-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CHiXrvL95jOdXWlFxYJl776U1nAPNgObcpSMJEikBb+p9LevtwUlQIgKBYVnV9mi GA4oifWx7puEqLblurLjxQ== 0000944209-96-000214.txt : 19960814 0000944209-96-000214.hdr.sgml : 19960814 ACCESSION NUMBER: 0000944209-96-000214 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES FILTER CORP CENTRAL INDEX KEY: 0000318025 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 330266015 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10728 FILM NUMBER: 96610209 BUSINESS ADDRESS: STREET 1: 73 710 FRED WARING DR STE 222 CITY: PALM DESERT STATE: CA ZIP: 92260 BUSINESS PHONE: 6193400098 MAIL ADDRESS: STREET 1: 73 710 FRED WARING DRIVE SUITE 222 CITY: PALM DESERT STATE: CA ZIP: 92260 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TOXXIC CONTROL INC DATE OF NAME CHANGE: 19910401 FORMER COMPANY: FORMER CONFORMED NAME: NOVAN ENERGY INC DATE OF NAME CHANGE: 19871227 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 and 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 1996 ------------- or [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission file number 1-10728 ------- UNITED STATES FILTER CORPORATION -------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 33-0266015 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 40-004 COOK STREET, PALM DESERT, CA 92211 ------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (619) 340-0098 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- The number of shares of common stock, $.01 par value, outstanding as of August 7, 1996, is shares. Total number of pages 17 ---- THERE IS ONE EXHIBIT FILED WITH THIS REPORT. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND MARCH 31, 1996 (UNAUDITED)
June 30, 1996 March 31, 1996 ------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 7,483,000 16,685,000 Short-term investments 1,443,000 65,000 Accounts receivable, net 171,510,000 183,666,000 Costs and estimated earnings in excess of billings on uncompleted contracts 44,242,000 32,156,000 Inventories 60,722,000 57,511,000 Prepaid expenses 8,595,000 7,230,000 Deferred taxes 3,577,000 3,577,000 Other current assets 10,537,000 9,388,000 ------------ ----------- Total current assets 308,109,000 310,278,000 ------------ ----------- Property, plant and equipment, net 163,387,000 159,631,000 Investment in leasehold interests, net 27,392,000 27,688,000 Cost in excess of net assets of businesses acquired, net 279,024,000 271,891,000 Other assets 37,875,000 33,091,000 ------------ ----------- $815,787,000 802,579,000 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 65,514,000 80,122,000 Accrued liabilities 87,365,000 86,391,000 Current portion of long-term debt 1,542,000 7,757,000 Billings in excess of costs and estimated earnings on uncompleted contracts 19,510,000 14,854,000 Other current liabilities 19,466,000 23,202,000 ----------- ----------- Total current liabilities 193,397,000 212,326,000 ----------- ----------- Notes payable 42,507,000 30,413,000 Long-term debt, excluding current portion 7,767,000 8,286,000 Convertible subordinated debentures 199,975,000 200,000,000 Deferred taxes 1,929,000 1,929,000 Other liabilities 13,876,000 10,780,000 ----------- ----------- Total liabilities 459,451,000 463,734,000 ----------- -----------
(Continued) SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2 UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (UNAUDITED)
June 30, 1996 March 31, 1996 ------------- -------------- Stockholders' equity: Common stock, $.01 par value; 75,000,000 shares authorized; 43,738,571 and 42,178,173 shares issued and outstanding at June 30, 1996 and March 31, 1996, respectively 437,000 422,000 Additional paid-in capital 352,787,000 341,715,000 Currency translation adjustment 2,009,000 1,836,000 Retained earnings (accumulated deficit) 1,103,000 (5,128,000) ------------ ----------- Total stockholders' equity 356,336,000 338,845,000 ------------ ----------- $815,787,000 802,579,000 ============ ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
1996 1995 ------------ ---------- Revenues $150,801,000 98,489,000 Cost of sales 104,060,000 68,456,000 ------------ ---------- Gross profit 46,741,000 30,033,000 Selling, general and administrative expenses 33,498,000 23,724,000 ------------ ---------- Operating income 13,243,000 6,309,000 Other income (expense): Interest expense (4,280,000) (2,653,000) Other income 585,000 705,000 ------------ ---------- (3,695,000) (1,948,000) ------------ ---------- Income before income taxes 9,548,000 4,361,000 Income taxes 2,631,000 1,184,000 ------------ ---------- Net income $ 6,917,000 3,177,000 ============ ========== Net income per common share $ 0.15 0.10 ============ ========== Weighted average number of common shares outstanding 45,133,000 30,881,000 ============ ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 UNITED STATES FILTER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
