Safety-Kleen Corp. 1999 Annual Report 99 Going the Distance
FRONT COVER
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INSIDE FRONT COVER
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Headquartered in Columbia, South Carolina, Safety-Kleen Corp. is the premier
industrial services company in North America servicing over 400,000 customers of
all sizes in a broad range of markets. The majority of these customers generate
some type of regulated waste that must be handled responsibly and efficiently.
Safety-Kleen is the only service provider that offers a completely integrated
network designed to collect, process, recycle and dispose of an almost unlimited
range of both hazardous and non-hazardous waste streams.
Financial Highlights & Selected Financial Data
Total Revenue Total Assets Operating Cash Flow (1)
($ in millions) ($ in millions) ($ in millions)
95 $599 95 $1,367 95 $108
96 $653 96 $1,491 96 $106
97 $679 97 $1,611 97 $121
98 $1,185 98 $4,469 98 $279
99 $1,686 99 $4,477 99 $481
Year Ended August 31 1999 1998 1997 1996 1995
($ in thousands, except per share amounts)
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Revenue $ 1,685,948 $ 1,185,473 $ 678,619 $ 652,973 $ 599,241
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Operating income (loss) (2) $ 344,783 $ 120,392 $ (264,714) $ 57,319 $ 59,859
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Income (loss) from
continuing operations (2) $ 103,912 $ 11,488 $ (183,452) $ 6,714 $ 16,765
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Income (loss) per share from
continuing operations -Basic (3) $ 1.17 $ 0.18 $ (5.32) $ 0.22 $ 0.56
-Diluted (3) $ 1.03 $ 0.18 $ (5.32) $ 0.22 $ 0.56
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Dividends per common share $ -- $ -- $ -- $ -- $ --
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Total assets $ 4,366,804 $ 4,468,895 $ 1,610,878 $ 1,491,294 $ 1,367,411
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Long-term debt $ 1,967,434 $ 1,930,168 $ 540,096 $ 55,838 $ 64,256
Weighted average common
stock outstanding (000's) (3) 88,537 62,322 34,508 30,000 30,000
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Weighted average common
stock outstanding and assumed
conversions (000's) (3) 111,645 62,322 34,508 30,000 30,000
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(1) Operating income before restructuring and other charges, plus depreciation
and amortization.
(2) Includes restructuring and other charges of $65.8 million in 1998 and $331.7
million in 1997.
(3) Restated to reflect a one-for-four reverse stock split effective December 1,
1998.
Private Securities Litigation Reform Act: Portions of this Annual Report contain
various forward-looking statements which reflect management's current views and
estimates of future economic circumstances, industry conditions and Company
performance. These statements include financial, operating and other
projections. Factors that could cause actual results to differ from these
projections include risks associated with acquisitions; the adoption of new
environmental laws and regulations and changes in how they are interpreted and
enforced; changes in demand for the Company's services; competition; and prices
for petroleum-based products.
Table of Contents Selected Financial Data 1 Shareholder Information 8
President's Letter 2 Annual Report on Form 10K
Service Matrix 3 Facility Locations IBC
Going the Distance 4-7
1
Letter to Shareholders
Going the distance. This is what Safety-Kleen is all about. Our Company's
culture is built upon the promise to always provide superior service. This
commitment is visible in our alliance with our customers, our employees, the
environment and our stakeholders. It is what pushes us each day to make that
extra effort and go the extra mile.
In our last annual report to shareholders, we stated that our foremost goal in
fiscal 1999 was to complete the integration of the former Laidlaw Environmental
Services and Safety-Kleen Corp. into the leading industrial services company in
North America. That goal has been achieved.
During the fiscal year, we sold a majority interest in our European
operations; reduced our long term debt from $2.28 billion in 1998 to $1.97
billion at year end; achieved our merger synergy targets; maintained operating
margins in excess of 20.5%; re-aligned our business operations into a more
effective centralized operating structure; and substantially completed the
process of making two corporate headquarters one.
But we did not stop there.
