AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 2002.
REGISTRATION NO. 333-62322
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WASTE CONNECTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3283464
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
620 COOLIDGE DRIVE, SUITE 350
FOLSOM, CALIFORNIA 95630
(916) 608-8200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RONALD J. MITTELSTAEDT
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
WASTE CONNECTIONS, INC.
620 COOLIDGE DRIVE, SUITE 350
FOLSOM, CALIFORNIA 95630
(916) 608-8200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
CAROLYN S. REISER, ESQ.
SHARTSIS, FRIESE & GINSBURG LLP
ONE MARITIME PLAZA, 18TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 421-6500
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only Securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
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5 1/2% Convertible Subordinated Notes
Due April 15, 2006................... $150,000,000 100%(1) $150,000,000 $37,500(2)
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Common Stock, $0.01 par value.......... 3,944,775 shares(3) (4) (4) (4)
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(i) of the Securities Act of 1933.
(2) Previously paid.
(3) This number represents the number of shares of common stock that are
initially issuable upon the conversion of 5 1/2% Convertible Subordinated
Notes due April 15, 2006 registered hereby. For purposes of estimating the
number of shares of common stock to be included in the Registration
Statement upon the conversion of the notes, we calculated the number of
shares issuable upon conversion of the notes based on a conversion rate of
approximately 26.2985 shares per $1,000 principal amount of the notes. In
addition to the shares set forth in the table, pursuant to Rule 416 under
the Securities Act of 1933, as amended, the amount to be registered includes
an indeterminate number of shares of common stock issuable upon conversion
of the notes, as this amount may be adjusted as a result of stock splits,
stock dividends and antidilution provisions.
(4) No additional consideration will be received for the common stock, and,
therefore, no registration fee is required pursuant to Rule 457(i).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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--------------------------------------------------------------------------------
(WASTE CONNECTIONS, INC. LOGO)
--------------------------------------------------------------------------------
$150,000,000
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2006 AND 3,944,775 SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE NOTES
--------------------------------------------------------------------------------
Selling holders will use this prospectus to sell the notes and the shares of
common stock into which the notes are convertible at any time at market prices
prevailing at the time of the sale or at privately negotiated prices. The
selling holders may sell the notes or the common stock directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions.
The holders of the notes may convert the notes into shares of our common stock
at any time at a conversion rate of approximately 26.2985 shares per $1,000
principal amount of notes. The conversion price is $38.03 per share. Interest on
the notes is payable on April 15 and October 15 of each year, commencing on
October 15, 2001. At any time on or after April 15, 2004, we may redeem the
notes, in whole or in part, at the redemption prices as set forth in this
prospectus.
In the event of a change in control, as defined in this prospectus, each holder
of notes may require us to repurchase the notes for cash at 100% of the
principal amount of the notes plus accrued interest.
The notes are unsecured obligations that are subordinated in right of payment to
all of our existing and future senior indebtedness. There are no sinking fund
provisions. Our long-term credit facility allows us to borrow up to $435
million; however, bank covenant restrictions existing as of December 31, 2001,
limited our maximum borrowings under the credit facility to $373 million.
Borrowings under our credit facility are senior to the notes.
We do not intend to list the notes for trading on any national securities
exchange or The Nasdaq National Market. Our common stock is listed on The Nasdaq
National Market under the symbol "WCNX." On March 15, 2002, the closing sale
price of our common stock, as reported on The Nasdaq National Market, was
$31.80.
INVESTING IN THE NOTES AND OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 8.
THE SECURITIES OFFERED OR SOLD UNDER THIS PROSPECTUS HAVE NOT BEEN APPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is March 18, 2002.
[INSIDE FRONT COVER]
This prospectus contains registered service marks, trademarks and trade names of
Waste Connections, including the Waste Connections, Inc. name and logo.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" throughout this prospectus. These
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," or "anticipates" or the negative
thereof or comparable terminology, or by discussions of strategy. Waste
Connections' business and operations are subject to a variety of risks and
uncertainties and, consequently, actual results may materially differ from those
projected by any forward-looking statements. Factors that could cause actual
results to differ from those projected include, but are not limited to, the
following:
- competition or unfavorable economic or industry conditions could lead to
a decrease in demand for our services and to a decline in prices we
realize for our services;
- we may be required to pay increased prices for acquisitions, and we may
experience difficulty in integrating and deriving synergies from
acquisitions;
- we cannot be certain that we will always have access to the additional
capital that we may require for our growth strategy or that our cost of
capital will not increase;
- governmental regulations may require increased capital expenditures or
otherwise affect our business;
- companies that we acquire could have undiscovered liabilities;
- we are highly dependent on the services of senior management;
- if our financial condition deteriorates, we may be unable to repurchase
the notes if a change in control occurs; and
- there is no public market for the notes and their transferability is
significantly restricted.
These risks and uncertainties, as well as others, are discussed in greater
detail in Waste Connections' filings with the SEC, including our most recent
annual report on Form 10-K and quarterly reports on Form 10-Q. You should read
carefully the section of this prospectus under the heading "Risk Factors"
beginning on page 8. We make no commitment to revise or update any
forward-looking statements in this prospectus to reflect events or circumstances
after the date of this prospectus.
3
SUMMARY
This summary highlights some information from this prospectus. This
document may not contain all of the information that is important to you. To
understand this offering fully, you should read this prospectus carefully,
including the risk factors and the financial statements incorporated by
reference herein. You should also read and consider the information in the
documents we have referred you to in "Where You Can Find More Information."
Unless otherwise specified, all references to "Waste Connections" mean Waste
Connections, Inc. and our subsidiaries, and all references to "solid waste" mean
non-hazardous solid waste.
OUR BUSINESS
Waste Connections is a regional, integrated solid waste services company
that provides solid waste collection, transfer, disposal and recycling services
primarily in secondary markets of the western U.S. We currently own and operate
74 collection operations, 26 transfer stations, and 18 recycling facilities. We
own and operate 17 Subtitle D landfills and operate another landfill in which we
own a majority interest. We also operate, but do not own, an additional nine
transfer stations and nine landfills. As of December 31, 2001, we served more
than 800,000 commercial, industrial and residential customers in 18 states:
California, Colorado, Iowa, Kansas, Kentucky, Minnesota, Mississippi, Montana,
Nebraska, New Mexico, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah,
Washington and Wyoming. Over 50% of our revenues are generated in exclusive
markets, the majority of which are from exclusive arrangements, including
franchise agreements, long-term municipal contracts and governmental
certificates.
We have targeted secondary markets of the western U.S. because we believe
that:
- there is a greater opportunity to obtain a strong market share in those
markets through exclusive arrangements or competitive asset position;
- these markets have strong projected economic and population growth rates;
- a large number of independent solid waste services companies suitable for
acquisition by us are located in these markets; and
- there is less competition in these markets from large, well-capitalized
solid waste services companies.
In addition, our senior management team has extensive experience in
acquiring, integrating and operating solid waste services business in the
western U.S.
We have developed a two-pronged strategy tailored to the competitive and
regulatory factors that affect our markets. In the markets where waste
collection services are performed under exclusive arrangements, we generally
focus on controlling the solid waste stream by providing collection services
under these exclusive arrangements. In markets where we believe that competitive
and regulatory factors make owning landfills advantageous, we generally focus on
providing integrated services, from collection through disposal of solid waste
in landfills that we own or operate.
-------------------------
Waste Connections' executive offices are located at 620 Coolidge Drive,
Suite 350, Folsom, California 95630. Our telephone number is (916) 608-8200. Our
website is www.wasteconnections.com. The information provided on our website is
not incorporated into this prospectus.
4
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following consolidated statement of operations and other data for the
years ended December 31, 1999, 2000 and 2001, are derived from our Annual Report
on Form 10-K filed with the SEC.
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 2000 2001
----------- ----------- -----------
STATEMENT OF OPERATIONS DATA(1):
Revenues.................................................. $ 184,225 $ 304,355 $ 377,533
Operating Expenses:
Cost of operations...................................... 112,686 174,510 210,590
Selling, general and administrative..................... 15,754 25,416 32,007
Depreciation and amortization........................... 14,769 27,195 36,138
Loss on disposal of operations.......................... -- 833 4,879
Stock compensation...................................... 265 163 --
Acquisition-related(2).................................. 9,003 150 --
----------- ----------- -----------
Income from operations.................................... 31,748 76,088 93,919
Interest expense.......................................... (11,531) (28,705) (30,045)
Other income (expense), net(3)............................ (66) 116 (5,891)
Minority interests........................................ -- -- (7,338)
----------- ----------- -----------
Income before income tax provision........................ 20,151 47,499 50,645
Income tax provision...................................... (10,924) (19,310) (19,932)
Extraordinary item(4)..................................... -- -- (185)
----------- ----------- -----------
Net income................................................ $ 9,227 $ 28,189 $ 30,528
=========== =========== ===========
Diluted net income per share.............................. $ 0.46 $ 1.17 $ 1.10
=========== =========== ===========
Shares used in calculating diluted net income per share... 19,929,539 23,994,994 27,675,639
=========== =========== ===========
OTHER DATA:
Net cash provided by operating activities................. $ 21,973 $ 53,776 $ 87,198
Net cash used in investing activities..................... (256,277) (192,974) (90,840)
Net cash provided by financing activities................. 233,346 139,266 8,460
EBITDA(5)................................................. 46,517 103,283 130,057
EBITDA margin(6).......................................... 25.3% 33.9% 34.4%
DECEMBER 31,
2001
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BALANCE SHEET DATA:
Cash and equivalents...................................... $ 7,279
Working capital (deficit)................................. (4,665)
Property and equipment, net............................... 465,806
Total assets.............................................. 979,353
Long-term debt, net of current portion.................... 416,171
Total stockholders' equity................................ 379,965
5
The ratio of earnings to combined fixed charges and preferred stock
dividends for Waste Connections is set forth below for the periods indicated.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001
----------- ----------- ----------- ----------- -----------
Ratio of earnings to combined fixed
charges and preferred stock
dividends(7)........................ N/A(8) 2.2 2.7 2.6 2.6
Pro Forma ratio of earnings to
combined fixed charges and preferred
stock dividends(7)(9)............... 2.7
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(1) Waste Connections' historical financial statements have been retroactively
restated to reflect the acquisitions consummated through December 31, 2001
that were accounted for using the pooling-of-interests method.
(2) Acquisition-related expenses consist of direct merger related expenses for
acquisitions accounted for using the pooling-of-interests method.
(3) Other income (expense), net for the year ended December 31, 2001 includes
$6.3 million of expenses resulting from cash payments made to terminate an
interest rate swap prior to its due date.
(4) Extraordinary item represents the expense from early extinguishment of debt,
net of income tax effects.
(5) EBITDA represents income from operations plus depreciation and amortization.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations as determined by generally accepted
accounting principles. Further, EBITDA does not necessarily indicate whether
cash flow will be sufficient for items such as working capital, capital
expenditures, or to react to changes in our industry or the economy in
general. We believe that EBITDA is a frequently used measure that provides
additional information for determining our ability to meet debt service
requirements and that it is one of the indicators upon which we, our lenders
and certain investors assess our financial performance and our capacity to
service debt. We therefore interpret the trends that EBITDA depicts as one
measure of our liquidity. Because EBITDA is not calculated by all companies
and analysts in the same fashion, the EBITDA measures presented by us may
not necessarily be comparable to other similarly titled measures of other
companies. Therefore, in evaluating EBITDA data, investors should consider,
among other factors:
- the non-GAAP nature of EBITDA data;
- actual cash flows;
- the actual availability of funds for debt service, capital
expenditures and working capital; and
- the comparability of our EBITDA data to similarly titled measures
reported by other companies.
Our measurement of EBITDA under our credit facility, for purposes of
determining debt covenant compliance, is further adjusted for the
following:
- the effect of purchase accounting acquisitions closed during the
preceding 12 months;
- amortization of deferred stock compensation charges;
6
- EBITDA from non-100% owned consolidated subsidiaries; and
- other one-time charges that are specifically stated in the credit
facility agreement.
As of December 31, 2001, we are in compliance with the EBITDA requirements
of our credit facility.
(6) EBITDA margin represents EBITDA expressed as a percentage of revenues.
(7) For purposes of calculating the ratios, fixed charges consist of interest on
debt, amortization of discount on debt, and the interest portion of rental
expense on operating leases.
The ratio of earnings to combined fixed charges and preferred stock
dividends is calculated as follows:
(income before extraordinary charges and income taxes) + (fixed charges and
preferred stock dividends) -- (capitalized interest)
(fixed charges and preferred stock dividends)
(8) For the year ended December 31, 1997, our earnings were inadequate to cover
combined fixed charges and preferred stock dividends. The coverage
deficiency was $3,367,000.
(9) Gives effect to the note offering as if it had occurred on January 1, 2001.
7
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
Any or all of the following risks could materially and adversely affect our
business, financial condition and results of operations. As a result, the
trading price of our common stock could decline, and you may lose all or part of
your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of the risks described
below and elsewhere in this prospectus and other factors that we cannot now
foresee.
RISKS RELATED TO OUR BUSINESS
DIFFICULTIES IN MAKING ACQUISITIONS, ACQUIRING EXCLUSIVE CONTRACTS AND
GENERATING INTERNAL GROWTH MAY CAUSE OUR GROWTH TO BE SLOWER THAN EXPECTED.
Our growth strategy includes expanding through acquisitions, acquiring
additional exclusive arrangements and generating internal growth. Since
inception, most of our growth has been through acquisitions. Internally
generated growth for the industry and Waste Connections has been less than 8%
per year. Although we have identified numerous acquisition candidates that we
believe are suitable, we may not be able to acquire them at prices or on terms
and conditions favorable to us. Our ability to grow also depends on several
other factors, including
- the availability of capital to support our growth,
- our ability to compete with existing and emerging companies,
- our ability to maintain profit margins in the face of competitive
pressures,
- our ability to continue to recruit, train and retain qualified employees
and
- continued strong demand for our services.
Difficulties in any of these areas could hinder our growth.
OUR ACQUISITIONS MAY NOT BE SUCCESSFUL, RESULTING IN CHANGES IN STRATEGY,
OPERATING LOSSES OR A LOSS ON SALE OF THE BUSINESS ACQUIRED.
Even if we are able to make acquisitions on advantageous terms and are able
successfully to integrate them into our operations and organization, some may
not successfully fulfill our strategy in a given market due to factors that we
cannot control, such as market position or customer base. As a result, operating
margins could be less than we originally anticipated when we made the
acquisition. We then may change our strategy with respect to the market or
businesses acquired in the market and decide to sell the operation at a loss.
RAPID GROWTH MAY STRAIN OUR MANAGEMENT, OPERATIONAL, FINANCIAL AND OTHER
RESOURCES.
From inception through December 31, 2001,we acquired 134 solid waste
services related businesses. To maintain and manage our growth, we will need to
expand our management information systems capabilities and our operational and
financial systems and controls. We will also need to attract, train, motivate,
retain and manage additional senior managers, technical professionals and other
employees. Failure to do any of these things would restrict our ability to
maintain and improve our profitability while continuing to grow.
8
OUR GROWTH AND FUTURE FINANCIAL PERFORMANCE DEPEND SIGNIFICANTLY ON OUR ABILITY
TO INTEGRATE ACQUIRED BUSINESSES INTO OUR ORGANIZATION AND OPERATIONS.