1996 1995 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,917,000 3,177,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 9,821,000 4,744,000 Provision for doubtful accounts 419,000 646,000 Gain on sale of property and equipment (5,000) (177,000) Stock option compensation - 28,000 Change in operating assets and liabilities: (Increase) decrease in accounts receivable 15,541,000 (5,879,000) Increase in costs and estimated earnings on uncompleted contracts (12,086,000) (10,968,000) Increase in inventories (3,153,000) (4,568,000) Increase in other assets (7,306,000) (3,899,000) Decrease in accounts payable and accrued expenses (13,791,000) (5,322,000) Increase (decrease) in billings in excess of costs and estimated earnings or uncompleted contracts 4,656,000 (2,068,000) Increase (decrease) in other liabilities (1,889,000) 7,078,000 ------------ ------------ Net cash used in operating activities (876,000) (17,208,000) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Payment for purchase of property, plant & equipment (11,159,000) (3,818,000) Payment for purchase of acquisitions, net of cash acquired (5,209,000) (91,739,000) Investment in leasehold interests Proceeds from disposal of equipment 79,000 1,282,000 Purchase of short-term investments (1,378,000) (2,979,000) ------------ ------------ Net cash used in investing activities (17,667,000) (97,254,000) ------------ ------------
(Continued) SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 UNITED STATES FILTER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (CONTINUED) (UNAUDITED)
1996 1995 ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt (3,399,000) (237,000) Dividends paid on preferred stock (40,000) (40,000) Proceeds from borrowings on notes payable and long-term debt 12,094,000 6,155,000 Proceeds from issuance of common stock 686,000 98,114,000 ----------- ----------- Net cash provided by financing activities 9,341,000 103,992,000 ----------- ----------- Net decrease in cash (9,202,000) (10,470,000) Cash balance at March 31, 1996 and 1995 16,685,000 16,274,000 ----------- ----------- Cash balance at June 30, 1996 and 1995 $ 7,483,000 5,804,000 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 3,123,000 3,341,000 =========== =========== Cash paid during the period for income taxes $ 273,000 357,000 =========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 UNITED STATES FILTER CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 AND MARCH 31, 1996 (UNAUDITED) Note 1. Operations and Significant Accounting Policies ---------------------------------------------- The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such regulations. The condensed consolidated financial statements reflect all adjustments and disclosures which are, in the opinion of management of the Company, necessary for a fair presentation of the information contained therein. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, a copy of which may be obtained from the Company. The results of operations for interim periods are not necessarily indicative of the results of operations for full fiscal years. Income per Common Share ----------------------- Income per common share is computed based on the weighted average number of shares outstanding. Common stock equivalents, consisting of convertible preferred stock, options and warrants are included in the computation of income per share when their effect is dilutive. All income per share data in the accompanying consolidated financial statements have been restated to reflect a three for two common stock split paid by way of stock dividend on July 15, 1996. Primary and fully diluted income per common share for the three months ended June 30, 1996 and 1995, respectively, were calculated as follows: 7
1996 1995 ------------- ----------- Net income $ 6,917,000 3,177,000 Dividends on preferred stock - (179,000) ----------- ---------- Adjusted net income applicable to common shares $ 6,917,000 2,998,000 =========== ========= Weighted average shares outstanding 43,552,000 30,191,000 Add: Exercise of stock options and warrants reduced by the number of shares purchased with proceeds 1,581,000 690,000 ----------- ---------- Adjusted weighted average shares outstanding 45,133,000 30,881,000 =========== ========== Income per common share: Net income $ 0.15 0.10 Dividends on preferred stock - (0.00) ----------- ---------- Adjusted income per common share $ 0.15 0.10 =========== ==========
Note 2. Inventories ----------- Inventories at June 30, 1996 and March 31, 1996 consist of the following:
June 30, 1996 March 31, 1996 ------------- -------------- Raw materials $23,282,000 21,048,000 Work-in-process 15,773,000 16,650,000 Finished goods 21,667,000 19,813,000 ----------- ---------- $60,722,000 57,511,000 =========== ==========
