March 28, 1996
- --------------------------------
Rick L. Burdick
/s/ John J. Melk Director March 28, 1996
- --------------------------------
John J. Melk
/s/ George D. Johnson, Jr. Director March 28, 1996
- --------------------------------
George D. Johnson, Jr.
44
46
REPUBLIC INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN THOUSANDS)
=============================================================================
Balance Balance
at Additions Accounts at End
Beginning Charged to Written of
Classifications of Year Income Off Other(1) Year
--------------- -------------- ------------- ---------------------- ---------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
1995 . . . . . . . . . . $ 1,055 $ 1,204 $ (1,034) $ 621 $ 1,846
1994 . . . . . . . . . . $ 1,016 $ 721 $ (686) $ 4 $ 1,055
1993 . . . . . . . . . . $ 904 $ 811 $ (782) $ 83 $ 1,016
- ---------
(1) Allowance of acquired businesses.
45
47
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
2.1* Agreement and Plan of Merger and Reorganization, dated May 30, 1991,
by and between Republic Waste Industries, Inc., an Oklahoma
corporation, and Republic Waste Industries, Inc., a Delaware
corporation (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991).
3.1* First Amended and Restated Certificate of Incorporation of Republic
Waste Industries, Inc., as amended (incorporated by reference to
Exhibit 3.1 to the Registrant's Registration Statement on Form S-3,
No. 33-62489 and to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-3, No. 33-65289).
3.2** Bylaws of Republic Industries, Inc., as amended to date.
10.1* Republic Waste Industries, Inc. 1990 Stock Option and Stock Purchase
Plan (incorporated by reference to Exhibit 10.1(a) to the Registrant's
Registration Statement on Form S-1, No. 33-37191).
10.2* Form of Stock Option Agreement (incorporated by reference to Exhibit
10.1(b) to the Registrant's Registration Statement on Form S-1, No.
33-37191).
10.3* Letter Agreement, dated March 18, 1991, by and among MGD Holdings
Ltd., Republic Waste Industries, Inc., Tom J. Fatjo, Jr., Republic
Investors, Ltd., Investors, Inc., Robert Alpert, First Financial
Environmental Investors, Pete Boyas, James D. Lee, Richard K. Reiling,
William M. DeArman, Frank C. Payton, David C. Payton and Richard
Morton. (incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990).
10.4* Warrant to Purchase 1,150,000 Shares of Republic Waste Industries,
Inc. Common Stock issued to MGD Holdings Ltd. (incorporated by
reference to Exhibit 10.18 to the Registrant's Registration Statement
on Form S-1, No. 33-42530).
10.5* Stock Exchange Agreement between Republic Waste Industries, Inc. and
MGD Holdings Ltd. (incorporated by reference to Exhibit 10.22 to the
Registrant's Registration Statement on Form S-1, No. 33-42530).
10.6* Republic Waste Industries, Inc. 1991 Stock Option Plan (incorporated
by reference to Exhibit 10.42 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992).
10.7* Form of Stock Option Agreement (incorporated by reference to Exhibit
10.43 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.8* Form of Warrant to purchase 300,000 shares of Republic Waste
Industries, Inc. Common Stock, issued to Donald E. Koogler
(incorporated by reference to Exhibit 10.54 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992).
10.9* Agreement of Settlement and Mutual Release by and among Republic Waste
Industries, Inc. and Michael G. DeGroote, Donald E. Koogler, Gary W.
DeGroote, Kevin J. Comeau, Rick L. Burdick, Douglas R. Gowland, Lance
R. Ruud, August C. Schultes, III, Mark S. Alsentzer, Gary J. Ziegler,
Eugene J. Kerins, Edward A. Schultes, Richard J. Schultes, Peter
Schultes, Barbara Schultes ITF Elizabeth Schultes (Minor), Barbara
Schultes ITF Deborah Schultes (Minor) and August C. Schultes, IV,
dated as of January 29, 1994 (incorporated by reference to Exhibit
10.46 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993).
48
10.10* Form of Warrant to purchase 100,000 shares of Republic Waste
Industries, Inc. Common Stock issued to MGD Holdings Ltd.