Part of our strategy is to achieve economies of scale and operating
efficiencies by growing through acquisitions. We may not achieve these goals
unless we effectively combine the operations of acquired businesses with our
existing operations. Our senior management team may not be able to integrate our
completed and future acquisitions. Any difficulties we encounter in the
integration process could interfere with our operations and reduce our operating
margins.
WE COMPETE FOR ACQUISITION CANDIDATES WITH OTHER PURCHASERS, SOME OF WHICH HAVE
GREATER FINANCIAL RESOURCES THAN WASTE CONNECTIONS. THESE COMPETITORS MAY BE
ABLE TO OFFER MORE FAVORABLE ACQUISITION TERMS, THUS LIMITING OUR ABILITY TO
GROW THROUGH ACQUISITION.
Other companies have adopted or will probably adopt our strategy of
acquiring and consolidating regional and local businesses. We expect that
increased consolidation in the solid waste services industry will increase
competitive pressures. Increased competition for acquisition candidates may make
fewer acquisition opportunities available to us, and may cause us to make
acquisitions on less attractive terms, such as higher purchase prices.
Acquisition costs may increase to levels beyond our financial capability or to
levels that would adversely affect our operating results and financial
condition. Our ongoing ability to make acquisitions will depend in part on the
relative attractiveness of our common stock as consideration for potential
acquisition candidates. This attractiveness may depend largely on the relative
market price and capital appreciation prospects of our common stock compared to
the common stock of our competitors. If the market price of our common stock
were to decline materially over a prolonged period of time, we may find it
difficult to make acquisitions on attractive terms.
TIMING OF ACQUISITIONS MAY CAUSE FLUCTUATIONS IN OUR QUARTERLY RESULTS, WHICH
MAY CAUSE OUR STOCK PRICE TO DECLINE.
We are not always able to control the timing of our acquisitions. Obtaining
third party consents and regulatory approvals, completing due diligence on the
acquired businesses, and finalizing transaction terms and documents are not
entirely within our control and may take longer than we anticipate, causing
certain transactions to be delayed. Our inability to complete acquisitions in
the time frames that we expect may cause our operating results to be less
favorable than expected, which could cause our stock price to decline.
WE MAY BE UNABLE TO COMPETE EFFECTIVELY WITH GOVERNMENTAL SERVICE PROVIDERS AND
LARGER AND BETTER CAPITALIZED COMPANIES, WHICH MAY RESULT IN REDUCED REVENUES
AND LOWER PROFITS.
Our industry is highly competitive, fragmented and requires substantial
labor and capital resources. Some of the markets in which we compete or will
likely compete are served by one or more large, national solid waste companies,
as well as by numerous regional and local solid waste companies of varying sizes
and resources, some of which have accumulated substantial goodwill in their
markets. We also compete with counties, municipalities and solid waste districts
that maintain their own waste collection and disposal operations. These
operators may have financial advantages over Waste Connections because of their
access to user fees and similar charges, tax revenues and tax-exempt financing.
Some of our competitors may also be better capitalized, have greater name
recognition or be able to provide services at a lower cost than Waste
Connections.
9
WE MAY LOSE CONTRACTS THROUGH COMPETITIVE BIDDING, EARLY TERMINATION OR
GOVERNMENTAL ACTION, WHICH WOULD CAUSE OUR REVENUES TO DECLINE.
We derive a substantial portion of our revenue from services provided under
exclusive municipal contracts, franchise agreements and governmental
certificates. Many of these will be subject to competitive bidding at some time
in the future. For example, we have 120 municipal contracts, representing annual
revenues of approximately $20.1 million, that could possibly expire in the next
12 months. We also intend to bid on additional municipal contracts and franchise
agreements. We may not be the successful bidder. In addition, some of our
customers may terminate their contracts with us before the end of the contract
term. Municipalities in Washington may by law annex unincorporated territory,
which would likely remove such territory from the area covered by governmental
certificates issued to us by the Washington Utilities and Transportation
Commission ("WUTC"). Annexation would reduce the areas covered by our
governmental certificates and subject more of our Washington operations to
competitive bidding in the future. Moreover, legislative action could amend or
repeal the laws governing WUTC regulation, which could harm our competitive
position by subjecting more areas to competitive bidding. If we were not able to
replace revenues from contracts lost through competitive bidding or early
termination or from the renegotiation of existing contracts with other revenues
within a reasonable time period, our revenues could decline.
WE MAY NOT HAVE ENOUGH CAPITAL OR BE ABLE TO RAISE ENOUGH ADDITIONAL CAPITAL ON
SATISFACTORY TERMS TO MEET OUR CAPITAL REQUIREMENTS, WHICH WOULD LIMIT OUR
GROWTH THROUGH ACQUISITIONS.
Continued growth will require additional capital. We expect to finance
future acquisitions through cash from operations borrowings under our credit
facility, issuing additional equity or debt securities and/or seller financing.
If acquisition candidates are unwilling to accept, or we are unwilling to issue,
shares of our common stock as part of the consideration for acquisitions or if
our common stock does not maintain a sufficient market value, we may have to use
more of our cash or borrowings under our credit facility to fund acquisitions.
Using cash for acquisitions limits our financial flexibility and makes us more
likely to seek additional capital through future debt or equity financings. If
available cash from operations and borrowings under the credit facility are not
sufficient to fund acquisitions, we will need additional equity and/or debt
financing. If we seek more debt, our interest expense would increase and we may
have to agree to financial covenants that limit our operational and financial
flexibility. We have pledged all of our assets as collateral for our credit
facility, which could restrict our ability to obtain additional debt on
attractive terms .If we seek more equity, we may dilute the ownership interests
of our then-existing stockholders. If we are unable to obtain additional equity
and/or debt financing on attractive terms, our rate of growth through
acquisitions may decline. We will also need to make substantial capital
expenditures to develop or acquire new landfills, transfer stations and other
facilities and to maintain such properties.
WE DEPEND SIGNIFICANTLY ON THE SERVICES OF THE MEMBERS OF OUR MANAGEMENT TEAM,
AND THE DEPARTURE OF ANY OF THOSE PERSONS COULD CAUSE OUR OPERATING RESULTS TO
SUFFER.
Our success depends significantly on the continued individual and
collective contributions of our senior and district management team. Key members
of our management have entered into employment agreements, but we may not be
able to enforce these agreements. The loss of the services of any member of our
senior or district management or the inability to hire and retain experienced
management personnel could harm our operating results.
10
OUR DECENTRALIZED DECISION MAKING STRUCTURE COULD ALLOW LOCAL MANAGERS TO MAKE
DECISIONS THAT ADVERSELY AFFECT OUR OPERATING RESULTS.
We manage our operations on a decentralized basis. Local managers have the
authority to make many decisions concerning their operations without obtaining
prior approval from executive officers, subject to compliance with general
company-wide policies. Poor decisions by local managers could result in loss of
customers or increases in costs, in each case reducing operating results.
THE GEOGRAPHIC CONCENTRATION OF OUR BUSINESS MAKES OUR RESULTS VULNERABLE TO
FACTORS AFFECTING THE WESTERN U.S., AND SEASONAL FLUCTUATIONS MAY CAUSE OUR
BUSINESS AND FINANCIAL RESULTS TO VARY AMONG QUARTERS, WHICH COULD NEGATIVELY
AFFECT OUR STOCK PRICE.
Our business and financial results would be harmed by downturns in the
general economy of the western U.S. and other factors affecting the region, such
as state regulations affecting the solid waste services industry and severe
weather conditions. Based on historic trends experienced by the businesses we
have acquired, we expect our operating results to vary seasonally, with revenues
typically lowest in the first quarter, higher in the second and third quarters,
and lower in the fourth quarter than in the second and third quarters. This
seasonality reflects the lower volume of solid waste generated during the late
fall, winter and early spring months because of decreased construction and
demolition activities during the winter months in the western U.S. In addition,
some of our operating costs should be generally higher in the winter months.
Adverse winter weather conditions slow waste collection activities, resulting in
higher labor and operational costs. Greater precipitation in the winter
increases the weight of collected waste, resulting in higher disposal costs,
which are calculated on a per ton basis. Because of these factors, we expect
operating income to be generally lower in the winter months, and our stock price
may be negatively affected by these variations.
UNUSUALLY ADVERSE WEATHER CONDITIONS MAY INTERFERE WITH OUR OPERATIONS, HARMING
OUR OPERATING RESULTS.
Our collection and landfill operations could be adversely affected, beyond
the normal seasonal variations described above, by unusually long periods of
inclement weather, which could interfere with collection and landfill
operations, reduce the volume of waste generated by our customers and delay the
development of landfill capacity. Periods of particularly harsh weather may
force us to temporarily suspend certain of our operations.
INCREASES IN THE COSTS OF LABOR, FUEL OR ENERGY COULD REDUCE OUR OPERATING
MARGINS.
Our continued success will depend on our ability to attract and retain
qualified personnel. We compete with other businesses in our markets for
qualified employees. The labor market is currently tight in many of our markets.
A shortage of qualified employees would require us to enhance our wage and
benefits packages to compete more effectively for employees or to hire more
expensive temporary employees. Labor is our second largest cost, and even
relatively small increases in labor costs per employee could materially affect
our cost structure. If we fail to attract and retain qualified employees, to
control our labor costs, or to recover any increased labor costs through
increased prices we charge for our services or otherwise offset such increases
with cost savings in other areas, our operating margins could suffer.
Although fuel and energy costs account for a relatively small portion of
our total operating expenses, the price of fuel and energy is volatile, and
shortages sometimes occur. Although the recent energy crisis affecting
California and other western states in which we operate did not materially
affect our operations or profitability in those regions, further significant
increases in the cost of fuel or energy, or shortages of fuel or energy, could
interrupt or curtail our operations and lower our operating margins.
11
EACH BUSINESS THAT WE ACQUIRE OR HAVE ACQUIRED MAY HAVE LIABILITIES THAT WE FAIL
OR ARE UNABLE TO DISCOVER, INCLUDING LIABILITIES THAT ARISE FROM PRIOR OWNERS'
FAILURE TO COMPLY WITH ENVIRONMENTAL LAWS, WHICH MAY HARM OUR FINANCIAL
CONDITION.
As a successor owner, we may be legally responsible for these liabilities.
Even if we obtain legally enforceable representations, warranties and
indemnities from the sellers of such businesses, they may not cover the
liabilities fully. Some environmental liabilities, even if we do not expressly
assume them, may be imposed on Waste Connections under various legal theories.
Our insurance program does not cover liabilities associated with any
environmental cleanup or remediation of our own sites. A successful uninsured
claim against Waste Connections could harm our financial condition.
OUR GROWTH MAY BE LIMITED BY THE INABILITY TO OBTAIN NEW LANDFILLS AND EXPAND
EXISTING ONES.
We currently own and operate a number of landfills. Based on current waste
flows, the estimated remaining lives of our landfills range from approximately
10 to 313 years, with an average remaining life of approximately 82 years. Our
ability to meet our growth objectives may depend in part on our ability to
acquire, lease and expand landfills and develop new landfill sites. We may not
be able to obtain new landfill sites or expand the permitted capacity of our
landfills when necessary. Obtaining new landfill sites is important to our
expansion into new non-exclusive markets; if we do not believe that we can
obtain a landfill site in a non-exclusive market, we may choose not to enter
into that market. Expanding existing landfill sites is important in those
markets where the remaining life of our landfills is relatively short. We may
choose to forego acquisitions and internal growth in these markets because
increased volumes would further shorten the life of these landfills. Either of
these circumstances could result in slower growth.
IN SOME AREAS IN WHICH WE OPERATE, SUITABLE LAND FOR NEW SITES OR EXPANSION OF
EXISTING LANDFILL SITES MAY BE UNAVAILABLE WHICH COULD INCREASE OUR DISPOSAL
COSTS AND REDUCE OUR OPERATING MARGINS.
Operating permits for landfills in states where we operate must generally
be renewed at least every five years. It has become increasingly difficult and
expensive to obtain required permits and approvals to build, operate and expand
solid waste management facilities, including landfills and transfer stations.
The process often takes several years, requires numerous hearings and compliance
with zoning, environmental and other requirements and is resisted by citizen,
public interest or other groups. We may not be able to obtain or maintain the
permits we require to expand, and such permits may contain burdensome terms and
conditions. Even when granted, final permits to expand are often not approved
until the remaining permitted disposal capacity of a landfill is very low. Local
laws and ordinances also may affect our ability to obtain permits to expand
landfills. If we were to exhaust our permitted capacity at a landfill, our
ability to expand internally would be limited, and we could be required to cap
and close that landfill and forced to dispose of collected waste at more distant
landfills or at landfills operated by our competitors. The resulting increased
costs would reduce our operating margins.
OUR ACCRUALS FOR OUR LANDFILL CLOSURE AND POST-CLOSURE COSTS MAY BE INADEQUATE,
AND OUR EARNINGS WOULD BE LOWERED IF WE ARE REQUIRED TO PAY ADDITIONAL AMOUNTS.
We may be required to pay closure and post-closure costs of landfills and
any disposal facilities that we own or operate. We accrue for future closure and
post-closure costs of our owned landfills, generally for a term of 30 years
after final closure of a landfill, based on engineering estimates of future
requirements associated with the final landfill design and closure and
post-closure process. Our obligations to pay closure or post-closure costs may
exceed the amount we accrued and reserved and other amounts available from funds
or reserves
12
established to pay such costs. Paying additional amounts would lower our
earnings and could cause our stock price to decline.
WE MAY INCUR ADDITIONAL CHARGES RELATED TO CAPITALIZED EXPENDITURES, WHICH WOULD
LOWER OUR EARNINGS.
In accordance with accounting principles generally accepted in the United
States, we capitalize some expenditures and advances relating to acquisitions,
pending acquisitions and landfill development projects. We expense indirect
acquisition costs such as executive salaries, general corporate overhead, public
affairs and other corporate services as we incur those costs. We charge against
earnings any unamortized capitalized expenditures and advances (net of any
amount that we estimate we will recover, through sale or otherwise)that relate
to any operation that is permanently shut down, any pending acquisition that is
not consummated and any landfill development project that we do not expect to
complete. Therefore, Waste Connections may incur charges against earnings in
future periods, which could lower our stock price.
RECENT ACCOUNTING PRONOUNCEMENTS MAY REQUIRE A WRITE-DOWN OF OUR GOODWILL, WHICH
COULD MATERIALLY IMPAIR OUR NET WORTH.
In July 2001, the Financial Accounting Standards Board issued Statement No.
142, Goodwill and Other Intangible Assets. ("FAS 142"). FAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition and supercedes APB 17, Intangible Assets. The most significant
changes made by FAS 142 are: (1) goodwill and indefinite-lived intangible assets
will no longer be amortized; (2) goodwill will be tested for impairment at least
annually at the reporting unit level; and (3) intangible assets deemed to have
an indefinite life will be tested for impairment at least annually.
As a result of our acquisition strategy, we have a material amount of
goodwill recorded on our financial statements. Under FAS 142, effective January
1, 2002, we no longer amortize our existing goodwill. In addition, we will test
goodwill for impairment using the two-step process prescribed in Statement 142.
