EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
MANAGEMENT'S
DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF
OPERATIONS
21
SELECTED FINANCIAL
DATA
26
REPORT OF
INDEPENDENT PUBLIC
ACCOUNTANTS
27
CONSOLIDATED
STATEMENTS OF
OPERATIONS
28
CONSOLIDATED BALANCE
SHEETS
29
CONSOLIDATED
STATEMENTS OF
SHAREHOLDERS' EQUITY
30
CONSOLIDATED
STATEMENTS OF CASH
FLOWS
31
NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
32
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY OF 1994, 1995 AND 1996 FINANCIAL RESULTS
In 1996 and 1995, the Company's net earnings increased 15% and 6%,
respectively, from the prior year. The following table sets forth for the
periods indicated (i) percentages which certain items reflected in the financial
data bear to consolidated revenue of the Company and (ii) the percentage
increase (decrease) of such items as compared to the prior period.
Relationship to Period to Period
Consolidated Increase
Revenue (Decrease)
Fiscal Year Fiscal Years
1996 1995 1994 1995-96 1994-95
- ------------------------------------------------------------------------------------
Revenue 100% 100% 100% 7.4% 8.6%
- -----------------------------------------------------------------
Costs and Expenses:
Operating costs and expenses 72.8 73.1 73.3 6.9 8.4
Selling and administrative
expenses 14.3 14.2 14.2 7.6 8.8
Restructuring charges (credits) -- (1.8) -- -- --
Special charge for environmental
remediation costs -- 1.4 -- -- --
Interest income (0.2) (0.1) (0.1) 43.5 37.0
Interest expense 2.1 2.4 1.9 (4.9) 33.0
- -----------------------------------------------------------------
89.0 89.2 89.3 7.1 8.5
- -----------------------------------------------------------------
Earnings before income taxes 11.0 10.8 10.7 9.9 9.0
Income taxes 4.4 4.6 4.4 3.5 12.8
- -----------------------------------------------------------------
Net earnings 6.6% 6.2% 6.3% 14.6% 6.4%
=================================================================
LIQUIDITY AND CAPITAL RESOURCES
Capital spending in 1996, 1995 and 1994 for additions of equipment at
customers and property, excluding business acquisitions, totaled $62 million,
$78 million and $88 million, respectively. These capital expenditures were
financed by cash from operations. Long-term debt decreased by $7 million in 1996
while remaining unchanged during 1995, and decreasing $5 million in 1994.
The Company expects its capital expenditures for equipment at customers
and property additions for the full year 1997 will be approximately $70 million.
The Company expects to be able to finance these expenditures entirely through
internally generated funds. As more fully described in Note 6 to the
Consolidated Financial Statements, the Company and its subsidiaries have lines
of credit aggregating approximately $362 million. As of December 28, 1996, total
borrowings under these lines were $121 million.
A portion of the Company's capital expenditures are related to
compliance with environmental laws and regulations. The Company estimates
capital spending of approximately $6 million in 1997 and $21 million in the
years 1998 through 2001 in order to comply with current environmental laws and
regulations in connection with the Company's existing business.
RESULTS OF OPERATIONS
REVENUES
Total revenue derived from the Company's North American services and
European operations for each of the three fiscal years in the period ended
December 28, 1996 are presented below:
Percentage of
Increase (Decrease)
(EXPRESSED IN MILLIONS) Fiscal Years
1996 1995 1994 1995-96 1995-94
- ------------------------------------------------------------------------------------
North America
Industrial Services $271.8 $241.6 $222.1 13% 9%
Automotive/Retail Repair Services 245.0 239.7 237.8 2% 1%
Oil Recovery Services 150.8 129.0 117.8 17% 10%
Other Service Areas 149.2 149.8 128.2 -- 17%
- ------------------------------------------------------------------------------------
Total North America 816.8 760.1 705.9 7% 8%
Europe 106.3 99.2 85.4 7% 16%
- ------------------------------------------------------------------------------------
Consolidated $923.1 $859.3 $791.3 7% 9%
====================================================================================
NORTH AMERICAN INDUSTRIAL SERVICES
FLUID RECOVERY SERVICE Revenue from the Company's North American
Industrial Services includes Fluid Recovery Service revenue of $143.0 million in
1996, $122.8 million in 1995 and $109.1 million in 1994. The 17% revenue
increase experienced in 1996 reflects volume increases of approximately 15% and
price increases of approximately 2%. This volume improvement is due, in part, to
new product and service offerings. Approximately 11 percentage points of the 13%
increase in Fluid Recovery Service revenue in 1995 can be attributed to higher
volume. The remaining increase was due to higher prices.
INDUSTRIAL PARTS CLEANER SERVICE The North American Industrial Parts
Cleaner Service accounts for the remaining North American Industrial Services
revenue of $128.8 million in 1996, $118.8 million in 1995 and $113.0 million in
1994. The 8% revenue increase
21
experienced in 1996 included volume increases of approximately 3% and price
increases of approximately 5%. Higher revenues in 1995 reflected a 1% increase
in volume and price increases of approximately 4%.
The Company's Parts Cleaner Service has three volume components: the
number of parts cleaner machines in service ("machines in service"); the
frequency with which the machines are serviced ("service interval"); and the
size or type of machines in service ("machine mix"). With respect to the first
two components, revenue is favorably impacted by increases in the number of
machines in service and the frequency with which those machines are serviced.
With respect to machine mix, Safety-Kleen offers many different types of parts
cleaning machines ranging from small units that are relatively inexpensive to
larger, more complex units with significantly higher service charges.
NORTH AMERICAN AUTOMOTIVE/RETAIL REPAIR SERVICES
Higher revenue from the Automotive Parts Cleaner Service contributed
$1.4 million to the 1996 North American Automotive/Retail Repair Services
revenue increase. The remaining revenue increase came from the addition of new
services, including the Company's Vacuum Services business. Price increases in
the Company's Automotive Parts Cleaner Service, which averaged 5% in 1996, were
partially offset by a 4% volume decline.
The 1995 revenue increase included price increases of approximately 4%.
These price increases were partially offset by lower volume.
NORTH AMERICAN OIL RECOVERY SERVICES
The $21.8 million increase in revenue experienced in 1996 included
approximately $10 million of revenue derived from acquisitions. Approximately
40% of the remaining revenue increase is attributable to more favorable
collection pricing; 60% resulted from higher volume.
An increase of 8% in the price of base lube oil and a 20% increase in
the average revenue per gallon of used oil, oily water and antifreeze collected
from the automotive market were the major factors contributing to the 1995
revenue increase.
NORTH AMERICAN OTHER SERVICE AREAS
Revenue from Other Service Areas in 1996 was unchanged compared with
1995. Increases in Imaging Services revenue generated by the branch network were
offset by a decline in revenue caused by the elimination of low-margin Imaging
Services broker business.
The revenue increase of $21.6 million in 1995 was mainly attributable to
an increase of $19.5 million from the Company's Imaging Services business.
EUROPE
A weakening of European currencies against the U.S. dollar decreased
revenue by approximately $1.8 million in 1996. Exclusive of exchange rate
effects, revenues in Europe increased approximately 9%, as all major European
operations (except the Envirosystems operations in Germany) showed revenue
growth in local currency due mainly to higher volume.
Foreign exchange rates accounted for approximately 50% of the increase
in revenue in 1995 over 1994, while the remaining increase experienced in 1995
reflected higher volumes and prices throughout most of the European operations.
OPERATING COSTS AND EXPENSES
The following table arrays the gross profit margins of the Company's
North American services and European operations for each of the three fiscal
years in the period ended December 28, 1996.
1996 1995 1994
- ------------------------------------------------------------
North America
Industrial Services 31% 30% 33%
Automotive/Retail Repair Services 36% 37% 35%
Oil Recovery Services 13% 15% 11%
Other Service Areas 21% 17% 19%
Total North America 27% 27% 27%
Europe 25% 25% 24%
Consolidated 27% 27% 27%
============================================================
NORTH AMERICAN INDUSTRIAL SERVICES
The North American Industrial Services gross margin for 1996 improved
slightly from 1995 due mainly to lower recycling costs and improved pricing in
the Fluid Recovery Service caused by the reduction of price discounts.
The gross margin decline in 1995 resulted from higher recycling and
plant costs. During 1995, the Company renegotiated its long-term exclusive
supply arrangements with two cement plants and entered
22
into arrangements to manage the waste-derived fuels program at two additional
plants. The Company's cost per gallon for disposal of waste-derived fuel under
the new agreements was higher than its historical cost per gallon. In addition,
three of these plants were unable to burn normal volumes of waste-derived fuel
during the third interim period of 1995 due to unscheduled fuel burning
outages, resulting in higher costs for alternate disposal.
NORTH AMERICAN AUTOMOTIVE/RETAIL REPAIR SERVICES
The North American Automotive/Retail Repair Service gross margin in 1996
declined slightly from 1995 due to the impact of the new Vacuum Services
business in the U.S. which was operating at approximately break-even at the
gross profit level in 1996.