(incorporated by reference to Exhibit 10.33 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.11* Form of Warrant to purchase 50,000 shares of Republic Waste
Industries, Inc. Common Stock issued to J.P. Bryan (incorporated by
reference to Exhibit 10.34 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
10.12* Form of Warrant to purchase 50,000 shares of Republic Waste
Industries, Inc. Common Stock issued to Rick L. Burdick (incorporated
by reference to Exhibit 10.35 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.13* Distribution Agreement, dated February 14, 1995, by and between
Republic Waste Industries, Inc. and Republic Environmental Systems,
Inc. (incorporated by reference to Exhibit 10.36 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.14* Stock Purchase Agreement, dated May 21, 1995, by and between H. Wayne
Huizenga and Republic Waste Industries, Inc. (incorporated by
reference to Exhibit (c)(1) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.15* Agreement and Plan of Merger, dated May 21, 1995, by and among
Republic Waste Industries, Inc., Republic Hudson Acquisition
Corporation, Hudson Management Corporation and Harris W. Hudson and
Bonnie J. Hudson (incorporated by reference to Exhibit (c)(2) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.16* Agreement and Plan of Merger, dated May 21, 1995, by and among
Republic Waste Industries, Inc., Republic Hudson Acquisition
Corporation, Envirocycle, Inc. and Harris W. Hudson and Bonnie J.
Hudson (incorporated by reference to Exhibit (c)(3) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.17* Stock Purchase Agreement, dated May 21, 1995, by and between Harris W.
Hudson and Republic Waste Industries, Inc. (incorporated by reference
to Exhibit (c)(4) to the Registrant's Current Report on Form 8-K/A,
dated July 17, 1995).
10.18* Stock Purchase Agreement, dated May 21, 1995, by and between Westbury
(Bermuda) Ltd. and Republic Waste Industries, Inc. (incorporated by
reference to Exhibit (c)(5) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.19* Proxy, dated as of May 21, 1995, by MGD Holdings Ltd., in favor of H.
Wayne Huizenga (incorporated by reference to Exhibit (c)(6) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.20* Stockholder Stock Option Agreement, dated as of May 21, 1995, by MGD
Holdings Ltd., in favor of H. Wayne Huizenga (incorporated by
reference to Exhibit (c)(7) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.21* First Amendment to Stock Purchase Agreement, dated July 17, 1995, by
and between Republic Waste Industries, Inc. and H. Wayne Huizenga
(incorporated by reference to Exhibit (c)(8) to the Registrant's
Current Report on Form 8-K/A, dated July 17, 1995).
10.22* Republic Waste Industries, Inc. 1995 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.19 to the Registrant's
Registration Statement on Form S-1, No. 33-63209).
10.23* Republic Waste Industries, Inc. 1995 Non-employee Director Stock
Option Plan (incorporated by reference to Exhibit 10.20 to the
Registrant's Registration Statement on Form S-1, No. 33-63209).
49
10.24* Merger Agreement, dated August 24, 1995, by and among Republic Waste
Industries, Inc., RS Mergersub, Inc., Southland Environmental
Services, Inc., Felix A. Crawford, Individually and as Trustee of the
Felix A. Crawford Revocable Living Trust, and CFP, Ltd. (incorporated
by reference to Exhibit (c)(1) to the Registrant's Current Report on
Form 8-K, dated August 24, 1995).
10.25* Merger Agreement, dated as of August 24, 1995, by and among Republic
Waste Industries, Inc., RKSA, Inc., RKSA II, Inc., Kertz Security
Systems, Inc., Kertz Security System II, Inc., Leon W. Brauser,
Michael Brauser, Robert Brauser and Joel Brauser (incorporated by
reference to Exhibit (c)(2.1) to the Registrant's Current Report on
Form 8-K, dated August 28, 1995).
10.26* First Amendment to Merger Agreement, dated as of October 17, 1995, to
the Merger Agreement, dated August 24, 1995, by and among Republic
Waste Industries, Inc., RS Mergersub, Inc., Southland Environmental
Services, Inc., Felix A. Crawford, Individually and as Trustee of the
Felix A. Crawford Revocable Living Trust, and CFP, Ltd. (incorporated
by reference to Exhibit 2.2 to the Registrant's Current Report on Form
8-K, dated October 17, 1995).