The first step is a screen for potential impairment, while the second step
measures the amount of the impairment, if any. Prior to June 30, 2002, we expect
to perform the first of the required impairment tests of goodwill and indefinite
lived intangible assets based on the carrying values as of January 1, 2002. If,
as a result of the implementation of FAS 142, we are required to write-down any
of our goodwill, our net worth will be reduced. Our credit agreement contains a
covenant requiring us to maintain a minimum funded debt to capitalization ratio,
and net worth is one of the components of capitalization. A reduction in net
worth, therefore, if substantial, could limit the amount that we can borrow
under our credit agreement and any failure to comply with the agreement could
result in an event of default under the credit agreement. We will not be able to
determine if a reduction in our goodwill will be required until completion of
the impairment tests upon adoption of FAS 142.
IF WE FAIL TO COMPLY WITH COVENANTS AND CONDITIONS OF OUR CREDIT FACILITY, WE
MAY BE UNABLE TO MAKE ACQUISITIONS AND MAY BE REQUIRED TO REPAY OUR DEBT EARLY,
WHICH COULD HARM OUR FINANCIAL RESULTS.
Our credit facility requires us to obtain the consent of the lending banks
before acquiring any other business for more than $25 million in cash and
assumed debt. If we are not able to obtain our banks' consent to acquisitions of
this size, we may not be able to complete them, which could inhibit our growth.
Our credit facility also contains financial covenants based on our current and
projected financial condition after completing an acquisition. If we cannot
satisfy these financial covenants on a pro forma basis after completing an
acquisition, we would not be able to complete the acquisition without a waiver
from our lending banks. Whether or not a waiver is needed, if the results of our
future operations differ materially from what we expect, we may no longer be
able to comply with the covenants in the credit facility. Our failure to
13
comply with these covenants may result in a default under the credit facility,
which would allow our lending banks to accelerate the date for repayment of debt
incurred under the credit facility and could harm our business and financial
results.
PROVISIONS IN OUR CHARTER AND BYLAWS MAY DETER CHANGES IN CONTROL THAT COULD
BENEFIT OUR STOCKHOLDERS.
Provisions in our Certificate of Incorporation and By-Laws, and in the
Delaware General Corporation Law, may deter tender offers and hostile takeovers
and delay or prevent changes in control or management of Waste Connections,
including transactions in which stockholders might be paid more than current
market prices for their shares. These provisions may also limit our
stockholders' ability to approve transactions that they believe are in their
best interests.
WE DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR COMMON STOCK.
We have never paid cash dividends on our common stock. We do not currently
anticipate paying any cash dividends on the common stock. We intend to retain
all earnings to fund the operation and expansion of our business. In addition,
our existing credit facility restricts the payment of cash dividends.
RISKS RELATED TO OUR INDUSTRY
EXTENSIVE AND EVOLVING ENVIRONMENTAL LAWS AND REGULATIONS MAY RESTRICT OUR
OPERATIONS AND GROWTH AND INCREASE OUR COSTS.
Environmental laws and regulations have been enforced more and more
stringently in recent years because of greater public interest in protecting the
environment. These laws and regulations impose substantial costs on us and
affect our business in many ways, including as described below. In addition,
federal, state and local governments may change the rights they grant to and the
restrictions they impose on solid waste services companies, and those changes
could restrict our operations and growth.
WE MAY BE UNABLE TO OBTAIN AND MAINTAIN LICENSES OR PERMITS AND ZONING,
ENVIRONMENTAL AND/OR OTHER LAND USE APPROVALS THAT WE NEED TO OWN AND OPERATE
OUR LANDFILLS.
These licenses or permits and approvals are difficult and time-consuming to
obtain and renew, and elected officials and citizens' groups frequently oppose
them. Failure to obtain and maintain the permits and approvals we need to own or
operate landfills (including increasing their capacity) could increase our
disposal costs and reduce our operating margins.
EXTENSIVE REGULATIONS THAT GOVERN THE DESIGN, OPERATION AND CLOSURE OF LANDFILLS
MAY RESTRICT OUR LANDFILL OPERATIONS OR INCREASE OUR COSTS OF OPERATING
LANDFILLS.
These regulations include the regulations that establish minimum federal
requirements adopted by the U.S. Environmental Protection Agency in October 1991
under Subtitle D of the Resource Conservation and Recovery Act of 1976. If we
fail to comply with these regulations, we could be required to undertake
investigatory or remedial activities, curtail operations or close a landfill
temporarily or permanently. Future changes to these regulations may require us
to modify, supplement or replace equipment or facilities at substantial costs.
If regulatory agencies fail to enforce these regulations vigorously or
consistently, our competitors whose facilities do not comply with the Subtitle D
regulations or their state counterparts may obtain an advantage over us. Our
financial obligations arising from any failure to comply with these regulations
could harm our business and earnings.
14
WE MAY BE SUBJECT IN THE NORMAL COURSE OF BUSINESS TO JUDICIAL AND
ADMINISTRATIVE PROCEEDINGS INVOLVING FEDERAL, STATE OR LOCAL AGENCIES OR
CITIZENS' GROUPS, WHICH COULD INTERRUPT OUR OPERATIONS, REQUIRE EXPENSIVE
REMEDIATION, AND CREATE NEGATIVE PUBLICITY.
Governmental agencies may impose fines or penalties on us. They may also
attempt to revoke or deny renewal of our operating permits, franchises or
licenses for violations or alleged violations of environmental laws or
regulations, or to require us to remediate potential environmental problems
relating to waste that we or our predecessors collected, transported, disposed
of or stored. Individuals or community groups might also bring actions against
us in connection with our operations. Any adverse outcome in these proceedings
could harm our operations and financial results and create adverse publicity
about Waste Connections, which could damage our competitive position and stock
price.
LIABILITIES FOR ENVIRONMENTAL DAMAGE MAY ADVERSELY AFFECT OUR BUSINESS AND
EARNINGS.
We are liable for any environmental damage that our solid waste facilities
cause, including damage to neighboring landowners or residents, particularly as
a result of the contamination of soil, groundwater or surface water, and
especially drinking water. We may be liable for damage resulting from conditions
existing before we acquired these facilities. We may also be liable for any
on-site environmental contamination caused by pollutants or hazardous substances
whose transportation, treatment or disposal that we or our predecessors
arranged. Any substantial liability for environmental damage could harm our
business and earnings.
FLUCTUATIONS IN PRICES FOR RECYCLED COMMODITIES THAT WE SELL MAY CAUSE OUR
REVENUES AND OPERATING RESULTS TO DECLINE.
We provide recycling services to some of our customers. The sale prices of
and demand for recyclable waste products, particularly wastepaper, are
frequently volatile and when they decline our revenues and operating results may
decline.
RISKS RELATED TO THE NOTES AND THE OFFERING
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION; WE MAY INCUR
SUBSTANTIALLY MORE DEBT BY INCREASING OUR COSTS AND LIMITING OUR ABILITY TO TAKE
ACTIONS THAT WOULD INCREASE OUR REVENUE AND EXECUTE OUR GROWTH STRATEGY.
As of December 31, 2001, we had approximately $421.5 million of recourse
indebtedness outstanding, including $150 million in notes covered by this
prospectus. Our long-term credit facility allows us to borrow up to $435
million, but bank covenant restrictions existing as of December 31, 2001,
limited our maximum borrowing under the credit facility to $373 million. Our
indebtedness could have important consequences to you. For example, it could:
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to obtain additional financing;
- require the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness, thereby reducing the availability of cash flow to fund our
growth strategy, working capital, capital expenditures and other general
corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry; and
- place us at a competitive disadvantage relative to our competitors with
less debt.
15
We may incur substantial additional debt in the future. Neither the terms
of our credit facility nor the terms of the notes fully prohibit us from doing
so. If new debt is added to our current levels, the related risks described
above could intensify.
WE MAY HAVE INSUFFICIENT CASH FLOW TO MEET OUR OBLIGATIONS TO PAY INTEREST AND
PRINCIPAL WHEN DUE ON THE NOTES, RESULTING IN A DEFAULT.
We are required to generate cash sufficient to pay all amounts due on the
notes and to conduct our business operations. As of December 31, 2001, our debt
service obligations for the following 12 months were approximately $31.6
million. We may not be able to cover our anticipated debt service obligations.
This may materially hinder our ability to make payments of interest and
principal on the notes. Our ability to meet our future debt service obligations
will depend upon our future performance, which will be subject to financial,
business and other factors affecting our operations, many of which are beyond
our control.
THE NOTES ARE SUBORDINATED TO SENIOR INDEBTEDNESS, SO THAT IN THE EVENT OF A
DEFAULT, OUR SENIOR INDEBTEDNESS WOULD BE REPAID IN FULL BEFORE ANY PAYMENT IS
MADE ON THE NOTES.
The notes are unsecured and subordinated in right of payment to all of our
existing and future Senior Indebtedness, as defined in the "Description of
Notes -- Subordination" section of this prospectus. As a result, in the event of
bankruptcy, liquidation or reorganization or upon acceleration of the notes due
to an event of default, as defined below, and in specific other events, our
assets will be available to pay obligations on the notes only after all Senior
Indebtedness has been paid in full in cash or other payment satisfactory to the
holders of Senior Indebtedness. There may not be sufficient assets remaining to
pay amounts due on any or all of the notes then outstanding. The notes are also
effectively subordinated to the indebtedness and other liabilities, including
trade payables, of our subsidiaries. The indenture does not prohibit or limit
the incurrence of Senior Indebtedness or the incurrence of other indebtedness
and other liabilities by us. Our credit facility provides for borrowing of up to
$435 million. Our incurring additional indebtedness and other liabilities could
adversely affect our ability to pay our obligations on the notes. As of December
31, 2001, we had approximately $271.5 million of indebtedness constituting
Senior Indebtedness to which the $150 million in notes covered by this
prospectus are subordinated in right of payment. We anticipate that from time to
time, we and our subsidiaries will incur additional indebtedness, including
Senior Indebtedness.
WE MAY REDEEM SOME OR ALL OF THE NOTES AT ANY TIME BEGINNING ON APRIL 15, 2004,
AND MAY DO SO AT PRICES AND TIMES DISADVANTAGEOUS TO NOTE HOLDERS.
We have the right to redeem some or all of the notes at specified prices on
or after April 15, 2004. Depending on the market price of our common stock and
the outlook for our business, those redemptions may occur at prices and times
disadvantageous to the note holders.
WE MAY NOT BE ABLE TO REPURCHASE THE NOTES IN THE EVENT OF A CHANGE IN CONTROL,
RESULTING IN A DEFAULT.
Upon the occurrence of certain change in control events, holders of the
notes may require us to offer to repurchase all of their notes. We may not have
sufficient funds at the time of the change in control to make the required
repurchases. Additionally, a change in control would be an event of default
under our credit facility, which would permit the lenders to accelerate the
debt, which could also cause an event of default under the indenture.
The source of funds for any repurchase required as a result of any change
in control will be our available cash or cash generated from operating
activities or other sources, including borrowings, sales of assets, sales of
equity or funds provided by a new controlling entity.
16
Sufficient funds may not be available at the time of any change in control to
make any required repurchases of the notes tendered. Furthermore, if we use
available cash to fund note repurchases upon a change in control, we may be
unable to obtain additional financing in the future.
THERE IS NO CURRENT MARKET FOR THE NOTES, AND IT IS UNCERTAIN WHETHER AN ACTIVE
TRADING MARKET WILL DEVELOP. LACK OF AN ACTIVE MARKET FOR THE NOTES MAY CAUSE
THEIR PRICE TO DECLINE.
There is no established trading market for the notes, and a market for the
notes may not develop or, if developed, be maintained. We do not intend to apply
to list the notes for trading on any securities exchange. If an active market
for the notes fails to develop or be maintained, their price may decline.
Furthermore, if a market were to develop, the market price for the notes may be
adversely affected by changes in our financial performance, changes in the
overall market for similar securities and performance or prospects for companies
in our industry.
THE NET TANGIBLE BOOK VALUE PER SHARE OF OUR COMMON STOCK WILL BE LESS THAN THE
CONVERSION PRICE PER SHARE OF THE COMMON STOCK ISSUED ON CONVERSION OF THE
NOTES.
Net tangible book value represents the amount of our total tangible assets
less total liabilities. Upon conversion of the notes into shares of common
stock, holders of those notes will suffer immediate substantial dilution in the
net tangible book value per share of the common stock issued upon the
conversion.
OUR STOCK PRICE HAS BEEN AND IS LIKELY TO CONTINUE TO BE VOLATILE, WHICH MAY
MAKE IT DIFFICULT FOR YOU TO RESELL THE NOTES OR THE COMMON STOCK INTO WHICH THE
NOTES ARE CONVERTIBLE WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE.
The trading price of our common stock has been and is likely to be
volatile. Our stock price could be subject to wide fluctuations in response to a
variety of factors, including:
- actual or anticipated variations in quarterly operating results;
- changes in financial estimates by securities analysts;
- conditions or trends in the solid waste services industry;
- changes in the economic performance and/or market valuations of other
solid waste services companies and the solid waste services industry in
general;
- our announcement of significant acquisitions or capital commitments;
- adverse or unfavorable publicity regarding us or our services;
- additions or departures of key personnel;
- sales of common stock; and
- other events or factors that may be beyond our control.
In addition, the stock markets in general and The Nasdaq National Market in
particular have experienced extreme price and volume volatility and a
significant cumulative decline in recent months. Such volatility and decline
have affected many companies irrespective of or disproportionately to their
operating performance. These broad market and industry factors may cause the
market price of our common stock to decline materially, regardless of our actual
operating performance.
17
USE OF PROCEEDS
We received proceeds of approximately $144.4 million from our private
placement of the notes, net of approximately $5.6 million attributable to the
initial purchaser's discount and other expenses of the offering. We used the net
proceeds to repay a portion of our outstanding indebtedness under our credit
facility and related costs. We reduced the balance under our credit facility
from approximately $333.7 million to approximately $189.3 million. The
weighted-average interest rate on the debt repaid was 8.7% per annum. We will
not receive any proceeds from the future sale of the notes or the common stock
into which the notes are convertible. The selling holders will receive all of
the net proceeds from the future sale of the notes and the common stock into
which the notes are convertible, which they respectively own.
PRICE RANGE OF COMMON STOCK
Our common stock trades on The Nasdaq National Market under the symbol
"WCNX." The following table sets forth, for the periods indicated, the high and
low sales prices per share for our common stock, as reported on The Nasdaq
National Market for the periods indicated.
HIGH LOW
------ ------
2000
First Quarter......................................... $14.94 $ 9.25
Second Quarter........................................ 19.75 9.75
Third Quarter......................................... 25.94 17.13
Fourth Quarter........................................ 35.25 21.69
2001
First Quarter......................................... $33.50 $23.00
Second Quarter........................................ 37.31 25.70
Third Quarter......................................... 34.90 22.20
Fourth Quarter........................................ 32.90 25.47
------ ------
2002
First Quarter (January 1 through March 15)............ $33.00 $23.49
On March 15, 2002, the last reported sale price of our common stock as
reported on The Nasdaq National Market was $31.80 per share. On March 15, 2002,
there were approximately 76 holders of record of our common stock.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We do not currently
anticipate paying any cash dividends on the common stock. We intend to retain
all earnings to fund the operation and expansion of our business. In addition,
our existing credit facility restricts the payment of cash dividends.
18
SELLING HOLDERS
We originally issued the notes and the notes were sold by the initial
purchaser in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by the initial purchaser to be
qualified institutional buyers as defined by Rule 144A under the Securities Act.