8 Note 3. Acquisitions ------------ On May 31, 1996, a wholly owned subsidiary of the Company merged with and into Zimpro Environmental, Inc. ("Zimpro"), in a tax free reorganization. In connection with this acquisition, the Company issued 585,074 shares (877,611 shares on a post-split basis) of the Company's common stock for all of the outstanding common and preferred shares of Zimpro pursuant to an Agreement and Plan of Merger among the Company, Landegger Environmental Holdings Inc., The Black Clawson Company, a trust, and two limited partnerships in the John Hancock Capital Growth Fund ("The Hancock Funds") (collectively the "Stockholders"). In addition, the Company liquidated existing indebtedness to the Hancock Funds in exchange for 114,994 shares (172,491 shares on a post-split basis) of Company common stock and $1,000,000 in cash. Zimpro, based in Wisconsin, manufactures wastewater treatment equipment with proprietary technologies in wet air oxidation, landfill leachate treatment systems, ground water remediation, filtration and sludge treatment systems. This transaction has been accounted for as a pooling of interests and, accordingly, the combined consolidated financial statements and notes thereto for all periods presented have been restated to include the accounts and operations of Zimpro. Separate results of operations of the combined entities for the three months ended June 30, 1995 are as follows:
Three Months Ended June 30, 1995 -------------- Revenues: U.S. Filter (as previously reported) $91,539,000 Zimpro 6,950,000 ----------- Combined $98,489,000 =========== Net Income (loss) U.S. Filter (as previously reported) $ 3,359,000 Zimpro (182,000) ----------- Combined $ 3,177,000 =========== Income per common share and common equivalent share: As previously reported $ 0.11 =========== As restated $ 0.10 ===========
9 On June 10, 1996, the Company entered into a definitive merger agreement with Davis Water & Waste Industries, Inc. ("Davis") in connection with a proposed acquisition by the Company of all of the outstanding capital stock of Davis. Pursuant to the terms of the definitive agreement the Company will exchange 1.3995 shares of its common stock for each of the approximately 3,443,000 shares of Davis, subject to adjustment. Davis manufactures and markets products relating to the distribution of water and wastewater. Davis also designs, engineers, manufactures, sells and installs water and wastewater treatment equipment to comply with applicable health and water quality standards. The proposed transaction is expected to be completed on August 23, 1996, subject to Davis shareholder approval and other conditions precedent, and will be accounted for as a pooling of interests. The Company's future consolidated financial statements will be restated to include the accounts and results of Davis. Davis had revenues of $202,621,000, $215,649,000 and $226,489,000 for the fiscal years ended April 30, 1994, 1995, and 1996, respectively. Additionally, Davis had net income (losses) of ($5,340,000), $3,448,000 and $5,749,000 for the fiscal years ended April 30, 1994, 1995, 1996, respectively. Note 4. Stockholders' Equity -------------------- On July 15, 1996, the Company paid in the form of a stock dividend a three for two split of the Company's common stock. All references to income per share and other common stock information in the accompanying condensed consolidated financial statements and notes thereto have been restated to reflect the stock dividends. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations --------------------- Revenues. Revenues for the three months ended June 30, 1996 were $150,801,000, an increase of $52,312,000 from $98,489,000 for the comparable period of the prior fiscal year. This increase was due primarily to acquisitions completed by the Company after the first quarter ended June 30, 1995. Revenues from capital equipment sales for the three months ended June 30, 1996 represented 52% of total revenues, while revenues from services and operations represented 30%, and revenues from replacement parts and consumables represented 18%. Gross Profit. Gross profit increased 55.6% to $46,741,000 for the three months ended June 30, 1996 from $33,033,000 for the comparable period of the prior fiscal year. Total gross profit as a percentage of revenue ("gross margin") increased to 31.0% for the three months ended June 30, 1996, compared to 30.5% for the comparable period of the prior fiscal year. The increase in gross margin through June 30, 1996 was due to both a continued strengthening of gross margins in the recurring and higher margin service-based revenue business and to increased economies of scale in manufacturing operations. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $33,498,000 for the three months ended June 30, 1996 from $23,724,000 for the comparable period of the prior fiscal year. This increase was primarily due to the addition of sales and administrative personnel accompanying the Company's recent acquisitions. As a percentage of revenues, selling, general and administrative expenses decreased to 22.2% during the three months ended June 30, 1996, as compared to 24.1% for the comparable period of the prior fiscal year. The decrease in the percentage of selling, general and administrative expenses to revenues for the three months ended June 30, 1996 was due primarily to the benefits derived from economies of scale resulting from growth in revenues, the continued implementation of cost controls and elimination of certain redundancies. 11 Interest Expense. Interest expense increased to $4,280,000 for the three months ended June 30, 1996 from $2,653,000 for the comparable period of the prior fiscal year. Interest expense for the three months ended June 30, 1996 consists primarily of interest on the Company's 5.0% Convertible Subordinated Debentures issued October 20, 1993 and 6.0% Convertible Subordinated Notes issued September 18, 1995, respectively, and increased borrowings under the Company's bank line of credit to finance its revenue expansion and recent acquisitions. At June 30, 1996, the Company had cash and short-term investments of $8,926,000. Income Taxes. Income tax expense increased to $2,631,000 for the three months ended June 30, 1996 from $1,184,000 for the comparable period of the prior fiscal year. This increase was attributable to increased net income. The Company's effective tax rate for the three months ended June 30, 1996 was 27.6%. As of March 31, 1996, the Company had net operating loss carryforwards in France of approximately $19,952,000 and other European countries of approximately $7,338,000 for which no financial statement benefit has been recognized. Future recognition of these carryforwards will be reflected if the above operations generate sufficient earnings before the expiration periods of the loss carryforwards. In addition, the benefit of the French loss carryforwards must be shared equally between the Company and Alcoa until March 31, 1997, pursuant to an agreement between the Company and Alcoa related to the Company's acquisition of SCT in 1992. Net Income. Net income increased to $6,917,000 for the three months ended June 30, 1996 from $3,177,000 for the comparable period of the prior fiscal year. Net income per common share increased to $0.15 per share (based upon 45,133,000 weighted average common shares outstanding) for the three months ended June 30, 1996 from $0.10 per common share (based upon 30,881,000 weighted average common shares outstanding) for the comparable period of the prior fiscal year, after deducting $179,000 for dividends on the Company's preferred shares for the three-month period ended June 30, 1995. 12 LIQUIDITY AND CAPITAL RESOURCES The Company's principal sources of funds are cash and other working capital, cash flow generated from operations and borrowings under the Company's bank line of credit. At June 30, 1996, the Company had working capital of $114,712,000, including cash and short-term investments of $8,926,000. The Company's long-term debt at June 30, 1996 included $59,975,000 of convertible subordinated debentures bearing interest at 5.0% per annum due in year 2000, $140,000,000 of convertible subordinated debt due in year 2005 and bearing interest at 6.0% per annum, and notes payable totaling $9,309,000 and bearing interest at rates ranging from 2.0% to 11.5%. As of June 30, 1996, the Company had an available bank line of credit of $135,000,000, of which there were outstanding borrowings of $42,507,000 and outstanding letters of credit of $14,753,000. As of March 31, 1996, the Company had net operating loss carryforwards generated from SCT of approximately $19,952,000, for which no financial statement benefit has been recognized. Approximately $1,946,000 of the net operating loss carryforwards will expire in the fiscal years 1997 to 1998, while the remainder have an indefinite carryforward period. The Company also has net operating loss carryforwards in other European countries of approximately $7,338,000 which expire from 1997 to 2002 for which no financial statement benefit has been recognized. No benefit has been given to these net operating loss carryforwards because of the limited carryforward periods or the uncertain business conditions relating to the operations giving rise to such carryforwards. Future recognition of these net operating loss carryforwards will occur if the operations of SCT generate sufficient earnings before the expiration of the respective net operating loss carryforwards. In addition, in the case of SCT, until March 31, 1997, the benefit, if any, of such carryforwards is to be shared equally between the Company and Alcoa. The Company also has available at March 31, 1996, other net operating loss carryforwards for Federal income tax purposes of approximately $13,327,000 which expire in 2007 to 2010. The Company believes its current cash position, cash flow from operations, and available borrowings under the Company's line of credit will be adequate to meet its anticipated cash needs for working capital, revenue growth, scheduled debt repayment and capital investment objectives for the next twelve months. 