10.27* Merger Agreement, dated as of October 31, 1995, by and among Republic
Waste Industries, Inc., RWI/GDS Mergersub, Inc., Garbage Disposal
Service, Inc., Lee G. Brown and Mina Brown McLean (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on Form
8-K, dated October 31, 1995).
10.28* Merger Agreement, dated as of November 11, 1995, by and among
Republic Waste Industries, Inc., RWI/JCD Inc., RWI/Grand Inc.,
RWI/Trashaway Inc., RWI/Tos-It Inc., RWI/WestTex Inc., RWI Pantego I
Inc., RWI/Pantego II Inc., J.C. Duncan Company, Inc., Arlington
Disposal Company, Inc., Grand Prairie Disposal Company, Inc.,
Trashaway Services, Inc., Tos-It Service Company, Inc., Wes Tex Waste
Services, Inc., Pantego Service Company, Pantego I, Inc., Pantego II,
Inc., E & E Truck Leasing, Ltd., EETL I, Inc., EETL II, Inc., Robert
C. Duncan, Janette T. Duncan, Dan R. Duncan, Debra A. Duncan, DeeDee
Duncan Elliot, George Martin Duncan, Melinda Duncan Vince and Robert
C. Duncan as Trustee of the Robert C. Duncan Annuity Trusts Nos. One,
Two, Three and Four (incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K, dated October 31, 1995).
10.29* Merger Agreement, dated as of November 13, 1995, by and among Republic
Waste Industries, Inc., RI/FCC Mergersub, Inc., RI/FWS Mergersub,
Inc., RI/FV Mergersub, Inc., RI/PD Mergersub, Inc., RI Investment Co.,
Inc., Fennell Waste Systems, Inc., Fennell Container Co., Inc.,
Fenn-Vac, Inc., Pepperhill Development Co., Inc., GF/WWF, Inc., George
W. Fennell, Robert N. Shepard, G. Scott Fennell, S. Allison Fennell,
Debra A. Haschker, James R. Bland, John H. Chapman, Jeffrey A.
Forslund and Leo J. Zolnierowicz (incorporated by reference to Exhibit
2.3 to the Registrant's Current Report on Form 8-K, dated October 31,
1995).
10.30* Merger Agreement, dated as of February 15, 1996, by and among Republic
Industries, Inc., RI/DFRP, Inc., RI/GS Merger Corp., The Denver
Fire Reporter & Protective Co., Guardian Security Services, Inc., and
John Stewart Jackson (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated February 14, 1996).
10.31* Reorganization Agreement, dated as of February 14, 1996, by and among
Republic Industries, Inc., RI/Area, Inc., RI/Smith, Inc., Incendere,
Inc., Area Container Services, Inc., Smithton Sanitation Service,
Inc., Dwight C. Schaubach, James D. Schaubach, Emmett K. Moore, Charles
F. Moore and R.D. Cuthrell (incorporated by reference to Exhibit 2.2
to the Registrant's Current Report on Form 8-K, dated February 14,
1996).
10.32** Credit Facilities and Reimbursement Agreement, dated December 19,
1995, by and among Republic Industries, Inc., as Borrower, NationsBank
of Florida, National Association, The First National Bank of Boston,
The Bank of Nova Scotia, The First National Bank of Chicago, SunTrust
Bank, South Florida, National Association, United States National Bank
of Oregon, ABN AMRO Bank, N.V., The Bank of New York, Barnett Bank of
Broward County, N.A., Credit Lyonnais New York Branch, Credit Lyonnais
Cayman Island Branch, and LTCB Trust
50
Company, as Lenders and NationsBank of Florida, National Association,
as Agent and The First National Bank of Boston, as Co-Agent.
21.1** Subsidiaries of Republic Industries, Inc. as of March 26, 1996.
23.1** Consent of Arthur Andersen LLP.
27.1** Financial Data Schedule (for SEC use only)
* Indicates documents incorporated by reference from the prior filing
indicated.
** Indicates documents filed herewith.