Selling holders, including their transferees, pledgees or donees or their
successors, may from time to time offer and sell pursuant to this prospectus any
or all of the notes and common stock into which the notes are convertible. We
agreed to use reasonable efforts to keep the registration statement covering the
notes and the common stock into which the notes are convertible effective until
April 4, 2003. Our registration of the notes and the shares of common stock into
which the notes are convertible does not necessarily mean that the selling
holders will sell any or all of the notes or the shares of the common stock into
which the notes are convertible.
The following table sets forth information, as of February 28, 2002, with
respect to the selling holders and the principal amounts of notes beneficially
owned by each selling holder that may be offered under this prospectus. The
information is based on information provided by or on behalf of the selling
holders. The selling holders may offer all, some or none of the notes or common
stock into which the notes are convertible. Because the selling holders may
offer all or some portion of the notes or the common stock, no estimate can be
given as to the amount of the notes or the common stock that will be held by the
selling holders upon termination of any sales. In addition, the selling holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their notes since the date on which they provided the information
regarding their notes in transactions exempt from the registration requirements
of the Securities Act.
Each selling holder proposes to sell up to all of the common stock issuable
to that holder upon conversion of the notes.
PRINCIPAL AMOUNT OF COMMON STOCK ISSUABLE
NOTES BENEFICIALLY UPON CONVERSION
SELLING HOLDER OWNED AND OFFERED OF THE NOTES(1)
-------------- ------------------- ---------------------
Kentfield Trading, Ltd...................................... $ 22,256,000 585,299
Deutsche Banc Alex Brown Inc................................ 12,700,000 333,990
Leonardo, LP................................................ 11,500,000 302,432
Alpine Associates........................................... 8,125,000 213,675
Alexandra Global Investment Fund I, Ltd..................... 7,000,000 184,089
CALAMOS Market Neutral Fund -- CALAMOS Investment Trust..... 6,905,000 181,591
Lipper Convertibles, LP..................................... 6,000,000 157,790
Double Black Diamond Offshore LDC........................... 3,933,000 103,431
Sage Capital................................................ 3,750,000 98,619
Chrysler Corporation Master Retirement Trust................ 3,720,000 97,830
TD Securities (USA) Inc..................................... 3,500,000 92,044
Vanguard Convertible Securities Fund, Inc................... 3,255,000 85,601
Clinton Riverside Convertible Portfolio Limited............. 3,000,000 78,895
State of Connecticut Combined Investment Funds.............. 2,805,000 73,767
CALAMOS Convertible Fund -- CALAMOS Investment Trust........ 2,750,000 72,320
BNP Paribas Equity Stategies SNC............................ 2,523,000 66,351
Clinton Mutistrategy Master Fund, Ltd....................... 2,500,000 65,746
CALAMOS Convertible Growth and Income Fund -- CALAMOS
Investment Trust.......................................... 2,250,000 59,171
Arkansas Teachers Retirement................................ 2,167,000 56,988
OCM Convertible Trust....................................... 2,155,000 56,673
Argent Classic Convertible Arbitrage Fund (Bermuda) Ltd..... 2,150,000 56,541
Argent Convertible Arbitrage Fund Ltd....................... 2,000,000 52,596
South Dakota Retirement System.............................. 2,000,000 52,596
TQA Master Plus Fund, Ltd................................... 2,000,000 52,596
Bear, Stearns & Co. Inc..................................... 1,500,000 39,447
White River Securities LLC.................................. 1,500,000 39,447
Zazore Hedged Convertible Fund LP........................... 1,500,000 39,447
Alpine Partners, L.P........................................ 1,400,000 36,817
State Employees' Retirement Fund of the State of Delaware... 1,305,000 34,319
San Diego County Convertible................................ 1,048,000 27,560
Argent Classic Convertible Arbitrage Fund L.P............... 1,000,000 26,298
Rockhaven Premier Dividend Fund............................. 1,000,000 26,298
San Diego County Employee Retirement Association............ 1,000,000 26,298
Zurich Institutional Benchmarks Master Fund LP.............. 1,000,000 26,298
19
PRINCIPAL AMOUNT OF COMMON STOCK ISSUABLE
NOTES BENEFICIALLY UPON CONVERSION
SELLING HOLDER OWNED AND OFFERED OF THE NOTES(1)
-------------- ------------------- ---------------------
BP Amoco PLC, Master Trust.................................. 918,000 24,142
American Motorist Insurance Company......................... 900,000 23,668
Delta Air Lines Master Trust (c/o Oaktree Capital
Management, LLC).......................................... 860,000 22,616
Nicholas Applegate Convertible Fund......................... 858,000 22,564
Black Diamond Offshore Ltd.................................. 856,000 22,511
AAM/Zazore Institutional Income Fund LP..................... 800,000 21,038
Consulting Group Capital Markets Funds...................... 660,000 17,357
Wyoming State Treasurer..................................... 580,000 15,253
Innovest Finanzdienstleistungs.............................. 525,000 13,806
San Diego City Retirement................................... 519,000 13,648
Partner Reinsurance Company Ltd............................. 505,000 13,280
Delta Pilots Disability and Survivorship Trust.............. 470,000 12,360
Delta Pilots D&S Trust...................................... 425,000 11,176
CooperNeff Convertible Strategies Fund, LP.................. 423,000 11,124
Wake Forest University...................................... 420,000 11,045
Wake Forest Convertible Arbitrage........................... 380,000 9,993
Clarica Life Insurance Co. -- U.S........................... 350,000 9,204
Lyxor Master Fund........................................... 350,000 9,204
Hotel Union & Hotel Industry of Hawaii...................... 321,000 8,441
Motion Picture Industry..................................... 314,000 8,257
Motion Picture Industry Health Plan -- Active Member Fund... 300,000 7,889
Baptist Health of South Florida............................. 298,000 7,836
Screen Actors Guild......................................... 290,000 7,626
Lumbermens.................................................. 281,000 7,389
Engineers Joint Pension Fund................................ 271,000 7,126
James Campbell Corporation.................................. 216,000 5,680
Worldwide Transactions Ltd.................................. 211,000 5,548
HFR Zazore Master Trust..................................... 200,000 5,259
Writers Guild............................................... 170,000 4,470
CALAMOS Convertible Portfolio -- CALAMOS Advisors Trust..... 135,000 3,550
Southdown Pension Plan...................................... 130,000 3,418
City of Albany Pension Plan................................. 125,000 3,287
Motion Picture Industry Health Plan -- Retiree Member
Fund...................................................... 120,000 3,155
SCI Endowment Care Common Trust Fund -- National Fiduciary
Services.................................................. 120,000 3,155
Physicians Life............................................. 107,000 2,813
Enterprise Convertible Securities Fund...................... 87,000 2,287
Kettering Medical Center Funded Depreciation Account........ 85,000 2,235
Sturgeon Limited............................................ 54,000 1,420
American Samoan Government.................................. 50,000 1,314
National Fuel and Gas Co. Retirement Plan................... 50,000 1,314
SCI Endowment Care Common Trust Fund -- Suntrust............ 50,000 1,314
Drury University............................................ 45,000 1,183
SCI Endowment Care Common Trust Fund -- First Union......... 45,000 1,183
Viacom Inc. Pension Plan Master Trust....................... 36,000 946
Nicholas Apple Global Holdings.............................. 30,000 788
Smithfield Trust Company.................................... 20,000 525
Jefferies & Company Inc..................................... 9,000 236
All other holders........................................... 1,834,000 48,282
------------ ---------
$150,000,000 3,944,775
============ =========
---------------
(1) Assumes a conversion rate of approximately 26.2985 shares of common stock
per $1,000 principal amount of notes and a cash payment in lieu of any
fractional interest.
None of the selling holders nor any of their affiliates, officers, directors or
principal equity holders has held any position or office or has had any material
relationship with us within the past three years. The selling holders purchased
all of the notes in a private transaction. All of the notes and the shares of
common stock into which the notes are convertible are "restricted securities"
under the Securities Act.
Information concerning the selling holders may change from time to time and any
changed information will be set forth in post-effective amendments to the
registration statement of which this prospectus is a part if and when necessary.
In addition, the conversion price, and therefore the number of shares of common
stock issuable upon conversion of the notes, is subject to adjustment.
Accordingly, the aggregate principal amount of notes and the number of shares of
common stock into which the notes are convertible may increase or decrease.
20
PLAN OF DISTRIBUTION
The selling holders and their successors, including their transferees,
pledgees, or donees or their successors, may sell the notes and the common stock
into which the notes are convertible directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling holders or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The notes and the common stock into which the notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at prices related to the prevailing market prices, at varying
prices determined at the time of sale, or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions:
- on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the notes or the
common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
- through the writing of options, whether the options are listed on an
options exchange or otherwise;
- by pledge to secure debts and other obligations;
- through the settlement of short sales; or
- a combination of any of the above transactions.
In connection with the sale of the notes and the common stock into which
the notes are convertible or otherwise, the selling holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the notes or the common stock into which
the notes are convertible in the course of hedging the positions they assume.
The selling holders may also sell the notes or the common stock into which the
notes are convertible short and deliver these securities to close out their
short positions, or loan or pledge the notes or the common stock into which the
notes are convertible to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling holders from the sale of the notes or
common stock into which the notes are convertible offered by them will be the
purchase price of the notes or common stock less discounts and commissions, if
any. Each of the selling holders reserves the right to accept and, together with
their agents from time to time, to reject, in whole or in part, any proposed
purchase of notes or common stock to be made directly or through agents. We will
not receive any of the proceeds from this offering.
Our outstanding common stock is listed for trading on The Nasdaq National
Market. We do not intend to list the notes for trading on any national
securities exchange or on The Nasdaq National Market and a trading market for
the notes might not develop.
To comply with the securities laws of some states, the notes and common
stock into which the notes are convertible may be sold in these jurisdictions
only through registered or licensed brokers or dealers. In addition, in some
states the notes and common stock into which the notes are convertible may not
be sold unless they have been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
21
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the notes and common stock into which the notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. By virtue of being registered broker-dealers, the following
shareholders are underwriters within the meaning of Section 2(11) of the
Securities Act: Deutsche Banc Alex. Brown Inc., TD Securities (USA), Inc., Bear
Stearns & Co. Inc., and White River Securities LLC. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act. Selling holders who are
"underwriters" within the meaning of Section of 2(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act. The
selling holders have acknowledged that they understand their obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell, transfer, make a gift of, or otherwise dispose of any notes or
common stock described in this prospectus by any means other than as described
in this prospectus.
To the extent required, the specific notes or common stock to be sold, the
names of the selling holders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the notes to register their notes and common stock under applicable federal
and state securities laws under specific circumstances and at specific times.
The registration rights agreement provides for cross-indemnification of the
selling holders and us and their and our respective directors, officers and
controlling persons against specific liabilities in connection with the offer
and sale of the notes and the common stock, including liabilities under the
Securities Act.
A prospectus has not been and will not be filed under the securities laws
of any province or territory of Canada to qualify the sale of notes in such
jurisdictions. The notes are not being offered and may not be offered or sold,
directly or indirectly, in Canada or to or for the account of any resident of
Canada except in compliance with or pursuant to an exemption from the
registration and prospectus requirements of applicable securities laws in
Canada.
DESCRIPTION OF NOTES
The notes were issued under an indenture between Waste Connections, Inc.
and State Street Bank and Trust Company of California, N.A., as Trustee. The
following description is only a summary of the material provisions of the
indenture, the notes and the registration rights agreement. We urge you to read
the indenture, the notes and the registration rights agreement in their entirety
because they, and not this description, define your rights as holders of the
notes. You may request copies of these documents at our address shown under the
caption "Where You Can Find More Information." The terms of the notes include
those stated in the Indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939, as amended. For purposes of this section,
references to "we," "us," "ours" and "Waste Connections" include only Waste
Connections, Inc. and not its subsidiaries.
GENERAL
We issued the notes with a principal amount of $150,000,000. The notes are
unsecured, subordinated obligations of Waste Connections and will mature on
April 15, 2006, unless
22
earlier redeemed at our option or repurchased by us at a holder's option upon a
change in control of Waste Connections. Interest on the notes will accrue at the
rate of 5 1/2% per annum and will be payable semiannually in arrears on April 15
and October 15 of each year, commencing on October 15, 2001. Interest on the
notes will accrue from the date of original issuance or, if interest has already
been paid, from the date it was most recently paid. We will make each interest
payment to the parties that were holders of record of the notes on the
immediately preceding April 1 and October 1, whether or not that day was a
business day. Interest on the notes will be computed on the basis of a 360-day
year comprised of 12 30-day months. The indenture does not contain any
restriction on:
- the payment of dividends;
- the issuance of Senior Indebtedness (as defined below) or other
indebtedness; or
- the repurchase of securities of Waste Connections
and does not contain any financial covenants. Other than as described below the
indenture contains no covenants or other provisions to afford protection to
holders of notes in the event of a highly leveraged transaction or a change in
control of Waste Connections. See "-- Optional Redemption of the Notes" and
"-- Right to Require Purchase of Notes upon a Change in Control."
We will pay the principal of, premium, if any, and interest on the notes at
the office or agency maintained by us in the Borough of Manhattan in New York
City. Holders may register the transfer of their notes at the same location. We
reserve the right to pay interest to holders of the notes by check mailed to the
holders at their registered addresses. Except under the limited circumstances
described below, the notes will be issued only in fully registered book-entry
form, without coupons, and will be represented by one or more global notes.
There will be no service charge for any registration of transfer or exchange of
notes. We may, however, require holders to pay a sum sufficient to cover any tax
or other governmental charge payable in connection with any transfer or
exchange.
CONVERSION RIGHTS
A holder may, at any time on or before the close of business on the
maturity date, convert a note or any portion of a note (if the portions are
$1,000 or whole multiples of $1,000) into shares of common stock initially at a
conversion price of $38.03 per share (which is equivalent to a conversion rate
of approximately 26.2985 shares per $1,000 principal amount of notes), unless
the note or a portion of the note has been previously redeemed or repurchased.
The right to convert a note called for redemption will terminate at the close of
business on the business day immediately preceding the date fixed for
redemption, unless we default in making the payment due on the redemption date.
If a holder of a note has delivered notice of its election to have the note
repurchased as a result of a change in control, the note may be converted only
if the notice of election is withdrawn as described under "-- Right to Require
Purchase of Notes upon a Change in Control." See "-- Optional Redemption of the
Notes."
We will adjust the conversion price if (without duplication):
(1) we issue common stock as a dividend or distribution on our common
stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to substantially all holders of our common stock rights,
warrants or options entitling them to subscribe for or purchase common
stock at less than the then current market price;
23
(4) we distribute to substantially all holders of common stock
evidences of our indebtedness, shares of capital stock (other than common
stock), securities, cash, property, rights, warrants or options, excluding:
- those rights, warrants or options referred to in clause (3) above;
- any dividend or distribution paid exclusively in cash not referred to
in clause (5) below; and
- any dividend or distribution referred to in clause (1) above;
(5) we make a cash distribution to substantially all holders of our
common stock that together with all other all-cash distributions and
consideration payable in respect of any tender or exchange offer by us or
one of our subsidiaries for our common stock made within the preceding 12
months exceeds 10% of our aggregate market capitalization on the date of
the distribution; or
(6) we complete a repurchase (including by way of a tender offer) of
our common stock that involves an aggregate consideration that, together
with:
- any cash and other consideration payable in respect of any tender or
exchange offer by us or one of our subsidiaries for our common stock
concluded within the preceding twelve months; and
- the amount of any all-cash distributions to all holders of our common
stock made within the preceding 12 months;
exceeds 10% of our aggregate market capitalization on the expiration of the
tender or exchange offer.