The 1995 gross margin improvement reflects improved pricing, a shift in
mix towards more cyclonic parts cleaners with higher profit margins and lower
worker's compensation costs.
NORTH AMERICAN OIL RECOVERY SERVICES
While total gross profits of the Oil Recovery Services remained
relatively unchanged from 1995, the gross profit margin declined by 2 percentage
points in 1996. The decrease in margins is attributable principally to a 2%
decline in the average selling price of base lube oil, increased cost of natural
gas used at the Company's lube oil re-refineries, and lower margins earned on
the $10 million of acquired collection business.
Improved pricing on base lube oil sold and higher automotive collection
charges for oil wastes account for most of the improvement in 1995 gross margin.
NORTH AMERICAN OTHER SERVICE AREAS
The improved margin in Other Services resulted principally from the
elimination of low-margin broker business in the Imaging Services business
during 1996 and lower waste-derived fuel processing costs and other waste
disposal costs.
Higher losses realized in the new Imaging Services business caused the
North American Other Services gross profit margin to decrease in 1995. The gross
margins on the North American Other Services, excluding Imaging Services,
increased by 2% due mainly to improved pricing in selected markets and higher
volumes in the Puerto Rico Envirosystems business.
EUROPE
The European gross margin in 1996 was unchanged compared with 1995.
Lower gross profits earned in the Company's German Envirosystems operation due
to lower sales, were offset by improved margins in the other major operations in
Europe.
The increase in Europe's 1995 gross profit margin was due mainly to
improved pricing and volumes.
SELLING AND ADMINISTRATIVE EXPENSES
The 8% and 9% increases in selling and administrative expenses the
Company experienced in 1996 and 1995, respectively, resulted primarily from
additional employees and related employee expenses, increases in compensation
and related benefits and business acquisitions.
RESTRUCTURING AND SPECIAL CHARGES
The Company adopted a restructuring plan in 1993 based on conversion of
its Parts Cleaner Service to new technology and other strategic actions to
better focus the Company on its core environmental services, reduce its cost
structure and improve the value of its services to its customers. In conjunction
with the adoption of the plan, the Company recorded a restructuring charge of
$179 million ($106 million after-tax or $1.84 per share). In 1993, the Company
also recorded a $50 million charge ($30 million after-tax or $0.52 per share)
representing a change in estimate for environmental remediation costs. In 1995,
the Company recorded a $15.2 million (pre-tax) credit to income to reduce the
amount of restructuring reserves established in 1993 to their expected required
levels. In 1995, the Company also recorded a $12 million (pre-tax) charge to
income to increase the reserves for environmental remediation at its facilities
in North America. In 1996, the Company substantially completed all of its
restructuring activities and reclassified the remaining accruals (totaling $12
million) to "other accrued expenses" and "other liabilities" on the Company's
balance sheet. The Company spent approximately $4 million, $7 million and $20
million of cash (net of tax benefits received) on restructuring during 1996,
1995 and 1994, respectively. In 1994, the Company also received a $10.8 million
refund of estimated tax payments made in 1993.
23
INTEREST EXPENSE
Slightly lower interest rates offset partially by a slightly higher
average debt balance resulted in a $1.0 million decrease in interest expense in
1996. Higher interest rates account for the $5.0 million increase in interest
expense in 1995. Interest expense excludes $2.1, $2.1 and $2.4 million of
interest capitalized during 1996, 1995 and 1994, respectively.
The impact of the interest rate swaps executed in the United States and
Germany in 1992 and 1993 are more fully explained in Note 6 to the Consolidated
Financial Statements resulted in interest expense savings of $0.1, $0.6, and
$1.8 million in 1996, 1995 and 1994, respectively.
INCOME TAXES
The effective income tax rate was 40% in 1996, 42% in 1995 and 41% in
1994. The effective tax rate in 1996 declined due to tax effects of the
restructuring credits and remediation charges recorded in 1995. The effective
income tax rate in 1995 before the restructuring credits and additional
remediation charges was 40% which is consistent with 1996. The higher rate
experienced in 1994 compared to 1995 and 1996 was due primarily to higher
non-deductible expenses.
ACCOUNTING CHANGES
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 121 on Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of in fiscal year 1996. The Company also adopted SFAS
No.123 on Accounting for Stock-Based Compensation as described more fully in
Note 7 to the Consolidated Financial Statements. The adoption of SFAS No. 121
and No. 123 did not have a material impact on the financial position or results
of operations of the Company.
OTHER TRENDS, EVENTS AND UNCERTAINTIES
The Company has committed significant human and capital resources to
fully comply with all environmental laws, regulations and other governmental
requirements. While the Company's goal is to achieve 100% compliance, given its
extensive operations, the technical aspects of the regulations, and the varying
interpretations of the requirements from jurisdiction to jurisdiction, the
Company may face government enforcement proceedings and incur fines and
penalties or expenses for remedial work from time to time. While the Company
does not anticipate any such fines, penalties or expenses will have a material
adverse impact on its financial condition, many environmental laws are written
and enforced in a way in which the potential liability can be large, and it is
always possible that the Company's actual liability in any particular case will
prove to be larger than anticipated and accrued for by the Company. It is also
possible that expenses incurred in any particular reporting period for
remediation costs or for fines, penalties or judgments, could have a material
impact on the Company's results of operations for that period. The Company paid
approximately $0.4 million in 1996, for environmental fines, penalties and
forfeitures, compared to $1 million and $4 million in 1995 and 1994,
respectively.
The Company continues to be subject to legislation and regulations
adopted by federal, state and local authorities which may impose stricter
operating and performance standards and increased taxes, assessments and fees.
The Company may not be able to pass on the costs associated with such
legislation and regulations to its customers through price increases.
On April 19, 1996, the U.S. Environmental Protection Agency ("EPA")
published its proposed Hazardous Waste Combustor Rule. This proposed rule will
set emissions standards for incinerators, cement kilns and lightweight aggregate
kilns that burn hazardous waste. As proposed, these standards would require
cement kilns, who are major outlets for the Company's waste-derived fuels, to
make capital improvements which would increase the cost of burning such fuels in
cement kilns. However, due to the complexity of the proposed rule, the lengthy
adoption process to which it is subject, and the likelihood that the rule will
undergo changes prior to its adoption, the effect of the final rule is unknown.
The South Coast Air Quality Management District ("SCAQMD"), the air
district for the greater Los Angeles, California area, has amended its rule
setting the allowable volatile organic compound ("VOC") content of materials
used for remote reservoir repair and maintenance cleaning.
24
The amended rule will, in effect, ban remote reservoir parts cleaning
with solutions containing VOCs in excess of fifty grams per liter as of
January 1, 1999, except in certain applications. Substantially all of the
Company's parts cleaners currently placed with SCAQMD customers utilize
solvents containing VOCs in excess of fifty grams per liter.
The Company offers aqueous parts cleaning systems which meet the 1999
SCAQMD requirements and is working with its SCAQMD customers to identify which
customers will need to convert their solvent parts cleaners to an alternative
cleaning solvent or solution prior to January 1, 1999. In addition, the Company
will continue to actively work with the SCAQMD to identify appropriate
exemptions and develop alternatives to the 1999 VOC limits for materials used
for remote reservoir parts cleaning. The Company expects other Clean Air Act
nonattainment municipalities to consider adopting similar rules.
In recent years, companies have generally endeavored to minimize the
amount of waste they generate and reduce costs. These waste minimization and
cost savings efforts have adversely affected demand for Safety-Kleen's services,
although the Company believes that the small quantity generators of wastes it
specializes in serving are not as greatly impacted by waste minimization efforts
as large generators. Certain Safety-Kleen service offerings are designed to help
customers reduce waste.
EFFECTS OF PETROLEUM PRICE CHANGES
Through its Oil Recovery operations, the Company re-refines and markets
petroleum based products at prices that have generally been positively
correlated to crude oil prices over the long-term. However, during the second
half of 1996, sales prices for the Company's base lube oil have declined, even
though crude oil prices increased by approximately 20% from mid-year to
year-end. The Company believes this lube oil selling price decline reflects the
market's reaction to construction of a new large lube oil refinery in the U.S.
and the expansion of a Canadian lube oil refinery which are expected to increase
the North American lube oil industry's capacity by approximately 10%. The
Company expects this added capacity will continue to negatively impact its base
lube oil selling prices unless and until some of the older, less-efficient
refineries in North America cease their lube oil operations.
The Company's various service operations (such as its Parts Cleaner
Service) also consume petroleum-based products, the cost of which are positively
correlated to crude oil prices over the long-term.
Generally, the Company's earnings are positively affected by higher
crude oil prices. The speed at which the Company is able to raise prices for its
services and products is restricted somewhat by committed price contracts.