In addition to these tasks, we set out to reintroduce the new Safety-Kleen and
the expanded menu of services we offer to commercial and industrial markets. By
increasing the number of services to our existing customers and defining new
areas of growth in waste water services, coolant management services and
industrial lubricants management, we are now uniquely positioned as the leading
service provider to the industrial marketplace. Industrial Services contributed
$800.1 million, or 47%, to our record fiscal 1999 revenue of $1.69 billion. This
business component is Safety-Kleen's future growth vehicle for the rollout of
new services and is targeted to contribute an increasing growth rate during
fiscal 2000. The Company's successful introduction of Compliance, Vacuum and
Imaging Services in the Commercial and Institutional Services markets are
examples of how we have successfully utilized and leveraged the existing branch
and route-based infrastructure to introduce new services.
What is next?
The challenges of 1999 have helped us to focus more clearly on the opportunities
ahead. The integration of Safety-Kleen's assets, sales and service personnel and
management teams was an exacting process that allowed us to evaluate how to best
move forward in a consolidating industry and produce long-term value for our
shareholders. I believe that today's Safety-Kleen is uniquely positioned to
benefit from the changes taking place in the waste industry. We know that our
unparalleled collection, recycle, treatment and disposal capabilities allow us
to quickly and efficiently service all sizes and types of customers across North
America. Furthermore, we have identified a tremendous market opportunity with
both existing and new customers. We now have the people, the facilities, and the
resources in place to continue to build our leading market position in the year
2000 and beyond.
Safety-Kleen's business is a service business largely based on
personal, face-to-face contact with its customers. Our success is a result of
all of the Safety-Kleen employees who make the commitment to provide superior
service, day-in and day-out. In particular, I would like to recognize and thank
each of them for their invaluable contributions during a period of rapid change.
To our shareholders, our customers, and our suppliers, we appreciate
and thank you for your continuing support of Safety-Kleen Corp.
/s/Kenneth W. Winger
Kenneth W. Winger
President and Chief Executive Officer
2
Collection & Recovery Component Treatment &
Disposal Component
Industrial Services Commercial/Institutional
Services
Fiscal 1999 Revenue $ 800 million $ 541 million $ 313 million
47% of total revenue 32% of total revenue 19% of total revenue
Services Offered o Industrial Waste o Automotive Parts o Thermal Treatment
Service Cleaner Service - Eight commercial
- Small/large quantities - Solvent/aqueous based. incineration facilities.
of solid and liquid drum - Customer-owned - Only incineration
wastes. machines. facility permitted for
- Technical Field Service o Compliance dioxin destruction in
- Remedial Service o Dry Cleaner Service North America.
o Industrial Parts o Imaging Service - Eight hazardous/three
Cleaner Service o Paint Refinishing non-hazardous landfills.
- Solvent/aqueous based. Service o Specialty Services
- Customer-owned machines. o Used Oil Collection - PCB management
o Industrial Lubricant o Used Oil Re-refining - Wastewater processing
Management o Vacuum Truck Service - Harbor dredging,
o Coolant Management treatment and placement
o Water Management
Market Potential o Market is $4.3 o Market is $1.1 o Market is $2.0
billion and nearly 400,000 billion excluding used billion for hazardous
potential customers oil services. waste treatment and
- Safety-Kleen currently - Safety-Kleen currently disposal
has 20% revenue share and has 33% revenue share - Safety-Kleen currently
120,000 customers. and 250,000 customers. has 16% revenue share.
- Every manufacturing o Waste Oil o Safety-Kleen
establishment in the U.S. collection market is maintains 8 of 20
has a potential need for estimated at 800 million off-site commercial
the services offered by 7 gallons. incinerators in North
of the 12 Industrial - Safety-Kleen now America.
lines of business collects 240 million o Commercial
Safety-Kleen offers. gallons of used oil incineration market
annually. estimated at $485
- Re-refines million.
approximately 80 million - Safety-Kleen has 43%
gallons of base lube per market share.
year. o Safety-Kleen
operates 8 of the 23
hazardous waste
landfills in North
America.
Strategy o Further expand and o Continue to push o Continue to direct
promote single source into aqueous parts internal waste streams
service capabilities to cleaning market as to Safety-Kleen
the underserved, medium alternative to treatment and disposal
quantity waste generator, solvent-based units, and facilities and maintain
by bundling traditional focus on expansion of incineration utilization
services with new existing Imaging, Vacuum levels in excess of 90%.
offerings. as well as new
route-based services.