The conversion price will not be adjusted until adjustments amount to 1% or
more of the conversion price as last adjusted. We will carry forward any
adjustment we do not make and will include it in any future adjustment.
If our common stock is converted into the right to receive other
securities, cash or other property as a result of reclassifications,
consolidations, mergers, sales or transfers of assets or other transactions,
each note then outstanding would, without the consent of any holders of notes,
become convertible only into the kind and amount of securities, cash and other
property receivable upon the transaction by a holder of the number of shares of
common stock which would have been received by a holder immediately prior to the
transaction if the holder had converted the note.
We will not issue fractional shares of common stock to a holder who
converts a note. In lieu of issuing fractional shares, we will pay cash based
upon the market price.
Except as described in this paragraph, no holder of notes will be entitled,
upon conversion of the notes, to any actual payment or adjustment on account of
accrued and unpaid interest or on account of dividends on shares of common stock
issued in connection with the conversion. If any holder surrenders a note for
conversion between the close of business on any record date for the payment of
an installment of interest and the opening of business on the related interest
payment date the holder must deliver payment to us of an amount equal to the
interest payable on the interest payment date on the principal amount converted
together with the note being surrendered. The foregoing sentence will not apply
to notes called for redemption on a redemption date within the period between
and including the record date and interest payment date.
If we make a distribution of property to our stockholders which would be
taxable to them as a dividend for federal income tax purposes and the conversion
price of the notes is reduced, this reduction may be deemed to be the receipt of
taxable income to holders of the notes.
24
In addition, we may make any reductions in the conversion price that our
board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of
stock, or rights to acquire stock, or from any event treated as such for income
tax purposes or for any other reasons.
SUBORDINATION
The payment of the principal or, premium, if any, and interest on the notes
will be subordinated in right of payment to the prior payment in full of all our
Senior Indebtedness to the extent described below. The holders of all Senior
Indebtedness will first be entitled to receive payment in full of all amounts
due or to become due on the Senior Indebtedness, or provision for payment in
money or money's worth, before the holders of the notes will be entitled to
receive any payment in respect of the notes, when there is a payment or
distribution of assets to creditors upon our:
- liquidation;
- dissolution;
- winding up;
- reorganization;
- assignment for the benefit of creditors;
- marshaling of assets;
- bankruptcy;
- insolvency; or
- similar proceedings.
In addition, because our subsidiaries are not obligated under the notes,
the notes will be effectively subordinated to all existing and future
indebtedness and other liabilities of our subsidiaries.
No payments on account of the notes or on account of the purchase or
acquisition of notes may be made if a default in any payment with respect to
Senior Indebtedness has occurred and is continuing. If (1) there is a default on
any designated Senior Indebtedness other than a payment default that occurs that
permits the holders of that designated Senior Indebtedness to accelerate its
maturity and (2) the Trustee and Waste Connections receive the notice required
by the indenture, no payments may be made on the notes for up to 180 days in any
365-day period unless the default is cured or waived. By reason of this
subordination, in the event of our insolvency, holders of the notes may recover
less ratably than holders of our Senior Indebtedness.
Payments on the notes may and shall be resumed, in the case of a payment
default, upon the date on which that default is cured or waived, and in the case
of a non-payment default, upon the earliest of:
- the date on which that non-payment default is cured or waived,
- 180 days after the date on which the applicable payment blockage notice
is received, or
- the date on which the payment blockage period is terminated by written
notice from the representative of the Senior Indebtedness to the Trustee
and Waste Connections, unless a payment default has occurred and is
continuing.
Only one payment blockage period may be commenced within any 365-day
period. No event of default with respect to designated Senior Indebtedness that
existed or was continuing
25
at the commencement of any payment blockage period with respect to that
designated Senior Indebtedness can be the basis for the commencement of a second
payment blockage period whether or not within a period of 365 days, unless that
event of default was cured or waived for at least 90 days. No payment blockage
period may extend beyond 180 days.
No action may be taken to declare the notes due and payable nor may any
judicial or other proceedings to collect the notes be initiated during any
standstill period. A standstill period commences on the occurrence of a payment
default or the date on which Waste Connections and the Trustee receive notice of
a payment blockage period and continues until:
- the date on which the default is cured or waived,
- holders of Senior Indebtedness take action to declare the Senior
Indebtedness due and payable or take certain actions to collect the
Senior Indebtedness,
- the date on which the Senior Indebtedness becomes automatically due and
payable,
- the occurrence of a bankruptcy, insolvency or reorganization of Waste
Connections or a significant subsidiary of Waste Connections or
- 120 days after a payment default or 180 days after a payment blockage
notice is given.
The Trustee or the holders of the notes must give the agent for holders of
Senior Indebtedness at least five business days' prior written notice of any
intent to declare the notes due and payable or to make any other amount owing
under the indenture due and payable.
"Senior Indebtedness" means:
- the principal of and premium, if any, and interest on, and fees, costs,
enforcement expenses, collateral protection expenses and other
reimbursement or indemnity obligations in respect of all of our
indebtedness or obligations to any person for money borrowed that is
evidenced by a note, bond, debenture, loan agreement, or similar
instrument or agreement including default interest and interest accruing
after a bankruptcy;
- commitment or standby fees due and payable to lending institutions with
respect to credit facilities available to us;
- all of our noncontingent obligations (1) for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (2) under interest rate swaps, caps, collars, options, and
similar arrangements, and (3) under any foreign exchange contract,
currency swap agreement, futures contract, currency option contract or
other foreign currency hedge;
- all of our obligations for the payment of money relating to capitalized
lease obligations;
- any liabilities of others described in the preceding clauses that we have
guaranteed or which are otherwise our legal liability; and
- renewals, extensions, refundings, refinancings, restructurings,
amendments and modifications of any such indebtedness or guarantee, other
than any indebtedness or other obligation of ours that by its terms is
not superior in right of payment to the notes.
"Designated Senior Indebtedness" means our obligations under our revolving
credit facility and any particular Senior Indebtedness in which the instrument
creating or evidencing it or the assumption or guarantee of it, or related
agreements or documents to which we are a party, expressly provides that that
indebtedness will be designated Senior Indebtedness for purposes of the
indenture. The instrument, agreement or other document evidencing any designated
Senior Indebtedness may place limitations and conditions of the right of that
senior debt to exercise the rights of designated Senior Indebtedness.
26
As of December 31, 2001, we had approximately $271.5 million of
indebtedness constituting Senior Indebtedness. We expect from time to time to
incur additional indebtedness. The indenture does not limit or prohibit us from
incurring additional Senior Indebtedness or other debt. See "Risk
Factors -- Risks Related to the Notes and the Offering -- We may not be able to
repurchase the notes in the event of a change in control."
OPTIONAL REDEMPTION OF THE NOTES
At any time on or after April 15, 2004, with the consent of the lenders
under our credit facility, we may redeem the notes in whole, or from time to
time, in part, at our option on at least 30 days' notice. The redemption price,
expressed as a percentage of the principal amount, will be as follows:
REDEMPTION
REDEMPTION PERIOD PRICE
----------------- ----------
April 15, 2004 through April 14, 2005................... 102.2%
April 15, 2005 through April 14, 2006................... 101.1%
and 100% of the principal amount on or after April 15, 2006.
Our decision whether to redeem the notes will be based on our balance sheet
at the time. If we have available capital, either through cash flow from
operations or from an external financing source that offers a lower cost of
capital, we will consider redeeming the notes.
If we opt to redeem less than all of the notes at any time, the Trustee
will select or cause to be selected the notes to be redeemed by any method that
it deems fair and appropriate. In the event of a partial redemption, the Trustee
may provide for selection for redemption of portions of the principal amount of
any note of a denomination larger than $1,000.
MANDATORY REDEMPTION
Except as described below, we are not required to make mandatory redemption
of, or sinking fund payments with respect to, the notes. See "-- Right to
Require Purchase of Notes upon a Change of Control,"
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a change in control (as defined below) occurs, each holder of notes may
require that we repurchase the holder's notes on the date fixed by us that is at
least 45 but no more than 60 days after we give notice of the change in control.
We will repurchase the notes for an amount of cash equal to 100% of the
principal amount of the notes on the date of purchase, plus accrued and unpaid
interest, if any, to the date of repurchase.
"Change in control" means the occurrence of one or more of the following
events:
- any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or "substantially" all of the
assets of Waste Connections and its subsidiaries, taken as a whole, to
any person or group of related persons, as defined in Section 13(d) of
the Securities Exchange Act of 1934;
- the approval by the holders of capital stock of Waste Connections of any
plan or proposal for the liquidation or dissolution of Waste Connections
(whether or not otherwise in compliance with the provisions of the
applicable indenture);
- any person or group becoming the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the
aggregate ordinary voting power represented by Waste Connections' issued
and outstanding voting stock of, or any successor to, all or
substantially all of Waste Connections' assets; or
27
- the first day on which a majority of the members of Waste Connections'
board of directors are not continuing directors.
The definition of change in control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Waste Connections and its subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
Waste Connections to repurchase those notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of
Waste Connections and its subsidiaries taken as a whole to another person or
group may be uncertain.
"Continuing directors" means, as of any date of determination, any member
of the board of directors of Waste Connections who (1) was a member of the board
of directors on the date of the original issuance of the notes or (2) was
nominated for election or elected to the board of directors with the approval of
a majority of the continuing directors who were members of that board at the
time of that nomination or election.
On or prior to the date of repurchase, we will deposit with a paying agent
an amount of money sufficient to pay the aggregate repurchase price of the notes
which is to be paid on the date of repurchase.
We may not repurchase any note at any time when the subordination
provisions of the indenture otherwise would prohibit us from making payments of
principal in respect of the notes. If we fail to repurchase the notes when
required as described above, this failure will constitute an event of default
under the indenture whether or not the subordination provisions of the indenture
permit repurchase.
On or before the 30th day after the change in control, we must mail to the
Trustee and all note holders a notice of the change in control, stating:
- the repurchase date;
- the date by which the repurchase right must be exercised;
- the repurchase price for the notes; and
- the procedures which a note holder must follow to exercise the repurchase
right.
To exercise the repurchase right, the note holder must deliver, on or
before the third business day before the repurchase date, a written notice to us
and the Trustee of the holder's exercise of the repurchase right. This notice
must be accompanied by certificates evidencing the note or notes with respect to
which the right is being exercised, duly endorsed for transfer. This notice of
exercise may be withdrawn by the holder at any time on or before the close of
business on the business day preceding the repurchase date.
These provisions granting the holders the right to require us to repurchase
the notes upon a change in control may make it more difficult for any person or
group to acquire control of us or to effect a business combination with us.
Moreover, under the indenture, we will not be permitted to pay principal of or
interest on, or otherwise acquire the notes, including any repurchase at the
election of the holders of notes upon a change in control, if a payment default
on our Senior Indebtedness has occurred and is continuing, or if our Senior
Indebtedness is not paid in full in the event of our insolvency, bankruptcy,
reorganization, dissolution or other winding up. Our ability to pay cash to
holders of notes following a change in control may be limited by our then
existing financial resources. Sufficient funds may not be available when
necessary to make any required repurchases. See "Risk Factors -- We may not be
able to repurchase the notes in the event of a change in control."
28
If a change in control occurs and the holders exercise their rights to
require us to repurchase notes, we intend to comply with applicable tender offer
rules under the Exchange Act with respect to any repurchase.
The term "beneficial owner" is defined in accordance with Rules 13d-3 and
13d-5 under the Securities Exchange Act or any successor provision, except that
a person will be deemed to have "beneficial ownership" of all shares that the
person has the right to acquire, whether exercisable immediately or only after
the passage of time.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the notes, consolidate
with or merge into any other person or convey, transfer or lease our properties
and assets substantially as an entirety to, any other person, if:
- we are the resulting or surviving corporation or the successor,
transferee or lessee, if other than us, is a corporation organized under
the laws of any U.S. jurisdiction and expressly assumes our obligations
under the indenture and the notes by means of a supplemental indenture
entered into with the Trustee; and
- after giving effect to the transaction, no event of default and no event
which, with notice or lapse of time, or both, would constitute an event
of default, has occurred and is continuing.
Under any consolidation, merger or any conveyance, transfer or lease of our
properties and assets as described in the preceding paragraph, the successor
company will be our successor and will succeed to, and be substituted for, and
may exercise every right and power of, Waste Connections under the indenture.
Except in the case of a lease, if the predecessor still exists after the
transaction, it will be released from its obligations and covenants under the
indenture and the notes.
MODIFICATION AND WAIVER
We and the Trustee may enter into one or more supplemental indentures that
add, change or eliminate provisions of the indenture or modify the rights of the
holders of the notes with the consent of the holders of at least a majority in
principal amount of the notes then outstanding. However, without the consent of
each holder of an outstanding note, no supplemental indenture may, among other
things:
- change the stated maturity of the principal of, or any installment of
interest on, any note;
- reduce the principal amount of, or the premium or rate of interest on,
any note;
- change the currency in which the principal of any note or any premium or
interest is payable;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any note when due;
- adversely affect the right provided in the indenture to convert any note;
- modify the subordination provisions of the indenture in a manner adverse
to the holders of the notes;
- modify the provisions of the indenture relating to our requirement to
offer to repurchase notes upon a change in control in a manner adverse to
the holders of the notes;
29
- reduce the percentage in principal amount of the outstanding notes
necessary to modify or amend the indenture or to consent to any waiver
provided for in the indenture; or
- waive a default in the payment of principal of, or any premium or
interest on, any note.
The holders of a majority in principal amount of the outstanding notes may,
on behalf of the holders of all notes:
- waive compliance by us with restrictive provisions of the indenture other
than as provided in the preceding paragraph; and
- waive any past default under the indenture and its consequences, except a
default in the payment of the principal of or any premium or interest on
any note or in respect of a provision which under the indenture cannot be
modified or amended without the consent of the holder of each outstanding
note affected.
Without the consent of any holders of notes, we and the Trustee may enter
into one or more supplemental indentures:
- to cure any ambiguity, omission, defect or inconsistency in the
indenture;
- to evidence a successor to us and the assumption by the successor of our
obligations under the indenture and the notes;
- to make any change that does not adversely affect the rights of any
holder of the notes;
- to comply with any requirement in connection with the qualification of
the indenture under the Trust Indenture Act; or
- to complete or make provision for other matters contemplated by the
indenture.
EVENTS OF DEFAULT
Each of the following is an "event of default":
- a default in the payment of any interest upon any of the notes when
due and payable, continued for 30 days;
- a default in the payment of the principal of and premium, if any, on
any of the notes when due, including on a redemption date;
- failure to pay when due the principal of or interest on indebtedness
for money borrowed by us or our subsidiaries in excess of $20.0 million, or
the acceleration of that indebtedness that is not withdrawn within 15 days
after the date of written notice to us by the Trustee or to us and the
Trustee by the holders of at least 25% in principal amount of the
outstanding notes;
- a default by us in the performance, or breach, of any of our other
covenants in the indenture which are not remedied by the end of a period of
60 days after written notice to us by the Trustee or to us and the Trustee
by the holders of at least 25% in principal amount of the outstanding
notes; or
- events of bankruptcy, insolvency or reorganization of Waste
Connections or any significant subsidiary of Waste Connections.