PRIVATE SECURITIES LITIGATION REFORM ACT DISCLOSURE
This report contains various forward-looking statements, including
financial, operating and other projections. There are many factors that could
cause actual results to differ materially, such as: adoption of new
environmental laws and regulations and changes in the way such laws and
regulations are interpreted and enforced; general business conditions, such as
the level of competition, changes in demand for the Company's services and the
strength of the economy in general; and prices for petroleum based products.
These and other factors are discussed in this report, the Company's Annual
Report on Form 10-K and other documents the Company has filed with the
Securities and Exchange Commission.
25
SELECTED FINANCIAL DATA
FISCAL YEAR 1996 1995 1994 1993 1992(3)
- ----------------------------------------------------------------------------------------------
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
- ----------------------------------------------------------------------------------------------
Revenue $ 923,126 $ 859,251 $ 791,267 $ 795,508 $ 794,542
- ----------------------------------------------------------------------------------------------
Net earnings (loss) 61,109 53,303 50,094 (101,346)(1) 45,637(2)
- ----------------------------------------------------------------------------------------------
Earnings (loss) per share 1.05 0.92 0.87 (1.76)(1) 0.79(2)
- ----------------------------------------------------------------------------------------------
Cash dividends per share 0.36 0.36 0.36 0.36 0.34
==============================================================================================
BALANCE SHEET DATA
- ----------------------------------------------------------------------------------------------
Current assets $ 230,133 $ 206,208 $ 197,221 $ 202,887 $ 188,717
- ----------------------------------------------------------------------------------------------
Current liabilities 157,793 162,676 165,455 149,415 140,988
- ----------------------------------------------------------------------------------------------
Working capital 72,340 43,532 31,766 53,472 47,729
- ----------------------------------------------------------------------------------------------
Total assets 1,044,823 1,009,050 973,444 950,664 1,006,446
- ----------------------------------------------------------------------------------------------
Long-term debt 276,954 283,715 284,125 288,633 300,724
- ----------------------------------------------------------------------------------------------
Shareholders' equity 480,290 433,435 396,336 362,664 492,095
==============================================================================================
(1) Includes restructuring and special charges, net of tax benefit,
of $136 million ($229 million pre-tax) or $2.36 per share.
(2) Includes $300,000 ($.01 per share) increase in net earnings from
cumulative effect of prior years effect of adopting Statement of
Financial Accounting Standards (SFAS) No.106 on accounting for post-
retirement benefits and SFAS No.109 on accounting for income taxes.
(3) Fiscal year 1992 was a fifty-three week year. All other years
presented were fifty-two weeks.
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SAFETY-KLEEN CORP.:
We have audited the accompanying consolidated balance sheets of
Safety-Kleen Corp. (a Wisconsin corporation) and Subsidiaries as of December 28,
1996 and December 30, 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three fiscal
years in the period ended December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Safety-Kleen Corp.
and Subsidiaries as of December 28, 1996 and December 30, 1995, and the results
of their operations and their cash flows for each of the three fiscal years in
the period ended December 28, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 6, 1997
27
CONSOLIDATED STATEMENTS OF OPERATIONS
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994
FISCAL YEAR 1996 1995 1994
- -----------------------------------------------------------------------------
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUE $ 923,126 $ 859,251 $ 791,267
- -----------------------------------------------------------------------------
COSTS AND EXPENSES
Operating costs and expenses 671,971 628,469 579,509
Selling and administrative expenses 131,665 122,319 112,434
Restructuring credit -- (15,217) --
Special charge for environmental
remediation costs -- 11,956 --
Interest income (1,398) (974) (711)
Interest expense 19,240 20,230 15,209
- -----------------------------------------------------------------------------
821,478 766,783 706,441
- -----------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 101,648 92,468 84,826
- -----------------------------------------------------------------------------
INCOME TAXES 40,539 39,165 34,732
- -----------------------------------------------------------------------------
NET EARNINGS $ 61,109 $ 53,303 $ 50,094
=============================================================================
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ 1.05 $ 0.92 $ 0.87
=============================================================================
The accompanying notes are an integral part of these financial statements.
28
CONSOLIDATED
BALANCE SHEETS
SAFETY-KLEEN CORP. AND SUBSIDIARIES
ASSETS Dec. 28, 1996 Dec. 30, 1995
===================================================================================
(EXPRESSED IN THOUSANDS)
CURRENT ASSETS
- -----------------------------------------------------------------------------------
Cash and cash equivalents $ 10,648 $ 22,238
Trade accounts receivable,
less allowances of $8,416 and
$7,969, respectively 132,436 110,120
Inventories 49,971 36,020
Deferred tax assets 11,973 17,984
Prepaid expenses and other 25,105 19,846
- ---------------------------------------------------------------------------------
230,133 206,208
- ---------------------------------------------------------------------------------
EQUIPMENT AT CUSTOMERS AND COMPONENTS, AT COST, LESS
accumulated depreciation of $45,811 and
$44,072, respectively 124,491 117,383
- ---------------------------------------------------------------------------------
PROPERTY, AT COST
Land 49,340 49,469
Buildings and improvements 238,296 242,886
Leasehold improvements 34,168 31,745
Machinery and equipment 421,134 391,519
Autos and trucks 129,319 129,026
- ---------------------------------------------------------------------------------
872,257 844,645
- ---------------------------------------------------------------------------------
Less accumulated depreciation and amortization 349,921 315,092
- ---------------------------------------------------------------------------------
522,336 529,553
- ---------------------------------------------------------------------------------
INTANGIBLE ASSETS, AT COST
Goodwill 92,112 95,233
Other 122,203 100,077
- ---------------------------------------------------------------------------------
214,315 195,310
Less accumulated amortization 77,106 68,008
- ---------------------------------------------------------------------------------
137,209 127,302
- ---------------------------------------------------------------------------------
OTHER ASSETS
- ---------------------------------------------------------------------------------
Deferred tax assets 24,135 24,957
Other 6,519 3,647
- ---------------------------------------------------------------------------------
30,654 28,604
- ---------------------------------------------------------------------------------
$ 1,044,823 $ 1,009,050
=================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
=================================================================================
(EXPRESSED IN THOUSANDS)
CURRENT LIABILITIES
- ---------------------------------------------------------------------------------
Trade accounts payable $ 69,684 $ 62,795
Accrued salaries, wages and employee benefits 25,510 29,197
Other accrued expenses 29,237 37,847
Insurance reserves 13,621 13,101
Accrued environmental liabilities 8,941 11,561
Income taxes payable 10,800 8,175
- ---------------------------------------------------------------------------------
157,793 162,676
- ---------------------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT PORTION 276,954 283,715
- ---------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES 49,849 43,111
- ---------------------------------------------------------------------------------
ACCRUED ENVIRONMENTAL LIABILITIES 40,260 42,713
- ---------------------------------------------------------------------------------
OTHER LIABILITIES 39,677 43,400
- ---------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------
Preferred stock ($.10 par value; authorized
1,000,000 shares; none issued) -- --
Common stock ($.10 par value; authorized
300,000,000 shares; issued and outstanding
58,246,939 shares and 57,868,541 shares,
respectively) 5,825 5,787
Additional paid-in capital 192,755 186,365
Retained earnings 296,225 256,052
Minimum pension liability adjustment -- (1,226)
Cumulative translation adjustments (14,515) (13,543)
- ---------------------------------------------------------------------------------
480,290 433,435
- ---------------------------------------------------------------------------------
$ 1,044,823 $ 1,009,050
=================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
29
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994
TOTAL COMMON ADDITIONAL MINIMUM CUMULATIVE
SHAREHOLDERS' STOCK $.10 PAID-IN RETAINED PENSION TRANSLATION
EQUITY PAR VALUE CAPITAL EARNINGS LIABILITY ADJ. ADJUSTMENTS
- -----------------------------------------------------------------------------------------------------------
(EXPRESSED IN THOUSANDS)
Balance at January 1, 1994 $ 362,664 $ 5,768 $ 183,612 $ 194,261 $ -- $ (20,977)
Net earnings 50,094 -- -- 50,094 -- --
Cash dividends (20,786) -- -- (20,786) -- --
Stock options exercised
and related tax benefits 1,184 7 1,177 -- -- --
Change in cumulative
translation adjustments 3,180 -- -- -- -- 3,180
===========================================================================================================
Balance at December 31, 1994 396,336 5,775 184,789 223,569 -- (17,797)
Net earnings 53,303 -- -- 53,303 -- --
Cash dividends (20,820) -- -- (20,820) -- --
Stock options exercised
and related tax benefits 1,588 12 1,576 -- -- --
Minimum pension
liability adjustment (1,226) -- -- -- (1,226) --
Change in cumulative
translation adjustments 4,254 -- -- -- -- 4,254
===========================================================================================================
Balance at December 30, 1995 433,435 5,787 186,365 256,052 (1,226) (13,543)
Net earnings 61,109 -- -- 61,109 -- --
Cash dividends (20,936) -- -- (20,936) -- --
Stock issued for
business acquired 4,847 27 4,820 -- -- --
Stock options exercised
and related tax benefits 1,581 11 1,570 -- -- --
