6-K 1 g85968e6vk.htm CAPITAL ENVIRONMENTAL RESOURCE, INC. FORM 6-K CAPITAL ENVIRONMENTAL RESOURCE, INC. FORM 6-K
Table of Contents



FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

Date of Report: December 11, 2003

Commission file number 333-77633

CAPITAL ENVIRONMENTAL RESOURCE INC.

(Exact name of registrant as specified in its charter)

1005 Skyview Drive

Burlington, Ontario, Canada L7P 5B1
(Address of principal executive offices)

     Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  þ          Form 40-F  o

      Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                

      Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                

      Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  o          No  þ




UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2003
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EXHIBITS
SIGNATURES
NORTH CENTRAL FLORIDA DISTRICT/COMBINED FINANCIALS
FLORIDA RECYCLING SERVICES/CONSOLIDATED FINANCIALS


Table of Contents

CAPITAL ENVIRONMENTAL RESOURCE INC.

INDEX TO FORM 6-K

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

         
Introduction
    2  
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2003
    4  
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 2002
    5  
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2003
    6  
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
    7  
Exhibits
    9  
 
SIGNATURE
    10  

i


Table of Contents

FORWARD LOOKING STATEMENT

      Certain statements included in this Form 6-K, including, without limitation, information appearing under, “Unaudited Pro Forma Condensed Consolidated Financial Statements,” are forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934) that involve risks and uncertainties. Factors set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 20-F/A filed with the SEC could affect the Company’s actual results and could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company in this Report on Form 6-K.

1


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      On November 14, 2003, Capital Environmental Resource Inc. (the “Company”) announced that its wholly-owned subsidiary Waste Services, Inc. (“WSI”), entered into a definitive agreement to acquire from Allied Waste Industries, Inc. (“Allied”), the assets of Allied’s Northern and Central Florida operations (the “Allied Acquisition”) for a purchase price of approximately US $120 million plus working capital, as defined in the asset purchase agreement, which as of September 30, 2003 approximated $4.8 million. The primary markets serviced by the operations are in Tampa, Sarasota and Jacksonville. Completion of the acquisition, which is expected to occur on or before December 31, 2003, is subject to certain customary conditions including but not limited to the Company obtaining financing.

      Additionally, on November 24, 2003 the Company announced that WSI entered into a definitive agreement to acquire all of the issued shares of Florida Recycling Services, Inc. (“FRS”) for a purchase price of approximately $128.5 million in cash, subject to certain changes in working capital and the issuance of 3,250,000 common shares (the “FRS Acquisition”). FRS operations are based in central Florida, primarily servicing the Orlando, Daytona, Fort Myers and Tampa markets. Completion of the acquisition, which is expected to occur on or before January 31, 2004, is subject to certain customary conditions including but not limited to the Company obtaining financing.

      For purposes of this document the Allied Acquisition and the FRS Acquisition are collectively referred to as the “Acquisitions”.

      These unaudited pro forma condensed financial statements have been prepared from the consolidated financial statements of the Company and its acquisition targets. The Company will acquire all of the Northern and Central Florida operating assets of Allied in connection with the Allied Acquisition and all of the operations of FRS in connection with the FRS Acquisition.

      You should read these unaudited pro forma condensed consolidated financial statements in conjunction with the Consolidated Financial Statements of the Company as filed on Form 20-F/A, and the Unaudited Condensed Consolidated Financial Statements of the Company as filed on Form 6-K as well as the audited and unaudited financial statements of the Acquisitions included herein.

      The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2003 and the year ended December 31, 2002 give effect to the Acquisitions and the following transactions and events as if each had occurred as of the beginning of the period presented:

  •  the financing of the Acquisitions and related expenses through the proceeds of the $250 million senior subordinated indebtedness;
 
  •  the elimination of certain indebtedness, liabilities and assets (including inter-company debt or receivables) not assumed by the Company and the related income statement effects;
 
  •  the acquisition of certain receivables, trucks, and containers from other Allied entities;
 
  •  the preliminary allocation of the purchase price, to the assets and liabilities of the Company based upon a preliminary estimate of the fair value of assets being acquired and liabilities being assumed by the Company;
 
  •  the amortization of certain acquired intangibles; and
 
  •  the tax effect of the foregoing events.