If an event of default described in the first four clauses above occurs and
is continuing, either the Trustee or the holders of at least 25% in principal
amount of the outstanding notes may declare the principal amount of and accrued
interest on all notes to be immediately due and payable. This declaration may be
rescinded if the conditions described in the indenture are satisfied. If an
event of default of the type referred to in the fifth clause above occurs, the
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principal amount of and accrued interest on the outstanding notes will
automatically become immediately due and payable.
"Significant subsidiary" means a "significant subsidiary" as defined in
Regulation S-X under the Securities Exchange Act.
Within 90 days after a default, the Trustee must give to the registered
holders of notes notice of all uncured defaults known to it. The Trustee will be
protected in withholding the notice if it in good faith determines that the
withholding of the notice is in the best interests of the registered holders,
except in the case of a default in the payment of the principal of, or premium,
if any, or interest on, any of the notes when due or in the payment of any
redemption obligation.
The holders of at least a majority in principal amount of the outstanding
notes may direct the time, method and place of conducting any proceedings for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee. Subject to the provisions of the indenture relating to the
duties of the Trustee, if an event of default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the indenture at the request or direction of any of the holders of the
notes unless the holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium, if any, or interest when due or the right
to convert a note in accordance with the indenture, no holder may institute a
proceeding or pursue any remedy with respect to the indenture or the notes
unless it complies with the conditions in the indenture, including:
- holders of at least 25% in principal amount of the outstanding notes have
requested the Trustee to pursue the remedy; and
- holders have offered the Trustee security or indemnity satisfactory, to
the Trustee against any loss, liability or expense.
We are required to deliver to the Trustee annually a certificate indicating
whether the officers signing the certificate know of any default by us in the
performance or observance of any of the terms of the indenture. If the officers
know of a default, the certificate must specify the status and nature of all
defaults.
BOOK-ENTRY, DELIVERY AND FORM
We issued the notes sold in the United States in reliance on Rule 144A in
the form of global notes. The global notes were deposited with, or on behalf of,
the clearing agency registered under the Exchange Act that is designated to act
as depositary for the notes and registered in the name of the depositary or its
nominee. The DTC was the initial depositary.
Investors who are "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) and who purchase notes in reliance on Rule 144A under
the Securities Act may hold their interests in a global note directly through
DTC if they are DTC participants, or indirectly through organizations that are
DTC participants.
Except as set forth below, a global note may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
DTC has advised us that DTC is:
- a limited-purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
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- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
We expect that pursuant to the procedures established by DTC (1) upon the
issuance of a global note, DTC will credit, on its book-entry registration and
transfer system, the respective principal amount of the individual beneficial
interests represented by the global note to the accounts of participants and (2)
ownership of beneficial interests in a global note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by DTC (with respect to participants' interests) and the participants
(with respect to the owners of beneficial interests in the global note other
than participants). The accounts to be credited will be designated by the
initial purchasers of the beneficial interests. Ownership of beneficial
interests in a global note is limited to participants or persons that may hold
interests through participants.
So long as DTC or its nominee is the registered holder and owner of a
global note, DTC or its nominee, as the case may be, will be considered the sole
legal owner of the notes represented by the global note for all purposes under
the indenture and the notes. Except as set forth below, owners of beneficial
interests in a global note will not be entitled to receive definitive notes and
will not be considered to be the owners or holders of any notes under the global
note. We understand that under existing industry practice, if an owner of a
beneficial interest in a global note desires to take any action that DTC, as the
holder of the global note, is entitled to take, DTC would authorize the
participants to take the action, and that participants would authorize
beneficial owners owning through the participants to take the action or would
otherwise act upon the instructions of beneficial owners owning through them. No
beneficial owner of an interest in a global note will be able to transfer the
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the indenture.
We will make payments of the principal of, and interest on, the notes
represented by a global note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the global note.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a global note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the global note as shown on the records of DTC or its
nominee. We also expect that payments by participants and indirect participants
to owners of beneficial interests in a global note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for accounts of customers registered in
the names of nominees for these customers. The payments, however, will be the
responsibility of the participants and indirect participants, and neither we,
the Trustee nor any paying agent will have any responsibility or liability for:
- any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a global note;
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- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
- any other aspect of the relationship between DTC and its participants; or
- the relationship between the participants and indirect participants and
the owners of beneficial interests in a global note.
Unless and until it is exchanged in whole or in part for definitive notes,
a global note may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in the
ordinary way in accordance with DTC rules and will settle transfers in same-day
funds. If a holder requires physical delivery of a definitive note for any
reason, including to sell notes to persons in jurisdictions which require
physical delivery or to pledge notes, the holder must transfer its interest in a
global note in accordance with the normal procedures of DTC and the procedures
described in the indenture.
We expect that DTC will take any action permitted to be taken by a holder
of notes (including the presentation of notes for exchange as described below)
only at the direction of one or more participants to whose accounts at the DTC
interests in a global note are credited and only in respect of the portion of
the aggregate the principal amount of the notes as to which the participant or
participants has or have given direction. However, if there is an event of
default under the notes, DTC will exchange the global notes for definitive
notes, which it will distribute to its participants. These definitive notes are
subject to restrictions on registration of transfers and will bear appropriate
legends restricting their transfer. Neither we nor the Trustee have any
responsibility for the performance by DTC or its participants or indirect
participants of its obligations under the rules and procedures governing its
operations.
If DTC is at any time unwilling or unable to continue as a depositary for
global notes or ceases to be a clearing agency registered under the Securities
Exchange Act and we do not appoint a successor depositary within 90 days, we
will issue definitive notes in exchange for the global notes. The definitive
notes will be subject to restrictions on registration of transfers and will bear
appropriate legends concerning these restrictions.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchaser
of the notes for the benefit of the holders of the notes and the common stock
issuable on conversion of the notes. Under this agreement, we will, at our cost:
- on or prior to July 3, 2001, file a shelf registration statement with the
SEC covering resales of the notes and the common stock issuable on
conversion of the notes;
- use all reasonable efforts to cause the shelf registration statement to
be declared effective under the Securities Act no later than October 1,
2001; and
- use all reasonable efforts to keep the shelf registration statement
effective after its effective date for as long as required to permit
sales under Rule 144(k) under the Securities Act or any successor rule or
regulation.
We have the right to suspend use of the shelf registration statement,
during specified periods of time relating to pending corporate developments and
public filings with the SEC and similar events. If we fail to file the shelf
registration statement on or prior to the 90th day after original issuance of
the notes, or after the shelf registration statement has been declared
effective, we fail to keep the shelf registration statement effective or usable
in accordance with and during the periods specified in the registration rights
agreement, then, in each case, we will
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pay liquidated damages to all holders of notes and all holders of common stock
issued on conversion of the notes equal to 0.5% of the aggregate principal
amount of notes per annum until such failure is cured.
A holder who elects to sell any securities pursuant to the shelf
registration statement:
- will be required to be named as selling security holder;
- will be required to deliver a prospectus to purchasers;
- will be subject to the civil liability provisions under the Securities
Act in connection with any sales; and
- will be bound by the provisions of the registration rights agreement,
which are applicable, including indemnification obligations.
We refer to the notes and the common stock issuable on conversion of the
notes as registrable securities. Promptly upon request from any holder of
registrable securities, we will provide a form of notice and questionnaire to be
completed and delivered by that holder to us at least three business days before
any intended distribution of registrable securities under the shelf registration
statement. If we receive from a holder of registrable securities a completed
questionnaire, together with other information that we reasonably request, after
the effectiveness of the shelf registration statement, we will file an amendment
to the shelf registration statement, or supplement to the related prospectus, to
permit the holder to deliver a prospectus to purchasers of registrable
securities. Any holder that does not complete and deliver a questionnaire or
provide such other information will not be named as a selling security holder in
the prospectus and therefore will not be permitted to sell any registrable
securities under the shelf registration statement.
GOVERNING LAW
The indenture and the notes are governed by and will be construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $0.01 per share, and 7,500,000 shares of preferred stock, par value
$0.01 per share.
COMMON STOCK
As of March 15, 2002, there were 27,544,807 shares of our common stock
outstanding held of record by approximately 76 holders.
The holders of our common stock are entitled to one vote per share held on
all matters submitted to a vote of our stockholders. Cumulative voting for the
election of directors is not permitted. Holders of our common stock are entitled
to receive pro rata dividends when, as and if declared by our Board of Directors
out of any funds that we can legally use to pay dividends. We may pay dividends
in cash, stock or other property. In some cases, holders of common stock may not
receive dividends until we have satisfied our obligations to any holders of our
preferred stock. If we liquidate, dissolve or wind up our business, holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preferences of any outstanding shares
of our preferred stock.
Holders of our common stock have no preemptive rights to subscribe for
additional shares of our stock or other securities of ours, except as may be
granted by our Board of Directors. The common stock has no conversion rights and
is not redeemable. There are no sinking fund provisions applicable to our common
stock. There is no restriction on our purchase of shares of
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our common stock except for regulatory limits. All outstanding shares of our
common stock are fully paid and non-assessable.
PREFERRED STOCK
We may, by resolution of our Board of Directors, and without any further
vote or action by our stockholders, authorize and issue, subject to limitations
prescribed by law, up to an aggregate of 7,500,000 shares of preferred stock, in
one or more series. The Board determines the rights, privileges and limitations
of preferred stock, including dividend rights, conversion rights, voting rights,
conversion privileges, redemption rights, liquidation rights and/or sinking fund
rights. Preferred stock may be issued in the future in connection with
acquisitions, financings or other matters that the Board of Directors believes
appropriate. No shares of preferred stock are outstanding and we presently have
no plans to issue shares of preferred stock.
One effect of having preferred stock authorized is that the Board of
Directors alone may be able to authorize the issuance of preferred stock in ways
that render more difficult or discourage an attempt to obtain control of Waste
Connections by a tender offer, proxy contest, merger or otherwise, and thereby
protect the continuity of our management. The issuance of shares of preferred
stock may adversely affect the voting and other rights of holders of common
stock. For example, preferred stock may rank prior to the common stock as to
dividend rights, liquidation preferences or both, may have full or limited
voting rights and may be convertible into common stock. Accordingly, the
issuance of preferred stock may discourage bids for the common stock or
otherwise adversely affect the market price of the common stock.
LIMITATION ON LIABILITY
Our Certificate of Incorporation provides that a director will not be
personally liable to Waste Connections or our stockholders for monetary damages
for a breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to the company or our
stockholders;
- for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
- for unlawful payments of dividends, stock purchases or redemptions
prohibited by Delaware corporate law; or
- for any transaction from which the director derived an improper personal
benefit.
If the Delaware General Corporation Law is amended in the future to permit
further limitation of the personal liability of directors, the liability of a
director of Waste Connections will be eliminated or limited to the fullest
extent permitted by that amended law.
CERTAIN STATUTORY, CHARTER AND BY-LAW PROVISIONS
Classified Board of Directors. Our Certificate of Incorporation provides
that our Board will be divided into three classes serving staggered terms, and
that the number of directors in each class will be as nearly equal as is
possible based on the number of directors constituting the entire Board. At each
annual meeting of stockholders, successors to directors of the class whose term
expires at such meeting will be elected to serve for three-year terms.
The classification of directors makes it more difficult for stockholders to
change the composition of the Board. At least two annual meetings of
stockholders, instead of one, will generally be required to change the majority
of the Board. This delay helps ensure that Waste Connections' directors, if
confronted by a third party attempting to force a proxy contest, a tender or
exchange offer or other extraordinary corporate transaction, would have
sufficient time to review the proposal and available alternatives and to act in
what they believe to be the best
35
interests of the stockholders. However, classification could also discourage a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of Waste Connections, even though that attempt
might benefit Waste Connections and our stockholders. The classification of the
Board could thus make it more likely that incumbent directors will retain their
positions.
Number of Directors; Removal; Filling Vacancies. The Certificate of
Incorporation provides that the number of directors will be fixed from time by a
majority of the directors then in office, and may not be less than three or more
than nine unless approved by at least two-thirds of the directors then in
office. In addition, newly created directorships resulting from an increase in
the authorized number of directors, vacancies on the Board resulting from death,
resignation, retirement, disqualification or removal of directors or any other
cause may be filled only by the Board (and not by the stockholders unless there
are no directors in office), if a quorum is then in office and present, or by a
majority of the directors then in office, if less than a quorum is then in
office, or by the sole remaining director. Accordingly, the Board could prevent
any stockholder from enlarging the Board and filling the new directorships with
that stockholder's own nominees.
The Certificate of Incorporation allows directors to be removed only for
cause and only on the affirmative vote of at least 66 2/3% of the voting power
of all the then outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class.
The provisions in the Certificate of Incorporation governing the number of
directors, their removal and the filling of vacancies may discourage a third
party from initiating a proxy contest, making a tender offer or otherwise
attempting to gain control of Waste Connections, or attempting to change the
composition or policies of the Board, even though those attempts might benefit
Waste Connections or our stockholders. These provisions of the Certificate of
Incorporation could thus increase the likelihood that incumbent directors retain
their positions.
Limitations on Special Meetings; No Stockholder Action by Written
Consent. The Certificate of Incorporation and the By-Laws provide that only a
majority of the Board of Directors or the President or Chairman of the Board may
call a special meeting of stockholders, only matters stated in the notice of
meeting or properly brought before the meeting by or at the direction of the
Board may be transacted at the meeting, and stockholder action may be taken only
at a duly called and convened meeting and may not be taken by written consent.
These provisions, taken together, prevent stockholders from forcing
consideration of stockholder proposals over the opposition of the Board, except
at an annual meeting.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. The By-Laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as a director, or to bring other
business before an annual meeting of stockholders. In general, only persons
nominated by or at the direction of the Board, any committee appointed by the
Board, or a stockholder who has given timely written notice to the Secretary of
Waste Connections, may be elected as directors. At an annual meeting, only
business that has been brought before the meeting by, or at the direction of,
the Board, any committee appointed by the Board, or a stockholder who has given
timely written notice to the Secretary of Waste Connections, may be conducted.
To be timely, notice of stockholder nominations or proposals to be made at an
annual or special meeting must be received by Waste Connections not less than 60
days nor more than 90 days before the scheduled date of the meeting (or, if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given, then the 15th day following the earlier of the day the notice was mailed
or the day the public disclosure was made).
By requiring advance notice of nominations by stockholders, the stockholder
notice procedure gives the Board an opportunity to consider the qualifications
of the proposed nominees and inform stockholders about those qualifications. By
requiring advance notice of other proposed business, the stockholder notice
procedure provides a more orderly procedure
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for conducting annual meetings of stockholders. It also gives the Board an
opportunity to inform stockholders in advance of any business proposed to be
conducted at meetings, together with the Board's recommendations regarding
action to be taken with respect to that business, so that stockholders can
better decide whether to attend such a meeting or to grant a proxy regarding the
disposition of any business.