Minimum pension
liability adjustment 1,226 -- -- -- 1,226 --
Change in cumulative
translation adjustments (972) -- -- -- -- (972)
===========================================================================================================
Balance at December 28, 1996 $ 480,290 $ 5,825 $ 192,755 $ 296,225 $ -- $ (14,515)
===========================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
CONSOLIDATED
STATEMENTS OF CASH FLOWS
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994
FISCAL YEAR 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
(EXPRESSED IN THOUSANDS)
Cash flows from operating activities:
Net earnings $ 61,109 $ 53,303 $ 50,094
=======================================================================================================
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation of equipment at customers and property 60,830 61,681 63,112
Amortization of intangible and other assets 16,911 16,120 14,618
Provisions for doubtful accounts receivable 4,556 4,225 5,067
Change in deferred income tax assets and liabilities, net 15,297 26,504 22,247
Other 9,461 2,584 (2,440)
(Increase) decrease in assets, net of effects from
business acquisitions:
Trade accounts receivable (25,251) (8,433) (9,072)
Inventories (13,499) (1,088) 2,472
Prepaid expenses and other (5,152) (2,001) (2,412)
Increase (decrease) in liabilities, net of effects from
business acquisitions:
Trade accounts payable and accrued expenses 1,990 703 18,644
Restructure liability (10,000) (36,475) (25,179)
Environmental liabilities (5,073) 4,459 (16,820)
Other liabilities 4,766 3,360 5,575
=======================================================================================================
Total adjustments 54,836 71,639 75,812
=======================================================================================================
Net cash provided by operating activities 115,945 124,942 125,906
=======================================================================================================
Cash flows used in investing activities:
Equipment at customers additions (23,854) (34,874) (42,623)
Property additions (37,670) (43,235) (45,349)
Payment for business acquisitions, net of cash acquired (26,651) (12,682) (1,845)
Other assets additions, net (13,158) (12,671) (7,446)
=======================================================================================================
Net cash used in investing activities (101,333) (103,462) (97,263)
=======================================================================================================
Cash flows from (used in) financing activities:
Net borrowings (payments) under line-of-credit agreements (6,760) (51,565) (5,404)
Proceeds from issuances of senior notes 0 50,000 --
Proceeds from stock option exercises 1,576 1,930 1,184
Cash dividends paid (20,936) (20,820) (20,786)
=======================================================================================================
Net cash from (used in) financing activities (26,120) (20,455) (25,006)
=======================================================================================================
Effect of exchange rate changes on cash (82) 198 3
=======================================================================================================
Increase (decrease) in cash and cash equivalents (11,590) 1,223 3,640
Cash and cash equivalents at beginning of year 22,238 21,015 17,375
=======================================================================================================
Cash and cash equivalents at end of year $ 10,648 $ 22,238 $ 21,015
=======================================================================================================
Supplemental Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 19,607 $ 18,997 $ 14,241
Income taxes (net of refunds received) 27,547 11,231 10,222
=======================================================================================================
Consideration given up and liabilities assumed in
business acquisitions $ 30,858 $ 17,268 $ 2,261
=======================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
31
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
SAFETY-KLEEN CORP. AND SUBSIDIARIES
1. NATURE OF BUSINESS
The Company is a leading provider of services to generators of spent
solvents and other contaminated waste streams as well as the leading provider of
parts cleaner services and one of the world's largest collectors and re-refiners
of used lube oil. The Company serves hundreds of thousands of customers in
North America and Europe, through a network of 230 branch facilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the
Company and its subsidiaries after elimination of all significant intercompany
balances and transactions. The Company's fiscal year ends on the Saturday
closest to December 31.
EQUIPMENT AT CUSTOMERS AND RELATED DEPRECIATION
Equipment at customers is capitalized at manufactured or purchased cost.
Depreciation is computed using the straight-line method over a period of 3 to 13
years, commencing when the units are placed in service.
PROPERTY AND RELATED DEPRECIATION
Land, buildings and improvements, leasehold improvements, machinery and
equipment, and autos and trucks are capitalized at cost. Items of an ordinary
repair or maintenance nature are charged directly to operating expense.
Improvement costs are capitalized and charged to operations over the shorter of
the improvement life or the related asset life. Depreciation is computed
principally using the straight-line method over the estimated useful lives as
follows: Buildings and improvements 5 to 40 years; machinery and equipment 2 to
20 years; autos and trucks 4 to 10 years; and leasehold improvements over the
shorter of 5 to 10 years, or remaining term of the lease.
INTANGIBLE ASSETS AND RELATED AMORTIZATION
Goodwill consists primarily of the cost of acquired businesses in excess
of market value of net assets acquired. Goodwill is being amortized on a
straight-line basis over forty years. Subsequent to its acquisition, the Company
continually evaluates whether later events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may warrant revision or
that the remaining balance of goodwill may not be recoverable. When factors
indicate that goodwill should be evaluated for possible impairment, the Company
uses an estimate of the related business segment's undiscounted operating income
over the remaining life of the goodwill in measuring whether the goodwill is
recoverable.
Other intangible assets consist primarily of costs to obtain customers,
regulatory operating permits and computer software. Amortization of other
intangible assets is computed using the straight-line method over the expected
life of the intangible asset, which principally ranges from 2 years to 10 years.
ENVIRONMENTAL REMEDIATION COSTS AND LIABILITIES
The Company has recorded estimates for remediation costs relating to all
operating and previously-closed sites prior to conducting detailed individual
site investigations to ascertain the existence and extent of contamination. The
Company reviews the adequacy of its liability for environmental remediation on a
periodic basis and records adjustments to the costs and liabilities accordingly.
In 1995, the Company recorded a $12 million pre-tax charge to refine its
estimates of environmental liabilities.
EARNINGS PER SHARE
Earnings per share amounts are based on the average shares of common
stock outstanding during each year and common stock equivalents of dilutive
stock options and warrants.
STATEMENT OF CASH FLOWS
Short-term investments with original maturities of 90 days or less are
considered to be cash equivalents for purposes of the Consolidated Statements of
Cash Flows and Consolidated Balance Sheets. Cash flows associated with items
intended as hedges of identifiable transactions are classified in the same
categories as the cash flows of the items being hedged.
USE OF ESTIMATES
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 the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to be consistent with
current year presentation.
32
3. ACQUISITIONS
All acquisitions made during the three fiscal years ended December 28,
1996 were accounted for using the purchase method and, accordingly, their
operating results have been included in the Company's Consolidated Statements of
Operations only since the respective dates of acquisition. The acquisitions were
not material either individually or in the aggregate.
4. SEGMENT INFORMATION
The Company and its subsidiaries operate in the United States, the
Commonwealth of Puerto Rico, Canada, the United Kingdom, the Republic of
Ireland, France, Belgium, Italy, Germany, and Spain. A summary of certain data
with respect to these operations for the fiscal years ended December 28, 1996,
December 30, 1995, and December 31, 1994 is presented below:
(EXPRESSED IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------
REVENUE
United States and
Puerto Rico $ 754,271 $ 698,792 $ 648,555
Canada 62,529 61,286 57,332
Europe 106,326 99,173 85,380
- ---------------------------------------------------------------
Consolidated $ 923,126 $ 859,251 $ 791,267
===============================================================
TOTAL ASSETS
United States and
Puerto Rico $ 788,521 $ 766,276 $ 742,140
Canada 75,750 68,482 68,550
Europe 180,552 174,292 162,754
- ---------------------------------------------------------------
Consolidated $1,044,823 $1,009,050 $ 973,444
===============================================================
NET EARNINGS
United States and
Puerto Rico $ 56,092 $ 44,446 $ 47,766
Canada 1,614 3,751 1,552
Europe 3,403 5,106 776
- ---------------------------------------------------------------
Consolidated $ 61,109 $ 53,303 $ 50,094
===============================================================
The 1995 net earnings, by segment, excluding the $15.2 million pre-tax
credit to income for the write down of restructuring reserves previously
established in 1993 and the $12 million pre-tax charge for the refinement of the
Company's environmental remediation reserves at its facilities in North America,
were as follows:
EXPRESSED IN THOUSANDS
--------------------------------
USA & Puerto Rico $ 49,383
Canada 1,856
Europe 2,064
--------------------------------
Consolidated $ 53,303
================================
The Company operates primarily in one business segment--providing
businesses with environmentally safe and convenient solutions for managing fluid
waste and other recoverable resources.
5. INVENTORIES
The Company's inventories consist primarily of solvent, oil and
supplies. LIFO inventories at December 28, 1996 and December 30, 1995 were $4.8
million and $5.3 million, respectively. Under the FIFO method of accounting
(which approximates current or replacement cost) inventories would have been
$0.3 million higher at December 28, 1996 and unchanged at December 30, 1995.