      The unaudited pro forma condensed consolidated balance sheet gives effect to the Acquisitions and the other transactions and events previously described as if each had occurred on June 30, 2003.

      The pro forma adjustments are based on preliminary estimates, available information and certain assumptions that the Company believes are reasonable, and may be revised as additional information

2


Table of Contents

becomes available. The pro forma adjustments are more fully described in the notes to the unaudited pro forma condensed consolidated financial statements.

      The unaudited pro forma condensed consolidated financial statements should not be considered indicative of actual results that would have been achieved had the Acquisitions and the other transactions and events described above been completed as of the dates or as of the beginning of the periods indicated and do not purport to project the financial condition or results of operations and cash flows for any future date or period.

3


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2003
(in thousands except per share data)
                                                   
Allied FRS
Historicals Acquisition Acquisition Adjustments Notes Pro Forma






Revenue
  $ 56,562     $ 46,013     $ 44,804     $             $ 147,379  
Operating expenses:
                                               
 
Cost of operations
    35,321       32,862       33,360       (723 )     (b )     100,820  
 
Selling, general and administrative
    13,047       4,063       5,278       (1,119 )     (b )     20,456  
                              (813 )     (b )        
 
Depreciation, depletion and amortization
    6,791       2,269       3,397       2,317       (a )     15,046  
                                272       (b )        
 
Foreign exchange loss and other
    357                                 357  
     
     
     
     
             
 
Income from operations
    1,046       6,819       2,769       66               10,700  
Other
          (50 )     (50 )                   (100 )
Interest income
          (2,510 )           2,510       (b )      
Interest expense
    5,185             1,015       11,680       (c )     16,865  
                              (1,015 )     (b )        
     
     
     
     
             
 
Income (loss) before income taxes
    (4,139 )     9,379       1,804       (13,109 )             (6,065 )
Income tax provision (benefit)
    (334 )     3,752       20       (3,772 )     (d )     (334 )
     
     
     
     
             
 
Net income (loss) before cumulative effect of change in accounting principle
  $ (3,805 )   $ 5,627     $ 1,784     $ (9,337 )           $ (5,731 )
     
     
     
     
             
 
Basic loss per share before cumulative effect of change in accounting principle
  $ (0.68 )                                   $ (0.67 )
Diluted loss per share before cumulative effect of change in accounting principle
  $ (0.68 )                                   $ (0.67 )
Shares used in computing per share amounts:
                                               
 
Basic
    36,537                   3,250               39,787  
 
Dilutive
    36,537                   3,250               39,787  

The accompanying notes are an integral part of these statements.

4


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2002
(in thousands except per share data)
                                                   
Allied FRS
Historicals Acquisition Acquisition Adjustments Notes Pro Forma






Revenue
  $ 98,846     $ 90,576     $ 84,784     $             $ 274,206  
Operating expenses:
                                               
 
Cost of operations
    61,250       63,927       64,452       (1,313 )     (b )     188,316  
 
Selling, general and administrative
    19,470       6,888       9,562       (2,438 )     (b )     33,482  
 
Depreciation, depletion and amortization
    10,718       4,663       9,215       4,635       (a )     29,723  
                              492       (b )        
 
Recovery related to sale of US assets
    (718 )                               (718 )
 
Foreign exchange gain and other
    (1,441 )                               (1,441 )
     
     
     
     
             
 
Income from operations
    9,567       15,098       1,555       (1,376 )             24,844  
Other
                12                     12  
Interest income
          (3,409 )           3,409       (b )      
Interest expense
    5,727             2,093       23,359       (c )     29,086  
                              (2,093 )     (b )        
     
     
     
     
             