3
Going the Distance
"As a BIM for nearly five years, my responsibilities
and opportunities to pursue new business have grown
dramatically with the flood of new services
Safety-Kleen now offers. Whether it's an opportunity in
parts cleaners, compliance, absorbents, transformers or
waste water streams, my commitment to the customer is
-- We can do that."
Not only does a BIM focus on managing existing
industrial accounts, more and more they are identifying
and tailoring a specific service to satisfy a
customer's future needs. The industrial needs
assessment checklist has grown from less than 40
categories to nearly 60 service opportunities that
Safety-Kleen now readily tackles. The expansion of
waste codes and internal disposal facilities opens the
door for Safety-Kleen to pursue virtually all waste
management and site remediation opportunities.
Whether calling on small, medium, or large-size
industrial customers, the Safety-Kleen BIM uses the
eyes and ears of the Industrial Service Rep to help
evaluate additional Safety-Kleen services a customer
may require. A growing component of the industrial
sales focus is the promotion of several programs that
move Safety-Kleen closer to the customer's operations.
The INSITE Environmental Management program stations
one or more Safety-Kleen employees at a customer's
workplace to directly manage all aspects of the
client's waste management program. The Total
Environmental Activity Management program analyzes a
customer's current service requirements and recommends
necessary adjustments in their operations, compliance
practices, and waste minimization opportunities. In
addition, Safety-Kleen's newest on-site recycling
services for aqueous and industrial fluid streams are
now bundled with the traditional waste services which
saves the customer money, while increasing the number
of Safety-Kleen services utilized.
These new services and marketing strategies
demonstrate Safety-Kleen's commitment to address all of
their customers environmental compliance and waste
handling needs.
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Todd Pikor
Branch Industrial Manager
("BIM")
Approximately 4,000 branch-based sales
and service personnel assist Safety-Kleen
customers on a daily basis from more than
175 branch locations throughout North
America.
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Combined, more than 3.0 million drums of
industrial wastes are collected, treated,
recycled or disposed of by Safety-Kleen
personnel on an annual basis.
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Safety-Kleen annually collects more
than 200 million gallons of used
solvent from its customers and re-
cycles more than 85% back into re-
usable solvent.
4
As Safety-Kleen looks at new opportunities in the consolidating waste industry
as well as the internal development of additional services, the underlying
requirement is that they will be supported by the existing infrastructure of the
branch-based service.
For example, the Vacuum Service was introduced in 1996 primarily to
enhance service to automotive customers using a Safety-Kleen parts cleaner. This
successful service introduction has expanded rapidly into a growing business
that focuses primarily on an unserved market.
A recent rollout of the Vacuum Service to an expanded customer base now
allows the service representative to collect a broader variety of waste streams
such as coolants, hydraulic fluids, or waste waters in addition to waste oil and
sludges. Servicing both commercial and industrial customers, a Vac rep may see
customers as often as twice a month or on a semi-annual basis. Approximately 70%
of these customers are already using other Safety-Kleen services.
Similar services that leverage off of the existing branch
infrastructure have been introduced in recent years such as the Imaging Services
program that offers compliance services and silver and aluminum recovery for
photo finishing, medical x-rays, publishing and graphic arts businesses. More
recently, the introduction of ArmaKleen, the result of a joint venture between
Safety-Kleen and Church and Dwight, makers of Arm & Hammer products, offers a
new chemistry for aqueous parts cleaners and industrial cleaning chemicals.
Another area of expanded service is integrated compliance. Safety-Kleen now
markets compliance solutions, regulatory training, material safety data sheet
management, hotlines and other programs to customers through its extensive sales
and service network.
"Many of my customers in the automotive industry need our service on a scheduled
or sometimes even unscheduled basis. When a garage's underground separator is
full or clogged, there is very little that can be accomplished until a
Safety-Kleen Vac truck arrives. I am always prepared to be paged for an
emergency service."
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Jim Gellner
Vacuum Services Representative
As a result of its recent
acquisition of First Recovery,
Safety-Kleen will collect roughly
240 million gallons of used oil
annually. Nearly 130 million
gallons will be re-refined of which
80 million will then be sold as
base lube stock.