13 Certain Trends and Uncertainties - -------------------------------- Acquisition Strategy. In pursuit of its strategic objective of becoming the leading global single-source provider of water treatment systems and services, the Company has, since 1991, acquired and successfully integrated more than 40 United States based and international businesses with strong market positions and substantial water treatment expertise. The Company's acquisition strategy entails the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities and potential profitability of acquisition candidates and in integrating the operations of acquired companies. Although the Company generally has been successful in pursuing these acquisitions, there can be no assurance that the acquisition opportunities will continue to be available, that the Company will have access to the capital required to finance potential acquisitions, that the Company will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable. International Transactions. The company has made and expects it will continue to make acquisitions and to obtain contracts in Europe, Asia, Latin America, and other areas outside the United States. While these activities may provide important opportunities for the Company to offer its products and services internationally, they also entail the risks associated with conducting business internationally, including the risks of currency fluctuations, slower payment of invoices and possible social, political and economic instability. Reliance on Key Personnel. The Company's operations are dependent on the continued efforts of senior management, in particular, Richard J. Heckmann, its Chairman, Chief Executive Officer and President. Should any of the Senior managers be unable to continue in their present roles, the Company's prospects could be adversely affected. Profitability of Fixed Price Contracts. A significant portion of the Company's revenues are generated under fixed price contracts. To the extent that original cost estimates are inaccurate, costs to complete increase, delivery schedules are delayed or progress under a contract is otherwise impeded, revenue recognition and profitability from a particular contract may be adversely affected. The Company routinely records upward or downward adjustments with respect to fixed price contracts due to changes in estimates of costs to complete such contracts. There can be no assurance that future downward adjustments will not be material. Cyclicality of Capital Equipment Sales. The sale of capital equipment within the wastewater treatment industry is cyclical and influenced by various economic factors including interest rates and general fluctuations of the business cycle. The Company's revenues from capital equipment sales were approximately 60% of total revenues for the fiscal year ended March 31,1995, and 49% for the fiscal year ended March 31, 1996. While the Company sells capital equipment to customers in diverse industries and in global markets, cyclicality of capital equipment sales and instability of general economic conditions could have an adverse effect on the Company's revenues and profitability. Potential Environmental Risks. The Company's business and products may be significantly influenced by the constantly changing body of environmental laws and regulations, which require that certain environmental standards be met and impose liability for the failure to comply with such standards. While the Company endeavors at each of its facilities to assure compliance with environmental laws and regulations, there can be no assurance that the Company's operations or activities, or historical operations by others at the Company's locations, will not result in civil or criminal enforcement actions or private actions that could have a material adverse effect on the Company. In that regard, allegations have been made by federal and state 14 environmental regulatory authorities of multiple violations by a wholly owned subsidiary of the Company with respect to applicable wastewater pretreatment standards at a Connecticut ion exchange regeneration facility acquired by the Company in October 1995 from Anjou International Company ("Anjou"). A grand jury investigation is pending which is believed to relate to the same conditions that were subject to the allegations. The Company has rights of indemnification