 
Income (loss) before income taxes
    3,840       18,507       (550 )     (26,051 )             (4,254 )
Income tax provision (benefit)
    1,713       7,403             (7,403 )     (d )     1,713  
     
     
     
     
             
 
Net income (loss)
  $ 2,127     $ 11,104     $ (550 )   $ (18,648 )           $ (5,967 )
     
     
     
     
             
 
Basic loss per share
  $ (0.39 )                                   $ (0.58 )
Diluted loss per share
  $ (0.39 )                                   $ (0.58 )
Shares used in computing per share amounts:
                                               
 
Basic
    32,414                   3,250               35,664  
 
Dilutive
    32,414                   3,250               35,664  

The accompanying notes are an integral part of these statements.

5


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2003
(in thousands)
                                                                                   
Allied(1) FRS(1) Allied FRS Financing
Historical Acquisition Acquisition Adjustment Notes Adjustment Notes Adjustment Notes Pro Forma










ASSETS
                                                                               
Cash and cash equivalents
  $ 16,282     $ 25     $ 339     $ (124,790 )     (e)     $ (128,500 )     (e)     $ 243,125       (h)     $ 6,481  
Accounts receivable
    19,793       3,290       14,772       6,108       (f)                                   43,963  
Prepaid expenses and other assets
    2,551       533       2,849                     (855 )     (f)                     5,078  
     
     
     
     
             
             
             
 
 
Total current assets
    38,626       3,848       17,960       (118,682 )             (129,355 )             243,125               55,522  
Property and equipment, net
    162,496       17,046       18,143       4,232       (f)                                   201,917  
Goodwill
    75,741       116,168       174       (116,168 )     (f)       (174 )     (f)                     278,385  
                              86,704       (g)       115,940       (g)                          
Deferred income taxes
    2,699             598                     (598 )     (f)                     2,699  
Other intangibles and other assets
    17,201       64       503       13,159       (g)       10,014       (g)       6,875       (h)       47,193  
                                              (485 )     (f)                          
                                              (138 )     (g)                          
     
     
     
     
             
             
             
 
 
Total assets
  $ 296,763     $ 137,126     $ 37,378     $ (130,755 )           $ (4,796 )           $ 250,000             $ 585,716  
     
     
     
     
             
             
             
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                               
Accounts payable
  $ 5,303     $ 5,226     $ 7,615     $ 500       (g)     $ 500       (g)     $             $ 13,918  
                              (5,226 )     (f)                                          
Notes payable
                10,500                     (10,500 )     (f)                      
Accrued expenses and other liabilities
    17,601       1,872       3,069       350       (g)       500       (g)                     22,137  
                              (1,255 )     (f)                                          
Deferred revenue
          4,544                                                       4,544  
Current portion of long-term debt
    1,224       5       8,532                     (8,532 )     (f)                     1,229  
Current portion of capital lease obligations
    1,407                                                             1,407  
     
     
     
     
             
             
             
 
 
Total current liabilities
    25,535       11,647       29,716       (5,631 )             (18,032 )                           43,235  
Capital lease obligations
    1,251                                                             1,251  
Redeemable Preferred Shares
    40,632                                                             40,632  
Due to affiliate
          80,863             (80,863 )     (f)                                    
Long-term obligations
    68,974       355       10,188                     (10,188 )     (f)       250,000       (h)       319,329  
     
     
     
     
             
             
             
 
 
Total liabilities
    136,392       92,865       39,904       (86,494 )             (28,220 )             250,000               404,447  
     
     
     
     
             
             
             
 
Common stock
    128,055             100                     20,898       (e)                     148,953  
                                              (100 )     (e)                          
Series 1 Preferred Shares
    26,891                                                             26,891  
Other additional paid-in-capital
    13,152             11,671                     (11,671 )     (e)                     13,152  
Investment by Parent
          44,261             (44,261 )     (e)                                    
Options, warrants and deferred compensation
    19,455                                                             19,455  
Accumulated other comprehensive income
    9,783                                                             9,783  
Accumulated deficit
    (36,965 )           (14,297 )                   14,297       (e)                     (36,965 )
     