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Safety-Kleen operates 11 Hazardous and Non-
hazardou Landfills With Over 67 Million
Cubic Yards of Capacity, Allowing for an
Average Life of Approximately 60 Years.
Safety-Kleen services over 400,000
solvent and aqueous based parts
cleaners in its industrial and
commercial/institutional markets.
5
Going the Distance
"I personally believe that if you only do `just the basics' in
your job, then that's all you will ever be known for. I am
very proud of the fact that in my role as Project Manager,
Safety-Kleen's services are completely and seamlessly
integrated with Monsanto's progressive work environment. We
always try to do more here and the result speaks for itself --
We're busier than ever."
The unique role of an on-site environmental manager
encompasses a number of responsibilities. In addition to
managing the collection, packing and direct shipment of all
waste streams from the facility, Linda also assists with
on-site training courses, environmental seminars, facility
inspections and consulting on the development of a custom
waste billing system.
This is an example of a growing part of
Safety-Kleen's industrial business -the development of
services that help customers manage all phases of their waste
program. For many years, Safety-Kleen focused on the
smaller-quantity waste generator. While this type of customer
remains a large percentage of Safety-Kleen's business, the
Company has identified an increasing number of customers with
more sophisticated waste handling needs. Today Safety-Kleen
has the largest industrial sales/service force in the industry
coupled with the complete range of permits, skills and
facilities required to fully service the needs of these
larger-scale customers.
Whether it is a field chemist who travels on a
regional basis or remains on-site at a customer's facility,
Safety-Kleen frequently puts an environmental professional at
a customer's location to oversee the responsibility of
documenting and removing wastes on a scheduled basis. These
waste streams are then shipped directly to a disposal facility
or transferred to a Safety-Kleen Accumulation Center where the
material is consolidated and the appropriate processing,
treatment or disposal option is determined.
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Linda Vishino
INSITE Project Manager
Monsanto
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The average automotive service rep
completes 10-15 services daily. This is
just the beginning of the 4 million
service calls Safety-Kleen makes on an
annual basis.
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Safety-Kleen's combined fleet consists
of over 4,000 vehicles driven an average
of 100 miles per day on a typical service
route.
6
In addition to the 31 fully-permitted Accumulation/Service
Centers Safety-Kleen operates, there are 10 Recycle Centers
throughout the United States.
The Recycle Centers (RCs) in the Safety-Kleen
network primarily reclaim waste streams collected by the
Company's vast branch service network. While waste solvent
is the predominate recyclable material, some RCs work with
cleaning fluid, industrial degreasers, PCB-contaminated oil,
and inorganic wastewater. Waste streams that cannot be
cleaned and returned to their original state for reuse are
prepared for different applications such as fuel blending to
use as an alternative fuel in cement kilns. Remaining
sludges that offer no further value are disposed of through
the incineration process.
Like the other RCs, Safety-Kleen's Chicago Recycle Center
reclaims used solvents and waste streams from many different
types of businesses. However, this particular Recycle Center
is unique in that it is primarily a custom recycle and
tolling facility where material is usually delivered by
tanker or railcar instead of in drums. Receiving large,
direct ship quantities from multi-national pharmaceutical,
electronics, polymer, chemical, and agricultural companies,
the Chicago RC works closely with its customers and partners
to assure that their waste is handled efficiently and
responsibly. After recycling the fluids, the clean material
is returned to the customer or sold to other customers on
the open market.
"As facility manager, I am directly involved in the
technical, environmental, and safety aspects of our recycle
facility to ensure that we have provided `peace of mind' to
our customers. We always go the distance for our customers,
not as a special consideration, but because it is our duty
in the concept of customer service."
Alfred Aghapour
Facility Manager
Chicago Recycle Center
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Nearly 130,000 businesses participate in
Safety-Kleen's WE CARE program, demonstrating
their commitment to protect the environment and
employ the most environmentally desirable
waste-handling methods.
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To address customer needs in its industrial services
and commercial and institutional markets,
Safety-Kleen presently offers more than 80 types of
service that encompass a multitude of specialized
sub-services.