6. FINANCIAL ARRANGEMENTS AND LONG-TERM DEBT
Long-term debt at December 28, 1996 and December 30, 1995 consisted of
the following:
(EXPRESSED IN THOUSANDS) DEC. 28, 1996 DEC. 30, 1995
- ------------------------------------------------------------------------------
9.25% Senior Notes due in 1999 $ 100,000 $ 100,000
8.05% Senior Notes due in 1998 50,000 50,000
Unsecured notes payable to banks
under financing agreements:
Revolving lines of credit 67,990 89,771
Uncommitted lines of credit 52,897 37,580
Other 6,067 6,364
- -------------------------------------------------------------------------------
$ 276,954 $ 283,715
Less-current portion -- --
- -------------------------------------------------------------------------------
Total long-term debt $ 276,954 $ 283,715
===============================================================================
The long-term debt as of December 28, 1996 is due as follows:
EXPRESSED IN THOUSANDS
------------------------------
1998 $ 103,841
1999 $ 100,108
2000 $ 72,585
2001 $ 60
2002 and thereafter $ 360
==============================
The $100 million of 9.25% Senior Notes ("the Notes") due September 1999
specify that, upon the occurrence of a credit agency rating decline below
investment grade, either in conjunction with a change in control or as a result
of other events as defined in the Notes, each holder of the Notes has the option
to require the Company to purchase all or any part of such holder's Notes at a
price equal to 100% of the principal amount plus accrued interest.
In May, 1992, the Company executed interest rate swap agreements that
effectively convert $100 million of its fixed-rate borrowings into variable rate
obligations. These swap agreements expire in September 1999. In April 1993, the
Company executed an interest rate swap agreement that converted these $100
million variable rate obligations to a fixed rate.
33
This agreement expired in September 1996. The effect of these swaps
reduced the interest rate on the Notes from 9.25% to 7.08% through
September 1996. At that time, the interest reverted back to a variable rate.
The variable rate is based on the U.S. Dollar London Interbank Offered Rate
(LIBOR) determined at 6-month intervals. At December 28, 1996, the effective
variable rate of interest on these borrowings was 7.8%.
In May 1992, at the same time the Company entered into the $100 million
interest rate swap agreement, the Company entered an interest rate cap
agreement, which protects the Company from rising interest rates. The cap has a
notional amount of $100 million, and expires on September 12, 1999. The cap
effectively limits the Company's interest rate exposure to 13.92% if LIBOR
exceeds 12%. The premium paid on the cap is being amortized to interest expense
over the term of the cap. The Company has a U.S. revolving credit agreement
totaling $160 million which expires in March 2000. The agreement provides for
interest rates to be determined at the time of the borrowing based on a choice
of formulas as specified in the agreement. The Company currently benefits from a
competitive bid option under the agreement which ensures that favorable market
rates of interest are secured. A facility fee based on the Company's credit
ratings is paid on the total amount of the line of credit. At December 28, 1996,
$20 million of borrowings were outstanding at an average interest rate of 5.6%.
At December 28, 1996, the Company had uncommitted lines of credit
totaling $145 million. Borrowings under these lines were $53 million at an
average interest rate of 5.5%.
The Company has the ability to convert other bank borrowings to its
revolving credit facilities. Since the committed facilities extend beyond 1997
and the Company intends to renew these obligations, $127 million of the loans
payable to banks have been classified as long-term debt.
The Company's German subsidiary has a revolving credit agreement
totaling 76 million Deutschmarks (U.S. $49 million) that extends credit until
December, 1997. The interest rate determined at the time of each borrowing is
6-month LIBOR plus 0.5%. A commitment fee of 0.125% per annum is paid quarterly
on the unused portion of the facility. At December 28, 1996, 75 million
Deutschmarks ($48 million U.S.) of borrowings were outstanding under these
facilities at an average interest rate of 3.8% (prior to the effect of interest
rate swap described as follows).
In May 1992, the Company's German subsidiary executed an interest rate
swap agreement which expires in May 1997. The interest rate on DM 70 million
(U.S. $45 million) was swapped from rates based on 6-month DM LIBOR to rates
based on 6-month U.S. Dollar LIBOR. At December 28, 1996, the effective interest
rate was 7.9%.
At December 28, 1996, the Company's other subsidiary operations have
miscellaneous line of credit agreements totaling $8 million (U.S.). At December
28, 1996, there were no borrowings under these lines of credit.
All of the Company's interest rate swap agreements have been entered
into with major financial institutions which are expected to fully perform under
the terms of the agreements. The Company monitors the credit ratings of these
counterparties and considers the risk of default to be remote.
The fair value of the three interest rate swap agreements and the
interest cap agreement noted above was approximately $2.1 million and $6.4
million greater than the Company's carrying value at December 28, 1996 and
December 30, 1995, respectively. This fair value is determined by obtaining
quotes from brokers who regularly deal in these types of financial instruments.
These interest rate swaps have resulted in a net savings of $0.1, $0.6, and $1.8
million in 1996, 1995, and 1994, respectively.
In January 1995, the Company entered into a note purchase agreement with
two insurance companies, under which the Company borrowed $50 million at a fixed
interest rate of 8.05% for 3 years expiring in January 1998. Proceeds from the
note were used to repay existing bank borrowings.
The Company's credit agreements include provisions, among others, relative
to maintenance of minimum shareholders' equity and interest coverage ratios.
At December 28, 1996, the Company's required minimum shareholders' equity
was $438 million and the Company was in compliance with its loan provisions.
7. CAPITAL STOCK
PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares
of preferred stock, par value $.10 per share, at such time or times, in such
series, and with such designations and features thereof as it may determine,
including rate of dividend, redemption provisions and prices, conversion
conditions and prices and voting rights. No shares of preferred stock have been
issued.
34
STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
The Company has the following stock option and employee stock purchase
plans:
1. The 1985 and 1993 Stock Option Plans (The "Option Plans")
2. The 1988 Non-Qualified Stock Option Plan for Outside Directors
(The "Directors' Plan")
3. The Employee Stock Purchase Plan (the "ESPP")
The Company accounts for these plans under Accounting Principles Board
(APB) Opinion No. 25, under which no compensation has been recognized. Had
compensation costs for these plans been determined based on the fair value at
the date of grant consistent with SFAS No. 123, the Company's 1996 and 1995 net
income and earnings per share would have been reduced to the following pro-forma
amounts:
1996 1995
- ------------------------------------------------------------------
Net Income: As Reported $ 61,109 $ 53,303
(IN THOUSANDS) Pro Forma $ 59,398 $ 52,235
Earnings Per Share: As Reported $ 1.05 $ 0.92
Pro Forma $ 1.02 $ 0.90
==================================================================
The fair value of each option granted under the Option Plans is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1996 and 1995:
- ---------------------------------------------------
Expected Lives 6 Years
Dividend Yield 1.56%
Expected Volatility 30.6%
Risk Free Interest Rate 6.54%
===================================================
The weighted average fair value of the shares granted under the Option
Plans in 1996 and 1995 would be $5.09 and $6.24, respectively. No grants were
made in 1996 and 1995 under the Directors' Plan. The cost per ESPP share granted
in 1996 and 1995 would be $3.30 and $3.49, respectively, based on a 10% discount
on share price and a Black-Scholes value of a 13-month option with a 2.23%
dividend yield rate.
Because the SFAS No. 123 method of fair-value accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
At the Annual Meeting of Shareholders held in May, 1996, the
shareholders approved an increase in the number of shares available for grant
under the Option Plans by 2,500,000 shares to a total of 8,437,500 shares. Under
the Option Plans, shares of the Company's common stock may be granted to
officers and other key employees at a price of 100% of the quoted market price
at date of grant. Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Stock Appreciation Rights (SARs) may be
granted in conjunction with Non-Qualified Stock Options whereby the grantee may
surrender exercisable Non-Qualified Options and receive a cash payment equal to
the difference between the option price and the market value of the common stock
on the exercise date. The exercise of Incentive Options, Non-Qualified Options
and SARs are subject to conditions as determined at the time of grant by the
Compensation Committee of the Board of Directors. All options granted since May
1990 have been for a 10-year life with 25% vesting per year beginning one year
from the date of the grant. In November 1994, the Board extended the expiration
date on all stock options granted from February 1987 through May 1990 to
November 30, 2004.
Under the Directors' Plan, options to purchase up to 300,000 shares of
the Company's common stock may be granted to outside Directors at a price of
100% of the quoted market price at the date of grant. Under the terms of the
Directors' Plan, each outside Director was granted an option to purchase 15,000
shares at the time the plan was adopted. Any new outside Director elected or
appointed after the date the plan was adopted would also be granted an option to
purchase 15,000 shares of the Company's common stock upon taking office. The
Directors' Plan also provides that a second option to purchase 15,000 shares be
granted to each outside Director on the fifth anniversary of the initial grant
of options if such Director is still serving on the Board at that time. Options
are exercisable 25% annually, on a cumulative basis, starting one year from date
of grant and terminating ten years after the grant date.