     
     
     
             
             
             
 
 
Total shareholders’ equity
    160,371       44,261       (2,526 )     (44,261 )             23,424                             181,269  
     
     
     
     
             
             
             
 
 
Total liabilities and shareholders’ equity
  $ 296,763     $ 137,126     $ 37,378     $ (130,755 )           $ (4,796 )           $ 250,000             $ 585,716  
     
     
     
     
             
             
             
 

(1) Allied Acquisition and FRS Acquisition balance sheet amounts are as of September 30, 2003.

The accompanying notes are an integral part of these statements

6


Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

      The following notes are a summary of the pro forma adjustments reflected in, and form an integral part of, the unaudited pro forma condensed consolidated financial statements.

(a)  Reflects the amortization of intangible assets based on the estimate of intangible asset values, primarily service agreements, customer lists and non-compete agreements, over their expected useful lives of five years.

(b)  Reflects the removal of rent expense from cost of operations for trucks and containers leased from other Allied subsidiaries. These trucks and containers are being acquired as part of the Allied Acquisition. Rent expense being removed is $723 for the six months ended June 30, 2003 and $1,313 for the year ended December 31, 2002. Depreciation relative to the assets being acquired is $272 for the six months ended June 30, 2003 and $492 for the year ended December 31, 2002.

  Reflects the removal of losses on the sale of receivables to another subsidiary of Allied. These receivables are being acquired as part of the Allied Acquisition. Loss on the sale of receivables being removed is $813 for the six months ended June 30, 2003 and nil for the year ended December 31, 2002.
 
  Reflects the elimination of FRS management fees related to agreements not being assumed approximating $1,344 for the six months ended June 30, 2003 and $2,888 for the year ended December 31, 2003 offset by new employment and consulting agreements approximating $225 for the six months ended June 30, 2003 and $450 for the year ended December 31, 2003.
 
  Reflects the elimination of interest income received on balances due from affiliate not being acquired as part of the Allied Acquisition. Such amounts were $2,510 for the six months ended June 30, 2003 and $3,409 for the year ended December 31, 2002.

  Reflects the elimination of FRS interest, expense of $1,015 for the six months ended June 30, 2003 and $2,093 for the year ended December 31, 2002, related to debt not assumed.

(c)  Reflects interest expense from the issuance by the Company of the $250 million senior subordinated indebtedness as of the beginning of the period being presented. The all-in interest cost includes interest based upon the stated rate of the notes, amortizing debt issue costs and underwriter fees. The stated rate of the notes is assumed to be 9.0%. For each additional 100bps change in the actual borrowing rate from the assumed rate, interest expense would increase or decrease by approximately $2.5 million. The Company expects to enter into a short-term bridge facility to close the Allied Acquisition. The bridge facility is expected to be outstanding for two months with a stated rate of 9.0%. The Company has excluded from the pro forma adjustments approximately $3.6 million of estimated fees and expenses related to the bridge facility.

(d)  Reflects the elimination of U.S. income taxes otherwise payable as a result of the pro forma adjustments previously described. The Company has not assumed any additional benefit of the tax losses attributed to the pro forma adjustments as it does not expect to benefit from such losses at this time.

(e)  Reflects the payment of cash purchase price as well as the issuance of 3,250 common shares at a fair value of $6.43 per share and the elimination of predecessor entity equity components. Fair value of the shares issued in connection with the acquisition was based upon the average closing market price of the Company’s common stock during the five-day period consisting of the period two days before, the day of and two days after the terms of the acquisition were agreed.

(f)  Reflects the elimination of assets not acquired and liabilities not assumed as part of the Acquisitions. The assets not being acquired primarily relate to predecessor entity goodwill and certain tax assets. The liabilities not assumed primarily relate to indebtedness of FRS and accounts payable and accrued expenses of Allied. Additionally, the Company is acquiring certain receivables, trucks and containers

7


Table of Contents

from other Allied entities. Also, refer to Note (g) for further details concerning the allocation of purchase price.