from Anjou which may be available with respect to these matters. The Company's activities as owner and operator of a hazardous waste treatment and recovery facility are subject to stringent laws and regulations and compliance reviews. Failure of this facility to comply with those regulations could result in substantial fines and the suspension or revocation of the facility's hazardous waste permit. In addition, to some extent, the liabilities and risks imposed by environmental laws on the Company's customer's may adversely impact demand for certain of the Company's products or services or impose greater liabilities and risks on the Company, which could also have an adverse effect on the Company's competitive or financial position. Competition. The water purification and wastewater treatment industry is fragmented and highly competitive. The Company competes with many United States- based and international companies in its global markets. The principal methods or competition in the markets in which the Company competes are technology, service, price, product specifications, customized design, product knowledge and reputation, ability to obtain sufficient performance bonds, timely delivery, and relative ease of system operations and maintenance, and the prompt availability of replacement parts. The municipal contract bid process, pricing and ability to meet bid specifications are the primary considerations. While no competitor is considered dominant, there are companies that are divisions or subsidiaries of larger companies which have significantly greater resources that the Company, which, among other things, could be a competitive disadvantage to the Company in securing certain projects. Technological and Regulatory Change. The water purification and wastewater treatment business is characterized by changing technology, competitively imposed process standards and regulatory requirements, each of which influences the demand for the Company's products and services. Changes in regulatory or industrial requirements may render certain of the Company's purification and treatment products and processes obsolete. Acceptance of new products may also be affected by the adoption of new government regulations requiring stricter standards. The Company's ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in the Company's ability to grow and remain competitive. There can be no assurance that the Company will be able to achieve the technological advances that may be necessary for it to remain competitive or that certain of its products will not become obsolete. In addition, the Company is subject to the risks generally associated with new product introduction and applications, including lack of market acceptance, delays in development or failure of products to operate properly. 15 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES N/A Item 3. DEFAULTS UPON SENIOR SECURITIES N/A Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS N/A Item 5. OTHER INFORMATION N/A Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 2.1 Agreement and Plan of Merger, dated as of June 10, 1996, among United States Filter Corporation, U.S. Filter/DWW Acquisition Corporation, and Davis Water & Waste Industries, Inc./1/ 99.1 Joint Press Release, dated June 10, 1996, issued by United States Filter Corporation and Davis Water & Waste Industries, Inc./2/ b) Reports on Form 8-K The Company filed three Current Reports on form 8-K during the quarter ended June 30, 1996, one dated May 31, 1996, as amended on form 8-K/A dated June 28, 1996, under Item 2 of that form, one dated June 10, 1996 under Item 5 of that Form, and one dated June 27, 1996 under Item 5 of that Form. Financial statements were included in the Current Report on Form 8-K dated May 31, 1996 under Item 7 of that Form and in the Current Report on Form 8-K dated June 27, 1996 under Item 7 of that Form. - ---------------- /1/ Previously filed with the Company's Current Report on Form 8-K dated June 10, 1996 and incorporated herein by reference. /2/ Previously filed with the Company's Current Report on Form 8-K dated June 10,1996 and incorporated herein by reference. 16 SIGNATURES Pursuant to the requirements of the U.S. Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED STATES FILTER CORPORATION By: /s/ Kevin L. Spence -------------------------------- Dated: August 13, 1996 Kevin L. Spence Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME OF UNITED STATES FILTER CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 7,483,000 1,443,000 179,959,000 (8,449,000) 60,722,000 308,109,000 208,092,000 (44,705,000) 815,787,000 193,397,000 207,742,000 0 0 437,000 355,899,000 815,787,000 150,801,000 150,801,000 104,060,000 104,060,000 0 419,000 4,280,000 9,548,000 2,631,000 6,917,000 0 0 0 6,917,000 .15 .15
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