Under the ESPP, a total of 1,500,000 shares of the Company's common
stock may be purchased by employees of the Company and designated subsidiaries,
through payroll deductions, at 90% of the lower of the quoted closing market
price on the date of grant or the quoted closing market price on June 30 in the
year following the date of grant. Under the plan, all full-time employees
(except officers of the Corporation) of the Company and designated subsidiaries
on the grant date who were continuously employed since January 1 of the year in
which the grant date occurs (subject to certain restrictions on percentage of
ownership outlined in the ESPP) are eligible to participate. The Company had an
employee stock purchase plan ("Old ESPP") which was in effect from 1990 through
1994. Under terms of the Old ESPP, no further grants to purchase shares could be
made after December 31, 1994. Therefore, 1,064,571 available option shares not
granted as of December 31, 1994 expired. An additional 66,188 shares granted in
1994 that were canceled in 1995 have expired.
35
A summary of the status of the Company's stock option plans for the
three fiscal years ended December 28, 1996 is presented below:
Available
Weighted for
Price Avg. Ex. Future
Shares Range Price Exercisable Grants
- ------------------------------------------------------------------------------------------------------
Outstanding Options @ 1/1/94 2,728,415 $ 13.50 - $ 32.25 $ 21.97 1,447,846 4,012,117
1994 Activity:
Expired (1,064,571)
Granted 853,408 13.50 - 15.88 14.97
Exercised (71,207) 16.65 - 16.65 16.65
Canceled (271,341) 13.50 - 32.00 18.42
- ------------------------------------------------------------------------------------------------------
Outstanding Options @ 12/31/94 3,239,275 13.50 - 32.25 20.54 1,829,500 2,365,479
1995 Activity:
Expired (66,188)
Authorized 1,500,000
Granted 1,228,846 15.41 - 16.88 16.15
Exercised (133,992) 13.50 - 15.63 14.40
Canceled (233,762) 13.50 - 32.25 19.05
- ------------------------------------------------------------------------------------------------------
Outstanding Options @ 12/30/95 4,100,367 13.50 - 32.25 19.43 2,142,623 2,804,207
1996 Activity:
Expired
Authorized 2,500,000
Granted 977,759 14.25 - 17.50 15.13
Exercised (102,536) 13.50 - 16.25 15.37
Canceled (115,789) 13.50 - 32.25 16.99
- ------------------------------------------------------------------------------------------------------
Outstanding Options @ 12/28/96 4,859,801 $ 13.50 - $ 32.25 $ 18.74 2,718,193 4,442,237
- ------------------------------------------------------------------------------------------------------
STOCK WARRANTS
The Company, on January 27, 1995 issued 200,000 stock warrants in
conjunction with an acquisition. These warrants give the owner of stock warrants
the right to purchase up to 200,000 shares of the Company's common stock at a
price of $17.79 per share and expire on January 27, 2000.
The following table summarizes information about the Company's stock
options and warrants outstanding at December 28, 1996:
OPTION/WARRANTS OPTIONS/WARRANTS EXERCISABLE
----------------------------------------------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING NUMBER RANGE OF AVERAGE NUMBER AVERAGE
CONTRACTUAL LIFE OUTSTANDING EXERCISE PRICES EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -----------------------------------------------------------------------------------------------------
1 278,370 $ 15.07 - $ 19.46 $ 17.54 172,930 $ 19.04
1 3,700 26.75 - 32.00 30.58 3,700 30.58
2 70,895 13.50 - 19.33 18.36 69,094 18.48
2 59,875 24.00 - 32.00 27.99 55,188 28.33
3 223,250 13.50 - 19.33 17.73 220,288 17.78
3 37,362 24.00 - 32.00 27.82 34,158 28.18
4 2,350 13.50 - 15.63 14.95 1,363 14.74
4 255,025 24.00 - 32.25 31.96 254,762 31.97
5 27,201 13.50 - 19.42 16.19 13,688 16.63
5 235,025 24.00 - 32.25 27.05 234,725 27.06
6 436,188 21.75 - 24.00 23.93 327,141 23.93
7 635,875 13.50 - 17.38 14.98 369,694 14.79
8 1,944,635 16.25 - 23.92 17.50 1,161,462 18.33
9 846,250 14.25 - 15.12 15.12 - -
10 3,800 17.50 - 17.50 17.50 - -
- -----------------------------------------------------------------------------------------------------
TOTAL 5,059,801 $ 13.50 - $ 32.25 $ 18.74 2,918,193 $ 20.72
=====================================================================================================
36
SHAREHOLDERS' RIGHTS PLAN
Pursuant to a plan adopted by the Company in December 1988, each share
of the Company's common stock carries the right to buy one share of the
Company's common stock at a price of $73.33 per share. The rights will expire on
November 21, 1998, unless earlier redeemed by the Company. The rights will
become exercisable if a person becomes an "acquiring person" by acquiring 20% of
the Company's common stock or announces a tender offer that would result in such
person owning 20% or more of the Company's common stock. If someone becomes an
acquiring person (except pursuant to certain cash tender offers for all shares),
the holder of each right (other than rights owned by the acquiring person) will
be entitled to purchase common stock of the Company having a market value of
twice the exercise price of the right. In addition, if the Company is acquired
in a merger or other business combination transaction in which the Company's
common stock is exchanged for cash or securities, or 50% or more of its
consolidated assets or earning power are sold, each holder (other than the
acquiring person) will have the right to purchase common stock of the acquiring
company having a market value of twice the exercise price. The rights may be
redeemed by the Company, at a price of 0.67 cent per right, at any time prior to
anyone becoming an acquiring person.
8. PENSION AND EMPLOYEE BENEFIT PLANS
The Company has four noncontributory pension plans covering
substantially all full time employees in the United States. Domestic pension
plans consist of three qualified plans and one unfunded non-qualified plan. The
qualified plans are funded in compliance with ERISA requirements as employees
become eligible to participate, generally, after completing one year of service.
The Company's consolidated pension costs for fiscal years 1996, 1995 and
1994 were $6.0 million, $4.9 million and $5.5 million, respectively.
The following table sets forth the domestic plans' combined funded
status at December 28, 1996 and December 30, 1995:
December 28, 1996 December 30, 1995
Assets exceed Accumulated Assets exceed Accumulated
Accumulated Benefits exceed Accumulated Benefits exceed
(EXPRESSED IN THOUSANDS) Benefits Assets Benefits Assets
- --------------------------------------------------------------------------------------------------------------------------
Actuarial present value
of benefit obligation:
Vested benefits $ 44,213 $ 2,395 $ 32,439 $ 7,314
Nonvested benefits 4,427 141 7,014 2,170
- --------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 48,640 2,536 39,453 9,484
- --------------------------------------------------------------------------------------------------------------------------
Effect of projected
compensation levels 16,169 584 14,063 420
- --------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 64,809 3,120 53,516 9,904
- --------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value 64,204 - 43,869 5,644
- --------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
(greater) than plan assets (605) (3,120) (9,647) (4,260)
Unrecognized net loss (gain) 1,476 (629) 7,338 1,541
Unrecognized net assets to be
amortized over 16-20 years (568) 494 (349) 267
Unrecognized prior service cost 355 114 238 280
Adjustment required to recognize
minimum liability - - - (2,019)
- --------------------------------------------------------------------------------------------------------------------------
Unfunded prepaid (accrued)
pension cost recognized in the
Consolidated Balance Sheets $ 658 $ (3,141) $ (2,420) $ (4,191)
==========================================================================================================================
In accordance with SFAS No. 87 on Employers' Accounting for Pensions,
the Company records an additional minimum pension liability for each defined
benefit plan which has an accumulated benefit obligation that exceeds the plan
assets at fair value. There was no additional minimum pension liability recorded
at December 28, 1996 and there was an additional minimum liability of $1,226,000
recorded as a reduction to shareholders' equity at December 30, 1995, net of
applicable deferred income taxes.
The Plans' assets consist of cash, cash equivalents, equity funds,
pooled funds of real estate and common stock of the Company.
Net periodic pension cost for the Company's domestic plans in 1996, 1995
and 1994 includes the following components:
(EXPRESSED IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------
Service cost-benefits earned
during the year $ 4,521 $ 3,451 $ 4,235
Interest on projected
benefit obligation 4,981 4,274 3,909
Return on plan assets (9,422) (10,405) (334)
Net amortization and deferral 4,593 6,493 (3,318)
- ------------------------------------------------------------------------------
Net periodic pension cost $ 4,673 $ 3,813 $ 4,492
==============================================================================
Actuarial assumptions used to determine the projected benefit obligation
and the expected net periodic pension costs were:
1996 1995 1994
- ------------------------------------------------------------------------
Projected Benefit
Obligation Assumptions:
Discount Rates 7.8% 7.3% 8.5%
Rates of increase in
compensation levels 4.5% 4.0% 5.0%
Net Periodic Pension
Cost Assumption:
Expected long-term rate
of return on assets 10.0% 10.0% 10.0%
========================================================================
The Company also has pension plans covering employees of its Canadian
and British subsidiaries. Those plans are funded by purchase of insurance
contracts and units in a managed fund invested in stocks, fixed income
securities and real estate. Vested benefits are fully funded. The Company's
foreign subsidiaries are not required to report under ERISA and do not otherwise
determine the actuarial value of accumulated plan benefits as disclosed above
for the Company's domestic pension plans. These plans do not have a material
effect on the Company's financial condition or results of operations.