(g)  Reflects the preliminary allocation of purchase price based upon a preliminary estimate of the fair value of assets being acquired and liabilities being assumed by the Company as follows:

                                 
Allied FRS
Acquisition Acquisition Total



Purchase price:
                       
 
Cash
  $ 124,790     $ 128,500     $ 253,290  
 
Common Stock issued
          20,898       20,898  
 
Warrants issued
          138       138  
     
     
     
 
       
Total purchase price
    124,790       149,536       274,326  
     
     
     
 
Allocated as follows:
                       
 
Net book value of assets acquired / (liabilities) assumed
    44,261       (2,526 )     41,735  
 
Adjustments to net book value:
                       
   
Receivables acquired
    6,108             6,108  
   
Trucks and containers acquired
    4,232             4,232  
   
Accounts payable and accrued expenses not assumed
    6,481             6,481  
   
Indebtedness not assumed
          29,220       29,220  
   
Due to affiliate not assumed
    80,863             80,863  
   
Historical goodwill and intangible assets
    (116,168 )     (659 )     (116,827 )
   
Additional liability assumed
    (850 )     (1,000 )     (1,850 )
   
Other assets not acquired
          (855 )     (855 )
   
Deferred income tax asset not acquired
          (598 )     (598 )
     
     
     
 
     
Adjusted net book value of assets/(liabilities)
    24,927       23,582       48,509  
     
     
     
 
Excess purchase price to be allocated
  $ 99,863     $ 125,954     $ 225,817  
     
     
     
 
Allocated as follows:
                       
 
Goodwill
  $ 86,704     $ 115,940     $ 202,644  
 
Service contracts, customer lists and non-compete agreements
    13,159       10,014       23,173  
     
     
     
 
       
Total allocated
  $ 99,863     $ 125,954     $ 225,817  
     
     
     
 

(h)  Reflects the issuance by the Company of $250 million senior subordinated indebtedness at a rate of 9.0% for eight years, and underwriting, professional and legal fees of approximately $6,875.

Other Note:

  •  Amounts used in the numerator for the calculation of loss per share before cumulative effect of change in accounting principle for the historical and pro forma periods are as follows:

                                   
For the six months ended For the year ended
June 30, 2003 December 31, 2002


Historical Pro Forma Historical Pro Forma




Numerator:
                               
 
Net income (loss) before cumulative effect of change in accounting principle
  $ (3,805 )   $ (5,731 )   $ 2,127     $ (5,967 )
 
Deemed dividend on Series 1 Preferred Shares
    (21,021 )     (21,021 )     (14,717 )     (14,717 )
     
     
     
     
 
 
Net loss attributable to Common Shareholders
  $ (24,826 )   $ (26,752 )   $ (12,590 )   $ (20,684 )
     
     
     
     
 

  •  Historical interest expense for the six months ended June 30, 2003 includes interest expense related to the Company’s Redeemable Preferred Shares of approximately $2,198.

8


Table of Contents

EXHIBITS

99.1                      North Central Florida District (Wholly Owned Divisions of Allied Waste Industries, Inc.) Combined Financial Statements, as of December 31, 2002 and 2001 and for the three years ended December 31, 2002 and Combined Financial Statements, as of September 30, 2003, December 31, 2002 and for the nine months ended September 30, 2003 and September 30, 2002

99.2                      Florida Recycling Services, Inc. of Illinois and Subsidiary, Consolidated Financial Statements for the years ended December 31, 2002, 2001 and 2000 and as of and for the nine months ended September 30, 2003 and September 30, 2002

9


Table of Contents

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

By:  
 
/s/ DAVID SUTHERLAND-YOEST  

 
David Sutherland-Yoest  
Chairman and Chief Executive Officer  
 
/s/ RONALD L. RUBIN  

 
Ronald L. Rubin  
Chief Financial Officer  

Date: December 11, 2003

10