7
Company Directors James R. Bullock, President and Chief Executive Officer,
Laidlaw Inc., Leslie W. Haworth, Senior Vice President and Chief Financial
Officer, Laidlaw Inc., Robert W. Luba,(1) President, Luba Financial Inc., John
W. Rollins, Sr., Chairman and Chief Executive Officer, Rollins Truck Leasing
Corp., John W. Rollins, Jr.,(2) President, Rollins Truck Leasing Corp., David E.
Thomas, Jr.,(2) Senior Managing Director, Raymond James & Associates, Inc.,
Henry B. Tippie,(1) Chairman, President and Chief Executive Officer, Tippie
Services, Inc., James L. Wareham,(1) President, AK Steel Corporation, Kenneth W.
Winger, President and Chief Executive Officer, Safety-Kleen Corp., Grover C.
Wrenn, President and Chief Executive Officer, Accent Health, Inc.
(1) Member of the Audit Committee (2) Member of the Human Resources and
Compensation Committee
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Executive Officers James R. Bullock, Chairman of the Board; Kenneth W. Winger,
President and Chief Executive Officer; Michael J. Bragagnolo, Executive Vice
President, Chief Operating Officer; Paul R. Humphreys, Senior Vice President
Finance and Chief Financial Officer; Henry H. Taylor, Vice President, General
Counsel and Secretary.
Senior Management Roy D. Bullinger, Senior Vice President Business Management;
David M. Sprinkle, Senior Vice President Sales and Service; Michael A. Faucett,
Senior Vice President Disposal and Incineration; Barry K. Fogle, Senior Vice
President Material Processing. James J. Hattler, Vice President Business
Development; Robert Arquilla, Vice President Administration; Donald L. Schwieg,
Vice President Technology; Rick L. McEwen, Vice President Planning and
Logistics; Timothy P. Keegan, Vice President Oil/Remedial; William D. Ridings,
Vice President Controller.
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Shareholder Information
Market Information: Safety-Kleen common stock is traded on the New York Stock
Exchange under the ticker symbol SK. The approximate number of record holders of
Safety-Kleen stock as of Aug. 31, 1999 was 4,063. The following table shows the
range of common stock prices for the fiscal quarters indicated as reported by
The New York Stock Exchange.
Fiscal Year Ended
August 31, 1999 High Low
Corporate Office
First Quarter $ 14-1/2 $ 8-1/2 Safety-Kleen Corp.
Second Quarter $ 16 $ 12-1/16 1301 Gervais Street, Suite 300
Third Quarter $ 17-3/16 $ 11-11/16 Columbia, S.C. 29201
Fourth Quarter $ 19-1/4 $ 11-3/4 Phone: (803) 933-4200
Please visit us via our website at
Fiscal year ended High Low www.safety-kleen.com.
August 31, 1998
Financial Publications Copies of Safety-Kleen's 1999
First Quarter $ 23 $ 17-1/2 annual report and other financial documents are available
Second Quarter $ 20-1/2 $ 15-1/2 upon request to Investor Relations, Safety-Kleen Corp.,
Third Quarter $ 19 $ 14-1/2 (803) 933-4285.
Fourth Quarter $ 17-1/2 $ 11-3/4 You may also e-mail requests to
investorrelations@safety-kleen.com.
Annual Meeting Shareholders are welcome to
attend the Company's Annual Meeting to be held on
Tuesday, November 30, 1999, at 9:30 a.m., (EST), at
the Adam's Mark Hotel, 1200 Hampton Street, in
Columbia, South Carolina.
Stock prices are adjusted to reflect a 1-for-4
reverse split effective December 1, 1998. Shareholder Inquiries
EquiServe Trust Company P.O. Box 2500
Jersey City, NJ 07303-2500
Safety-Kleen has not paid dividends during the Phone: (800) 446-2617 or
reported periods and does not intend to pay e-mail: www.equiserve.com
dividends in the foreseeable future
8
Safety-Kleen Corp. 1999 Annual Report on Form 10-K
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INSIDE BACK COVER
Collection and Recovery Network
Picture - Map
o Branch
o Accumulation/
Service Center
Treatment, Recycle and Disposal Network
Picture - Map
o Recycling Center
o Oil Re-Refinery
o Secure Landfill
o Thermal Treatment
o Specialty Treatment
Safety-Kleen Corp. 1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
OUTSIDE BACK COVER
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