The Safety-Kleen Corp. Savings and Investment Plan allows eligible
employees to make contributions, up to a certain limit, to the Plan on a
tax-deferred basis under Section 401(k) of the Internal Revenue Code of 1986.
The Company may, at its discretion, make matching contributions out of its
profits for the year. The Company's expense for contributions was $3.2 million
in 1996, $1.9 million in 1995 and $1.5 million in 1994. The Company offers a
post-retirement medical insurance plan to its domestic employees retiring prior
to the normal retirement age of 65. Retirees are eligible to continue this
medical coverage until age 65. The plan is currently unfunded and retirees
electing this coverage are required to pay a premium for the insurance.
The following table reconciles the funded status of the plan to the
accrued post-retirement benefit cost recognized in the Consolidated Balance
Sheets at December 28, 1996 and December 30, 1995:
(IN THOUSANDS) DEC. 28, 1996 DEC. 30, 1995
- ----------------------------------------------------------------------------
Accumulated post-retirement
benefit obligation (APBO)
Retirees, beneficiaries
and dependents $ 1,310 $ 1,055
Active employees 5,074 5,575
- ----------------------------------------------------------------------------
6,384 6,630
- ----------------------------------------------------------------------------
Plan assets at fair value - -
- ----------------------------------------------------------------------------
APBO greater than
plan assets (6,384) (6,630)
Unrecognized net
loss (gain) (2,502) (1,453)
Accrued post-retirement
benefit cost $ (8,886) $ (8,083)
- ----------------------------------------------------------------------------
APBO discount rate
assumption 7.75% 7.25%
============================================================================
Net periodic post-retirement benefit costs recognized for 1996, 1995,
and 1994 are as follows:
(EXPRESSED IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------------------
Service costs - benefits
earned during the year $ 683 $ 511 $ 786
Interest costs on APBO 478 436 498
Other (57) (87) (44)
- ------------------------------------------------------------------------
Net periodic post-retirement
benefit cost $ 1,104 $ 860 $ 1,240
========================================================================
38
The health care cost trend was assumed to be 9% for 1995, 7% for 1996,
decreasing to 5% for 1997, then to an ultimate trend of 4.5% in 1998.
If the health care cost trend rate increases one percent for all future
years, the accumulated post-retirement benefit obligation as of December 28,
1996 would have increased 17%. The effect of this change on the aggregate of the
service and interest cost for 1996 would be an increase of 23%.
9. INCOME TAXES
The components of earnings before income taxes consisted of the
following for each of the last three fiscal years.
(EXPRESSED IN THOUSANDS) 1996 1995 1994
- ----------------------------------------------------------
Domestic $ 93,986 $ 74,492 $ 81,275
Foreign 7,662 17,976 3,551
- ----------------------------------------------------------
$ 101,648 $ 92,468 $ 84,826
Under SFAS No. 109 on Accounting for Income Taxes, deferred tax assets
and liabilities are calculated based on the difference between the financial
statement and income tax bases of assets and liabilities using the enacted tax
rates. The provisions (benefits) for income taxes include the following:
(EXPRESSED IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------
Current
Federal $ 19,979 $ 16,505 $ 12,352
State 5,956 5,087 5,692
Commonwealth
of Puerto Rico 159 (376) (883)
Foreign 704 662 1,365
Deferred
Federal 6,863 7,247 6,590
Foreign 4,105 2,087 928
Prepaid
Federal 5,077 1,949 10,090
Foreign (2,304) 6,004 (1,402)
- ------------------------------------------------------------
Total Provision $ 40,539 $ 39,165 $ 34,732
============================================================
The following table reconciles the statutory U.S. Federal income tax
rate to the Company's consolidated effective tax rate:
1996 1995 1994
- -----------------------------------------------------------------
Statutory U.S. federal tax rate 35.0% 35.0% 35.0%
- -----------------------------------------------------------------
Increase (decrease) resulting from:
Provision for state
income tax
(net of federal benefit) 2.1 3.6 4.4
Difference in foreign
statutory rates 1.6 2.2 (0.3)
Other 1.2 1.6 1.8
- -----------------------------------------------------------------
Effective tax rate 39.9% 42.4% 40.9%
=================================================================
Temporary differences and carry forwards which give rise to deferred tax
assets and liabilities are as follows:
DEC. 28 DEC. 30 DEC.31
(EXPRESSED IN THOUSANDS) 1996 1995 1994
- -----------------------------------------------------------------------
Deferred tax assets - Current
Restructuring reserves $ 1,758 $ 4,278 $ 7,773
Environmental reserves 2,395 2,625 1,628
Insurance reserves 4,415 5,908 6,399
Bad debt reserve 1,800 1,800 1,659
Other 1,605 3,373 797
- -----------------------------------------------------------------------
Total deferred tax
assets - Current $ 11,973 $ 17,984 $ 18,256
- -----------------------------------------------------------------------
Deferred tax assets -
non-current
Restructuring charges
not currently deductible $ 11,440 $ 17,494 $ 24,842
Net operating loss (NOL)
carry forwards of
subsidiaries 20,616 20,149 18,679
Insurance reserves 7,798 4,822 3,605
Environmental reserves 16,325 14,382 19,382
Other 5,458 3,273 1,484
Valuation allowance (3,340) (3,676) (3,217)
- ------------------------------------------------------------------------
Total deferred tax assets -
non current $ 58,297 $ 56,444 $ 64,775
- ------------------------------------------------------------------------
Total Deferred Tax Asset $ 70,270 $ 74,428 $ 83,031
- ------------------------------------------------------------------------
Deferred Tax Liabilities
Restructuring and
special charges -- 13,820 12,726
Depreciation $(76,115) $(80,250) $(68,828)
Tax lease agreements (6,852) (7,253) (7,539)
Other (1,044) (915) (3,840)
- ------------------------------------------------------------------------
Total Deferred
Tax Liabilities $(84,011) $(74,598) $(67,481)
========================================================================
As of December 28, 1996, the Company had undistributed earnings of
foreign consolidated subsidiaries of approximately $23.8 million. Since it is
the Company's intention to reinvest the earnings into the foreign subsidiaries
ongoing operations, the Company does not provide for deferred taxes on possible
future remittances of future earnings. If the reinvested earnings were to be
remitted, U. S. income taxes, under current law, would not be material.
39
As of December 28, 1996, the tax assets derived from Net Operating Loss
carry forwards (NOLs) consist of NOL tax assets with expiration dates as
follows:
IN THOUSANDS
--------------------------
1997 $ 774
1998 $ 643
1999 $ 1,577
2000 $ 428
2001 $ 458
No Expiration $ 16,736
==========================
The Company has recorded a valuation allowance of approximately $3.3
million for unrealized NOL tax assets that may expire before the Company is able
to utilize such NOLs.
The valuation allowance account balance of $3.3 million represents
approximately 86% of the NOL tax assets that are due to expire as compared to a
valuation allowance percentage of approximately 79% of the NOLs due to expire at
the end of 1995. The valuation account activity is summarized in the table
below.
(Expressed in thousands) 1996
- --------------------------------------------
Balance - beginning of year $ 3,676
Adjust valuation balances (220)
Cumulative translation adjustment (116)
Balance - end of year $ 3,340
============================================
10. SPECIAL CHARGE FOR ENVIRONMENTAL COST, OTHER ACCRUED EXPENSES AND
LIABILITIES, COMMITMENTS AND CONTINGENT LIABILITIES
The Company operates a large number of hazardous waste facilities for
the collection and processing of hazardous and non-hazardous wastes and is
subject to extensive and expansive regulation by federal, state and local
authorities.
In the ordinary course of conducting its business activities, the
Company becomes involved in judicial and administrative proceedings in which
governmental authorities seek remedial actions and/or fines and penalties. The
Company also has been notified by the EPA that it may be a responsible party at
several National Priority List ("NPL") sites. Generally, these proceedings by
federal and state regulatory agencies have been resolved by negotiation and
settlement. The Company does not anticipate that the amount of fines and
penalties will have a material adverse impact on its financial condition. It
should be noted, however, that many environmental laws are written and enforced
in a way in which the potential liability can be large, and it is possible that
the Company's actual liability in any particular case or claim will prove to be
larger than anticipated and accrued for by the Company. It is also possible that
expenses incurred in any particular reporting period for remediation costs or
for fines, penalties or judgments could have a material impact on the Company's
results of operations for that period.