Although the By-Laws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, the stockholder notice procedure may preclude a contest for the
election of directors or the consideration of stockholder proposals. It may also
discourage or deter a third party from soliciting proxies to elect its own slate
of directors or to approve its own proposal, even though consideration of those
nominees or proposals might benefit Waste Connections and our stockholders.
Certain Provisions Relating to Potential Change of Control. The Certificate
of Incorporation authorizes the Board and any Board committee to take action it
determines to be reasonably necessary or desirable to encourage any person or
entity to enter into negotiations with the Board and management about
transactions that may result in a change of control of Waste Connections. The
Board and its committees may also contest or oppose any such transaction that
the Board determines to be unfair, abusive or otherwise undesirable to Waste
Connections, our business, assets, properties or stockholders. The Board or any
Board committee may adopt plans to issue securities of Waste Connections, and to
determine the terms and conditions on which those securities may be exchangeable
or convertible into cash or other securities. In addition, the Board or any
Board committee may treat any holder or class of holders of those designated
securities differently than all other security holders in respect of the terms,
conditions, provisions and rights of those securities.
This authority is intended to give the Board flexibility to act in the best
interests of stockholders in the event of a potential change of control. These
provisions may, however, deter potential acquirors from proposing unsolicited
transactions not approved by the Board and might enable the Board to hinder or
frustrate such a transaction if proposed.
Amendment of the Certificate of Incorporation and By-Laws. The Certificate
of Incorporation contains provisions requiring the affirmative vote of the
holders of at least 66 2/3% of the voting power of the voting stock to amend
some provisions of the Certificate of Incorporation (including the provisions
discussed above relating to the size and classification of the Board,
replacement and/or removal of Board members, action by written consent, special
stockholder meetings, the authorization by the Board to take steps to encourage
or oppose transactions that may result in a change of control of Waste
Connections, and limitation of the liability of directors) or to amend any
provision of the By-Laws by action of stockholders. These provisions make it
more difficult for stockholders to make changes in the Certificate of
Incorporation and the By-Laws, including changes designed to facilitate the
exercise of control over Waste Connections.
Waste Connections is a Delaware corporation and is subject to section 203
of the Delaware General Corporation Law. Section 203 generally prevents a person
who, together with affiliates and associates, owns, or within the past three
years did own, 15% or more of the outstanding voting stock of a corporation from
engaging in some types of business combinations with the corporation for three
years after the date that person became a 15% stockholder, subject to some
exceptions. Business combinations covered by section 203 include a wide variety
of transactions with or caused by a 15% stockholder, including mergers, asset
sales and other transactions in which that Stockholder receives or could receive
a benefit on other than a pro rata basis with other stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which notes may be converted. This summary is based on
laws, regulations, rulings and decisions now in effect, all of which are subject
to change or differing interpretation possibly with retroactive effect. Except
as specifically discussed below with regard to non-U.S. holders, this summary
applies only to beneficial owners that will hold notes and common stock into
which notes may be converted as "capital assets" (within the meaning of Section
1221 of the Internal Revenue Code) and who, for U.S. federal income tax
purposes, are (1) individual citizens or residents of the U.S., (2)
corporations, partnerships or other entities created or organized in or under
the laws of the U.S. or of any political subdivision thereof (unless, in the
case of a partnership, Treasury Regulations otherwise provide), (3) estates, the
incomes of which are subject to U.S. federal income taxation regardless of the
source of such income or (4) trusts subject to the primary supervision of a U.S.
court and the control of one or more U.S. persons or any trust that has a valid
election in effect under applicable Treasury Regulations to be treated as a U.S.
person ("U.S. holders"). Persons other than U.S. holders are subject to special
U.S. federal income tax considerations, some of which are discussed below. This
discussion does not address tax considerations applicable to an investor's
particular circumstances or to investors that may be subject to special tax
rules, such as banks or other financial institutions, holders subject to the
alternative minimum tax, tax-exempt organizations, insurance companies,
regulated investment companies, foreign persons or entities (except to the
extent specifically set forth below), dealers in securities, commodities or
currencies, initial holders whose "functional currency" is not the U.S. dollar,
persons that will hold notes as a position in a hedging transaction, "straddle"
or "conversion transaction" for tax purposes or persons deemed to sell notes or
common stock under the constructive sale provisions of the Code. This summary
discusses the tax considerations applicable to initial holders of the notes who
purchase the notes at their "issue price" as defined in Section 1273 of the Code
and some tax considerations applicable to subsequent purchasers of the notes. We
have not sought any ruling from the IRS or an opinion of counsel with respect to
the statements made and the conclusions reached in the following summary, and
the IRS might not agree with these statements and conclusions. In addition, the
IRS may successfully adopt a contrary position. This summary does not consider
the effect of the federal estate or gift tax laws or the tax laws (except as set
forth below with respect to non-U.S. holders) of any applicable foreign, state,
local or other jurisdiction.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE FEDERAL, ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
U.S. HOLDERS
Taxation of Interest
Interest paid on the notes will be included in the income of a U.S. holder
as ordinary income at the time it is treated as received or accrued, in
accordance with that holder's regular method of accounting for U.S. federal
income tax purposes. Under Treasury Regulations, the possibility of an
additional payment under a note may be disregarded for purposes of determining
the amount of interest or original issue discount income to be recognized by a
holder in respect of the note (or the timing of that recognition) if the
likelihood of the payment, as of the date the notes are issued, is remote. A
holder may require us to redeem any and all of his notes in the event of a
change in control. We believe that the likelihood of a liquidated damages
payment with respect to the notes is remote and do not intend to treat such
possibility as affecting the
38
yield to maturity of any note. Similarly, we intend to take the position that a
change in control is remote under the Treasury Regulations, and likewise do not
intend to treat the possibility of a change in control as affecting the yield to
maturity of any note. If either contingency occurs, it would affect the amount
and timing of the income that must be recognized by a U.S. holder of notes. The
IRS may not agree with these positions. Our determination that there is a remote
likelihood of paying additional interest on the notes is binding on each U.S.
holder unless the holder explicitly discloses in the manner required by
applicable Treasury Regulations that its determination is different from ours.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange (other than a conversion) or redemption of a note,
a U.S. holder generally will recognize capital gain or loss equal to the
difference between (1) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
that amount is attributable to accrued interest income not previously included
in income, which will be taxable as ordinary income, or is attributable to
accrued interest that was previously included in income, which amount may be
received without generating further income) and (2) that holder's adjusted tax
basis in the note. A U.S. holder's adjusted tax basis in a note generally will
equal the cost of the note to that holder. That capital gain or loss will be
long-term capital gain or loss if the U.S. holder's holding period in the note
is more than one year at the time of sale, exchange or redemption. Long term
capital gains recognized by some non-corporate U.S. holders, including
individuals, will generally be subject to a maximum federal rate of tax of 20%.
The deductibility of capital losses is subject to limitations.
Market Discount
The resale of the notes may be affected by the impact on a purchaser of the
"market discount" provisions of the Code. For this purpose, the market discount
on the notes generally will be equal to the amount, if any, by which the stated
redemption price at maturity of the notes immediately after acquisition (other
than at original issue) exceeds the holder's adjusted tax basis in the notes.
Subject to a de minimis exception, these provisions generally require a U.S.
holder who acquires notes at a market discount to treat as ordinary income any
gain recognized on the disposition of the notes to the extent of the "accrued
market discount" on the notes at the time of disposition, unless the holder
elects to include accrued market discount in income currently. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS. In general, market discount will be treated as accruing on a
straight-line basis over the remaining term of the notes at the time of
acquisition, or, at the election of the holder, under a constant yield method. A
holder who acquires notes at a market discount and who does not elect to include
accrued market discount in income currently may be required to defer the
deduction of a portion of the interest on any indebtedness incurred or
maintained to purchase or carry the notes until such notes are disposed of in a
taxable transaction. If a holder acquires notes with market discount and
receives our common stock upon conversion of such notes, the amount of accrued
market discount not previously included in income with respect to the converted
notes through the date of conversion will be treated as ordinary income upon the
disposition of the common stock.
Amortizable Premium
A holder who purchases a note at a premium over its stated principal
amount, plus accrued interest, generally may elect to amortize that premium
("Section 171 premium") from the purchase date to the note's maturity date under
a constant-yield method that reflects
39
semiannual compounding based on the note's payment period. Amortizable premium,
however, will not include any premium attributable to a note conversion feature.
The premium attributable to the conversion feature is the excess, if any, of the
note's purchase price over what the note's fair market value would be if there
were no conversion feature. Amortized Section 171 premium is treated as an
offset to interest income on a note and not as a separate deduction. The
election to amortize a premium on a constant yield method, once made, applies to
all debt obligations held or subsequently acquired by the electing U.S. holder
on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS.
Deductibility of Interest
Generally, under Section 279 of the Code, an interest deduction in excess
of $5.0 million per year is not permitted with respect to some "corporate
acquisition indebtedness." Corporate acquisition indebtedness includes any
indebtedness that is:
- issued to provide consideration for the direct or indirect acquisition of
stock or assets of another corporation;
- subordinated to the claims of trade creditors of the issuing corporation
generally or expressly subordinated to any substantial amount of
unsecured indebtedness, whether outstanding or subsequently issued, of
the issuing corporation;
- convertible directly or indirectly into the stock of the issuing
corporation; and
- issued by a corporation that has a debt to equity ratio that exceeds 2 to
1 or as to which the projected earnings do not exceed three times the
annual interest to be paid or accrued by the corporation.
Our ability to deduct all of the interest payable on the notes will depend
on the application of the foregoing tests to us. We do not anticipate that the
Section 279 rules will apply to limit the deductibility of any of our interest
payments on the notes. However, the application of these rules is subject to
uncertainties and depends on various factual matters, so that there is no
assurance that Section 279 will not apply. A limitation on the deductibility of
our interest payments could have an adverse effect on Waste Connections.
Under Section 163(l) of the Code, no deduction is permitted for interest
paid or accrued on any indebtedness of a corporation that is "payable in equity"
of the issuer or a related party. Debt is treated as debt payable in equity of
the issuer if the debt is part of an arrangement designed to result in payment
of the instrument with or by reference to the equity. These arrangements could
include debt instruments that are convertible at the holder's option if it is
substantially certain that the option will be exercised. The legislative history
indicates that it is not expected the provision will affect debt with a
conversion feature where the conversion price is significantly higher than the
market price of the stock on the date of the debt issuance. Accordingly, we do
not believe that our interest deduction with respect to interest payments on the
notes will be adversely affected by these rules.
Conversion of the Notes
A U.S. holder generally should not recognize any income, gain or loss upon
conversion of a note into common stock except with respect to cash received in
lieu of a fractional share of common stock. A U.S. holder's tax basis in the
common stock received on conversion of a note should be the same as that
holder's adjusted tax basis in the note at the time of conversion (reduced by
any basis allocable to a fractional share interest), and the holding period for
the common stock received on conversion should generally include the holding
period of the note converted.
40
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share).
Distributions on Common Stock
Distributions, if any, made on the common stock after a conversion
generally will be included in the income of a U.S. holder as ordinary dividend
income to the extent of our current or accumulated earnings and profits.
Distributions in excess of our current and accumulated earnings and profits will
be treated as a return of capital to the extent of the U.S. holder's basis in
the common stock and thereafter as capital gain. A dividend distribution to a
corporate U.S. holder may qualify for a dividends received deduction.
Adjustment of Conversion Price
Holders of convertible debt instruments such as the notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of those instruments is adjusted. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Some of the possible adjustments provided in
the notes (including, without limitation, adjustments in respect of taxable
dividends to our stockholders) will not qualify as being pursuant to a bona fide
reasonable adjustment formula. If these adjustments are made, the U.S. holders
of notes will be deemed to have received constructive distributions taxable as
dividends to the extent of our current and accumulated earnings and profits even
though they have not received any cash or property as a result of these
adjustments. In some circumstances, the failure to provide for such an
adjustment may result in taxable dividend income to the U.S. holders of common
stock.
Sale of Common Stock
Upon the sale or exchange of common stock, a U.S. holder generally will
recognize capital gain or loss equal to the difference between (1) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (2) the U.S. holder's adjusted tax basis in the common stock. This
capital gain or loss will be long-term capital gain or loss if the U.S. holder's
holding period in common stock is more than one year at the time of the sale or
exchange. Long-term capital gains recognized by certain non-corporate U.S.
holders, including individuals, will generally be subject to a maximum federal
rate of tax of 20%. A U.S. holder's basis and holding period in common stock
received upon conversion of a note are determined as discussed above under
"Conversion of the Notes." The deductibility of capital losses is subject to
limitations.
Backup Withholding and Information Reporting
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments in respect of a note or common stock to a U.S. holder that is not an
"exempt recipient" and that fails to provide certain identifying information
(such as the holder's taxpayer identification number) in the manner required.
Generally, individuals are not exempt recipients, whereas corporations and some
other entities are exempt recipients. Payments made in respect of a note or
common stock must be reported to the IRS, unless the U.S. holder is an exempt
recipient or otherwise establishes an exemption. The amount of any backup
withholding from a payment to a U.S. holder will be allowed as a credit against
the U.S. holder's federal income tax
41
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.
SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
Taxation of Interest
In general, subject to the discussion below concerning backup withholding,
payments of interest on the notes by us or any paying agent to a beneficial
owner of a note that is a non-U.S. holder will not be subject to U.S.
withholding tax, provided that:
- the non-U.S. holder does not own, actually or constructively, 10% or more
of our total combined voting power of all classes of stock entitled to
vote within the meaning of Section 871(h)(3) of the Code,
- the non-U.S. holder is not a "controlled foreign corporation" with
respect to which Waste Connections is a "related person" within the
meaning of the Code,
- the non-U.S. holder is not a bank receiving interest described in Section
881(c)(3)(A) of the Code, and
- the certification requirements under Section 871(h) or Section 881(c) of
the Code and Treasury Regulations thereunder (discussed below) are
satisfied.
Interest on notes not excluded from U.S. withholding tax as described above
generally will be subject to U.S. withholding tax at a 30% rate, except where an
applicable tax treaty provides for the reduction or elimination of such
withholding tax.
To satisfy the certification requirements referred to above, Sections
871(h) and 881(c) of the Code and the Treasury Regulations thereunder require
that either (1) the beneficial owner of a note must certify, under penalties of
perjury, to us or our paying agent, that that owner is a non-U.S. holder and
must provide that owner's name and address, and U.S. TIN, if any, or (2) a
securities clearing organization, bank or other financial institution that holds
customer securities in the ordinary course of its trade or business and holds
the note on behalf of the beneficial owner thereof must certify, under penalties
of perjury, to us or our paying agent, that the certificate has been received
from the beneficial owner and must furnish the payor with a copy thereof. This
requirement will be fulfilled if the beneficial owner of a note certifies on IRS
Form W-8BEN or successor form, under penalties of perjury, that it is a Non-U.S.
holder and provides its name and address or any financial institution holding
the note on behalf of the beneficial owner files a statement with the
withholding agent that it has received that statement from the beneficial owner
(and furnishes the withholding agent with a copy).
The Treasury Regulations provide alternative methods for satisfying these
certification requirements. The Treasury Regulations also require, in the case
of notes held by a foreign partnership, that the certification be provided by
the partners rather than by the foreign partnership, and the partnership provide
information, including a TIN. A look-through rule applies in the case of tiered
partnerships.