Under various federal, state and local regulations, the Company can be
required to conduct an environmental investigation of any of its permitted
operating or closed facilities to determine the possible existence and extent of
environmental contamination. In the event that contamination is found, the
Company may be required to perform a remedial cleanup of the site. The Company
is currently engaged in investigation and cleanup work at many of its sites.
In 1993 the Company recorded a $50 million pre-tax special charge ($30
million after-tax or $.52 per share) for a change in estimate for remediation
costs relating to all operating and previously-closed sites prior to conducting
detailed individual site investigations to ascertain the existence and extent of
contamination. This change results in earlier recognition of environmental
remediation costs and liabilities as compared with the Company's previous
practice which was to accrue the estimated cost of remedial cleanup work at the
time the need for such work was specifically identified based on site
investigation. In 1995, the Company recorded a $12 million pre-tax charge to
increase its reserves for environmental remediation based on a refinement of the
estimate for such liabilities.
Federal environmental regulations require that the Company demonstrate
financial responsibility for sudden and non-sudden releases, as well as closure
and post-closure liabilities. One manner by which to make this demonstration is
through Environmental Impairment Liability (EIL) insurance coverage. The Company
has EIL insurance coverage which it believes complies with the Federal
regulatory requirements. However, the Company must reimburse the insurance
carrier for all losses and expenses incurred by it under the policy. The
Company's income could be adversely affected in the future if it is unable to
obtain risk-transfer EIL insurance coverage and uninsured losses were to be
incurred.
40
The Company leases many of its branches, vehicles and other equipment.
These leases are accounted for as operating leases. Related rental expenses were
$31.5 million in 1996, $24.8 million in 1995 and $21.2 million in 1994.
Aggregate minimum future rentals are payable as follows:
EXPRESSED IN
PERIODS MILLIONS
-----------------------------
1997 $ 27.8
1998 22.5
1999 16.5
2000 8.7
2001 5.8
Future Years 19.6
Total $ 100.9
11. RESTRUCTURING CHARGES
In 1993, the Company adopted a restructuring plan based on conversion of
its core parts cleaner service to new technology and other strategic actions. In
conjunction with the adoption of this plan, the Company recorded a special
charge of $179 million ($106 million after tax or $1.84 per share). The pre-tax
restructuring charge included $93 million of asset write downs and $86 million
of other restructuring charges. In 1995, the Company recorded a pre-tax credit
to income of $15.2 million to adjust the restructuring reserves to their
expected required levels. In 1996, the Company substantially completed all of
its restructuring activities and reclassified the remaining restructure
liabilities (which are primarily associated with the European operations) to
other accrued expenses in current liabilities and other liabilities in
non-current liabilities. At December 28, 1996 and December 30, 1995, other
accrued expenses include $3.6 million and $10.4 million, respectively, and other
liabilities include $7.9 million and $12.1 million, respectively.
12. ACCOUNTING CHANGES
The Company adopted Statement of Financial Accounting Standards (SFAS)
No.121 on Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of in fiscal year 1996. The adoption of SFAS No.121 did
not have an impact on the financial position or results of operations of the
Company.
13. INTERIM RESULTS OF OPERATIONS (UNAUDITED)
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUE GROSS PROFIT
- -------------------------------------------------------------
Interim Period 1996 1995 1996 1995
- -------------------------------------------------------------
First (12 weeks) $201,723 $194,559 $ 55,900 $ 52,142
Second (12 Weeks) 211,355 203,192 56,567 54,206
Third (12 Weeks) 213,098 197,529 57,824 52,290
Fourth (16 Weeks) 296,950 263,971 80,864 72,144
- -------------------------------------------------------------
Total $923,126 $859,251 $251,155 $230,782
==============================================================
EARNINGS
NET EARNINGS PER SHARE
- ---------------------------------------------------------------------
Interim Period 1996 1995 1996 1995
- ---------------------------------------------------------------------
First (12 weeks) $13,077 $ 12,071 $ 0.23 $ 0.21
Second (12 Weeks) 13,604 12,131 0.23 0.21
Third (12 Weeks) 14,004 11,126 0.24 0.19
Fourth (16 Weeks) 20,424 17,975 0.35 0.31
- ---------------------------------------------------------------------
Total $61,109 $ 53,303 $ 1.05 $ 0.92
=====================================================================
41
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
DONALD W. BRINCKMAN
Founder,
Chairman of the Board
Safety-Kleen Corp.
JOHN G. JOHNSON JR.
President and Chief
Executive Officer
Safety-Kleen Corp.
RICHARD T. FARMER
Chairman
Cintas Corporation
(uniform manufacturer
and supply company)
RUSSELL A. GWILLIM
Chairman Emeritus
Safety-Kleen Corp.
EDGAR D. JANNOTTA
Senior Principal
William Blair
& Company, L.L.C.
(investment banking firm)
KARL G. OTZEN
President
Gerhard & Company
(product development
consulting firm)
PAUL D. SCHRAGE
Senior Executive Vice
President
McDonald's Corporation
(restaurant operator)
MARCIA WILLIAMS
President
Williams & Vanino, Inc.
(environmental/manage-
ment consulting firm)
W. GORDON WOOD
Retired Vice President
Safety-Kleen Corp.
CORPORATE OFFICERS
DONALD W. BRINCKMAN Founder, Chairman of the Board, Director
JOHN G. JOHNSON JR. President, Chief Executive Officer and Director
HYMAN K. BIELSKY Senior Vice President, General Counsel and Managing Director,
European Operations
ROY D. BULLINGER Senior Vice President Business Management and Marketing
ROBERT J. BURIAN Senior Vice President Human Resources
MICHAEL H. CARNEY Senior Vice President Marketing Services and Customer Care
JOSEPH CHALHOUB Senior Vice President Operations, Oil Recovery and Envirosystems
DAVID A. DATTILO Senior Vice President Sales and Service
SCOTT E. FORE Senior Vice President Environment, Health and Safety
F. HENRY HABICHT II Senior Vice President Corporate Development and Environment
ROBERT W. WILLMSCHEN JR. Senior Vice President Finance, Chief Financial
Officer and Secretary
LAWRENCE G. DAVENPORT Vice President Information Services and
Chief Information Officer
CLARK J. ROSE Vice President Manufacturing and Technical Services
LAURENCE M. RUDNICK Treasurer
CLIFFORD J. SCHULZ Controller
BOARD COMMITTEES
AUDIT: Otzen, Schrage, Wood
COMPENSATION: Farmer, Gwillim, Jannotta
ENVIRONMENTAL: Brinckman, Schrage, Williams
EXECUTIVE: Brinckman, Gwillim, Jannotta, Otzen (alternate)
BOARD AFFAIRS AND NOMINATING: Farmer, Otzen, Schrage
42
SHAREHOLDER REFERENCE
CORPORATE OFFICE
Safety-Kleen Corp.
1000 North Randall Road
Elgin, IL 60123
Telephone: (847) 697-8460
Arthur Andersen LLP, 33 W. Monroe Street,
Chicago, IL 60603
The Annual Meeting of Shareholders of Safety-Kleen Corp. will be held at 10:00
a.m., Friday, May 9, 1997, at the Northern Illinois University Hoffman Estates
Education Center, 5555 Trillium Blvd., Hoffman Estates, IL 60192. Directions to
the meeting are located in the 1997 proxy statement.
A copy of Safety-Kleen's Annual Report, 1996 Form 10-K, and quarterly reports to
shareholders are available upon request to:
Financial Relations
Safety-Kleen Corp.
1000 N. Randall Rd., Elgin, IL 60123.
Visit our web site at
WWW.SAFETY-KLEEN.COM
or E-mail requests to
FINANCE@SAFETY-KLEEN.COM
Safety-Kleen offers a dividend reinvestment plan for shareholders of record.
Further information may be obtained from the Company's Registrar and Transfer
Agent.
First Chicago Trust Company of New York
Post Office Box 2598, Jersey City, NJ 07303
Telephone: (800)446-2617
Safety-Kleen stock is traded on the New York Stock Exchange under the symbol SK.
The approximate number of record holders of the Company's common stock at
December 28, 1996 was 8,042. The following table shows the range of common stock
prices for the calendar quarters indicated. The quotations represent the high
and low prices on the New York Stock Exchange as reported by THE WALL STREET
JOURNAL.
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
QUARTER HIGH LOW HIGH LOW
- -------------------------------------------------------------------------------
First $15.75 $13.50 $17.88 $14.50
- -------------------------------------------------------------------------------
Second 17.00 14.25 18.00 15.13
- -------------------------------------------------------------------------------
Third 18.13 15.63 17.13 13.50
- -------------------------------------------------------------------------------
Fourth 17.25 14.75 15.63 14.00
- -------------------------------------------------------------------------------
Safety-Kleen paid a quarterly cash dividend of $.09 per share in 1996 and 1995,
and has paid a cash dividend for 71 consecutive quarters since March 1979. The
Company expects to continue this policy, although there is no assurance as to
future dividends, as they are dependent upon future earnings, capital
requirements, the financial condition of the Company and other factors.