If a non-U.S. holder of a note is engaged in a trade or business in the
U.S. and if interest on the note is effectively connected with the conduct of
that trade or business (and, if some tax treaties apply, is attributable to a
U.S. permanent establishment maintained by the non-U.S. holder in the U.S.), the
non-U.S. holder will generally be subject to U.S. federal income tax on that
interest on a net income basis in the same manner as if it were a U.S. holder.
In lieu of the certificate described above, that a non-U.S. holder must provide
us with a properly executed IRS Form W-8ECI or 4224 or successor form in order
to claim an exemption from any applicable withholding tax. In addition, if that
non-U.S. holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% (or a lower rate provided by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments.
42
Conversion of the Notes
A non-U.S. holder generally will not be subject to U.S. federal withholding
tax on the conversion of a note into common stock. To the extent a non-U.S.
holder receives cash in lieu of a fractional share of common stock upon
conversion, that cash may give rise to gain that would be subject to the rules
described below with respect to the sale or exchange of a note or common stock.
See "Sale, Exchange or Redemption of the Notes or Common Stock" below.
Adjustment of Conversion Price
The conversion price of the notes is subject to adjustment in some
circumstances. Any adjustment could, in some circumstances, give rise to a
deemed distribution to non-U.S. holders of the notes. See "U.S.
Holders -- Adjustment of Conversion Price" above. In that case, the deemed
distribution would be subject to the rules below regarding withholding of U.S.
federal tax on dividends in respect of common stock.
Distributions on Common Stock
Distributions on common stock will constitute a dividend for U.S. federal
income tax purposes to the extent of our current or accumulated earnings and
profits as determined under U.S. federal income tax principles. Dividends paid
on common stock held by a non-U.S. holder will be subject to U.S. federal
withholding tax at a rate of 30% (or lower treaty rate, if applicable) unless
the dividend is effectively connected with the conduct of a U.S. trade or
business by the non-U.S. holder and, if required by a tax treaty, is
attributable to a permanent establishment maintained in the United States, in
which case the dividend will be subject to U.S. federal income tax on net income
that applies to U.S. persons generally (and with respect to corporate holders
under some circumstances, the branch profits tax). A non-U.S. holder may be
required to satisfy certain requirements to claim a reduction of or exemption
from withholding under these rules.
Sale, Exchange or Redemption of the Notes or Common Stock
A non-U.S. holder of a note or common stock will not be subject to U.S.
federal income tax on gains realized on the sale, exchange or other disposition
of such note or common stock unless:
- the non-U.S. holder is an individual who is present in the U.S. for 183
days or more in the taxable year of sale, exchange or other disposition,
and specified conditions are met,
- the gain is effectively connected with the conduct by the non-U.S. holder
of a trade or business in the U.S. and, if certain U.S. income tax
treaties apply, is attributable to a U.S. permanent establishment
maintained by the non-U.S. holder,
- the non-U.S. holder is subject to Code provisions applicable to certain
U.S. expatriates, or
- in the case of a note or common stock held by a person who holds more
than 5% of our stock, we are or have been, at any time within the shorter
of the five-year period preceding that sale or other disposition or the
period the non-U.S. holder held the common stock, a U.S. real property
holding corporation for U.S. federal income tax purposes. We do not
believe that we currently are a USRPHC or that we will become one in the
future.
U.S. Federal Estate Tax
A note held by an individual who at the time of death is not a citizen or
resident of the U.S. (as specially defined for U.S. federal estate tax purposes)
will not be subject to U.S. federal
43
estate tax if the individual did not actually or constructively own 10% or more
of the total combined voting power of all classes of our stock and, at the time
of the individual's death, payments with respect to the note would not have been
effectively connected with the conduct by that individual of a trade or business
in the U.S. Common stock held by an individual who at the time of death is not a
citizen or resident of the U.S. (as specially defined for U.S. federal estate
tax purposes) will be included in the individual's estate for U.S. federal
estate tax purposes, unless an estate tax treaty otherwise applies.
Non-U.S. holders should consult with their tax advisors regarding U.S. and
foreign tax consequences with respect to the notes and common stock.
Backup Withholding and Information Reporting
In the case of payments of interest on a note to a non-U.S. holder,
Treasury Regulations provide that backup withholding and information reporting
will not apply to payments with respect to which either requisite certification
has been received or an exemption has otherwise been established (provided that
neither we nor our paying agent has actual knowledge that the holder is a U.S.
holder or that the conditions of any other exemption are not satisfied).
Dividends on common stock paid to non-U.S. holders that are subject to U.S.
withholding tax, as described above, generally will be exempt from U.S. backup
withholding tax but will be subject to information reporting.
Payments of the proceeds of the sale of a note or common stock to or
through a foreign office of a U.S. broker or a foreign broker that is a
"controlled foreign corporation" within the meaning of the Code or a foreign
person, 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with the conduct of a trade or business within the U.S.
are currently subject to certain information reporting requirements, unless the
payee is an exempt recipient or the broker has evidence in its records that the
payee is a non-U.S. holder and no actual knowledge that such evidence is false
and other conditions are met. Temporary Treasury Regulations indicate that these
payments are not currently subject to backup withholding.
Under current Treasury Regulations, payments of the proceeds of a sale of a
note or common stock to or through the U.S. office of a broker will be subject
to information reporting and backup withholding unless the payee certifies under
penalties of perjury as to his or her status as a non-U.S. holder and satisfies
other qualifications (and no agent of the broker who is responsible for
receiving or reviewing that statement has actual knowledge that it is incorrect)
and provides his or her name and address or the payee otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder of a note or common stock will be allowed as a credit against
that holder's U.S. federal income tax, if any, or will be otherwise refundable
if the required information is furnished to the IRS in a timely manner.
The Treasury Regulations permit the shifting of primary responsibility for
withholding to some financial intermediaries acting on behalf of beneficial
owners. A non-U.S. holder of a note or common stock should consult with its tax
advisor regarding the application of the backup withholding rules to its
particular situation, the availability of an exemption from backup withholding,
and the procedure for obtaining an exemption.
THE PRECEDING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO THE PARTICULAR
U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND
DISPOSING OF THE NOTES AND OUR COMMON STOCK. TAX ADVISORS SHOULD ALSO BE
CONSULTED AS TO THE U.S. ESTATE AND GIFT TAX CONSEQUENCES
44
AND THE FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING OR DISPOSING OF OUR
NOTES AND COMMON STOCK, AS WELL AS THE CONSEQUENCES OF ANY PROPOSED CHANGE IN
APPLICABLE LAWS.
DESCRIPTION OF WASTE CONNECTIONS, MANAGEMENT AND ADDITIONAL INFORMATION
A description of Waste Connections, and information relating to executive
compensation, various benefit plans, voting securities and the principal holders
of voting securities, relationships and related transactions and other related
matters as to Waste Connections is incorporated by reference or set forth in
Waste Connections' Annual Report on Form 10-K for the year ended December 31,
2001, which is incorporated into this prospectus by reference. Stockholders
desiring copies of such documents may contact Waste Connections at our address
or phone number indicated under "Incorporation by Reference."
LEGAL MATTERS
Some legal matters with respect to the validity of the notes offered by
this prospectus and the common stock issuable upon conversion of the notes are
being passed upon for Waste Connections by Shartsis, Friese & Ginsburg LLP, San
Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 2001, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our consolidated financial statements and schedule are incorporated
by reference in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any materials we file with the
SEC at the SEC's public reference room at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C., as well as at the SEC's regional offices at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, NY 10048. You can request copies of these documents by writing
to the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
rooms. Our SEC filings are also available at the SEC's website at
"http://www.sec.gov." In addition, you can read and copy our SEC filings at the
office of the National Association of Securities Dealers, Inc. at 1735 K Street,
Washington, D.C. 20006.
45
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering:
- Annual Report on Form 10-K for the year ended December 31, 2001;
- Report on Form 8-K filed on April 3, 2001; and
- Report on Form 8-K filed on April 26, 2001.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
INVESTOR RELATIONS
WASTE CONNECTIONS, INC.
620 COOLIDGE DRIVE, SUITE 350
FOLSOM, CA 95630
(916) 608-8200
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided in
this prospectus, any prospectus supplement and the registration statement. We
have not authorized anyone to provide you with different information. You should
assume that the information in this prospectus and any prospectus supplement is
accurate only as of the date on the front of the document. Our business,
financial condition, results of operations and prospects may have changed since
that date. Any material changes that we do not disclose in a supplement to this
prospectus will be incorporated by reference to future filings with the SEC.
46
YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS PROSPECTUS. WASTE CONNECTIONS
HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL, AND IT
DOES NOT SEEK AN OFFER TO BUY, THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS CURRENT
ONLY AS OF THE DATE OF THIS PROSPECTUS. ANY MATERIAL CHANGES THAT WE DO NOT
DISCLOSE IN A SUPPLEMENT TO THIS PROSPECTUS WILL BE INCORPORATED BY REFERENCE TO
FUTURE FILINGS WITH THE SEC.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.................... 4
Risk Factors.......................... 8
Use of Proceeds....................... 17
Price Range of Common Stock........... 18
Dividend Policy....................... 18
Selling Holders....................... 19
Plan of Distribution.................. 21
Description of Notes.................. 22
Description of Capital Stock.......... 34
Material United States Federal Income
Tax Considerations.................. 38
Description of Waste Connections,
Management and Additional
Information......................... 45
Legal Matters......................... 45
Experts............................... 45
Where You Can Find More
Information......................... 45
Incorporation by Reference............ 46
[LOGO]
$150,000,000
Prospectus
March 18, 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee........................................ $ 37,500
Printing Expenses*.......................................... $ 200,000
Accounting Fees and Expenses*............................... $ 150,000
Legal Fees and Expenses*.................................... $ 200,000
Credit Rating Expenses...................................... $ 294,000
Miscellaneous Expenses*..................................... $ 200,000
----------
Total*...................................................... $1,081,500
==========
---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Certificate of Incorporation of Waste Connections
provides that a director will not be personally liable to Waste Connections or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- under Section 174 of the Delaware General Corporation Law (the "Delaware
Law"), which concerns unlawful payments of dividends, stock purchases or
redemptions, or
- for any transaction from which the director derived an improper personal
benefit.
If the Delaware Law is subsequently amended to permit further limitation of the
personal liability of directors, the liability of a director of Waste
Connections will be eliminated or limited to the fullest extent permitted by the
Delaware Law as amended.
Section 145(a) of the Delaware Law provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
Section 145(b) of the Delaware Law states that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor
II-1
by reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145(c) of the Delaware Law provides that to the extent that a
present or former director or officer of a corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
Section 145(d) of the Delaware Law states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the present or former director, officer, employee or
agent is proper in the circumstances because the person has met the applicable
standard of conduct set forth in subsections (a) and (b) of Section 145. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority of the directors
who were not parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority vote of
such directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
Section 145(e) of the Delaware Law provides that expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized in
Section 145. Such expenses (including attorneys' fees) incurred by former
officers and directors or other employees and agents may be so paid upon such
terms and conditions, if any, as the corporation deems appropriate.
Section 145(f) of the Delaware Law states that the indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of Section 145 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
Section 145(g) of the Delaware Law provides that a corporation shall have
the power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by such
person in any
II-2
such capacity, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability under the provisions of Section 145.
Section 145(j) of the Delaware Law states that the indemnification and
advancement of expenses provided by, or granted pursuant to, Section 145 shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Pursuant to Section 145 of the Delaware Law, Waste Connections has
purchased insurance on behalf of its present and former directors and officers
against any liability asserted against or incurred by them in such capacity or
arising out of their status as such. Waste Connections has entered into
indemnification agreements with each of its directors and officers providing for
mandatory indemnification and advancement of expenses to the maximum extent
permitted by the Delaware Law.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
*4.1 Form of Note for Waste Connections, Inc.'s 5 1/2%
Convertible Subordinated Notes due April 15, 2006
*4.2 Indenture between Waste Connections, Inc., as Issuer, and
State Street Bank and Trust Company, as Trustee, dated as of
April 4, 2001
*4.3 Purchase Agreement between Waste Connections, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
March 30, 2001
*4.4 Registration Rights Agreement between Waste Connections,
Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
dated as of April 4, 2001
*5.1 Opinion of Shartsis, Friese & Ginsburg LLP
12.1 Statement regarding computation of ratio of earnings to
fixed charges
12.2 Statement of computation of pro forma ratio of earnings to
combined fixed charges and preferred stock dividends
*23.1 Consent of Shartsis, Friese & Ginsburg LLP (included in
Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
*24.1 Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")
*24.2 Power of Attorney -- Robert H. Davis
*25 Statement of Eligibility of Trustee
* Previously filed
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted
II-3
by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of
1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that
provisions (i) and (ii) do not apply if the information required to be
included in a post-effective amendment by those provisions is contained
in periodic reports filed by the Registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the
termination of the offering.
(4) That for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall
be deemed to be part of this registration statement as of the time it
was declared effective.
(5) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(6) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
the issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Folsom, State of California, on March 18, 2002.
WASTE CONNECTIONS, INC.
By: /s/ RONALD J. MITTELSTAEDT*
------------------------------------
Ronald J. Mittelstaedt
President, Chief Executive Officer
and Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on March 18, 2002.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RONALD J. MITTELSTAEDT* President, Chief Executive Officer March 18, 2002
------------------------------------------------ and Chairman
Ronald J. Mittelstaedt
/s/ EUGENE V. DUPREAU* Director and Regional Vice March 18, 2002
------------------------------------------------ President -- Western Region
Eugene V. Dupreau
/s/ MICHAEL W. HARLAN* Director March 18, 2002
------------------------------------------------
Michael W. Harlan
/s/ WILLIAM J. RAZZOUK* Director March 18, 2002
------------------------------------------------
William J. Razzouk
/s/ ROBERT H. DAVIS* Director March 18, 2002
------------------------------------------------
Robert H. Davis
/s/ STEVEN F. BOUCK Executive Vice President and Chief March 18, 2002
------------------------------------------------ Financial Officer
Steven F. Bouck
/s/ MICHAEL R. FOOS* Chief Accounting Officer and Vice March 18, 2002
------------------------------------------------ President -- Finance
Michael R. Foos
/s/ *STEVEN F. BOUCK
------------------------------------------------
Attorney-in-Fact
II-6
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
------- ----------------------- ------
*4.1 Form of Note for Waste Connections, Inc.'s 5 1/2%
Convertible Subordinated Notes due April 15, 2006...........
*4.2 Indenture between Waste Connections, Inc., as Issuer, and
State Street Bank and Trust Company, as Trustee, dated as of
April 4, 2001...............................................
*4.3 Purchase Agreement between Waste Connections, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
March 30, 2001..............................................
*4.4 Registration Rights Agreement between Waste Connections,
Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
dated as of April 4, 2001...................................
*5.1 Opinion of Shartsis, Friese & Ginsburg LLP..................
12.1 Statement regarding computation of ratio of earnings to
fixed charges...............................................
12.2 Statement of computation of pro forma ratio of earnings to
combined fixed charges and preferred stock dividends........
*23.1 Consent of Shartsis, Friese & Ginsburg LLP (included in
Exhibit 5.1)................................................
23.2 Consent of Ernst & Young LLP, Independent Auditors..........
*24.1 Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")...................
*24.2 Power of Attorney -- Robert H. Davis........................
*25 Statement of Eligibility of Trustee.........................
* Previously filed