<PAGE>
================================================================================
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
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 1-7327
WMX TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2660763
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3003 BUTTERFIELD ROAD,
OAK BROOK, ILLINOIS 60521
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (708) 572-8800
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (l) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION l3 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.
YES X NO
--- ---
SHARES OF REGISTRANT'S COMMON STOCK, $1 PAR VALUE, ISSUED AND OUTSTANDING
AT JULY 31, 1994 -- 483,797,716
- --------------------------------------------------------------------------------
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<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
----
PART I. Financial Information:
Consolidated balance sheets as of December 31, 1993 and
June 30, 1994.................................................... 3
Consolidated statements of income for the three-month and six-month
periods ended June 30, 1993 and 1994............................. 5
Consolidated statements of stockholders' equity for the six-month
periods ended June 30, 1993 and 1994............................. 6
Consolidated statements of cash flows for the six-month
periods ended June 30, 1993 and 1994............................. 8
Notes to consolidated financial statements............................ 9
Management's discussion and analysis of results of operations
and financial condition.......................................... 14
PART II. Other Information........................................... 22
******
2
<PAGE>
PART I. FINANCIAL INFORMATION
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000's omitted)
ASSETS
<TABLE>
<CAPTION>
December 31, 1993 June 30, 1994
----------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ - $ 50,033
Short-term investments 126,382 68,869
Accounts receivable, less reserve of $63,146 in 1993
and $63,936 in 1994 1,762,091 1,981,961
Employee receivables 9,670 9,662
Parts and supplies 148,022 151,287
Costs and estimated earnings in excess of billings on
uncompleted contracts 339,364 419,334
Refundable income taxes 54,001 -
Prepaid expenses 337,990 343,744
----------- -----------
Total Current Assets $ 2,777,520 $ 3,024,890
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Land, primarily disposal sites $ 3,625,412 $ 3,853,630
Buildings 1,223,139 1,288,704
Vehicles and equipment 6,856,044 6,982,971
Leasehold improvements 100,262 91,571
----------- -----------
$11,804,857 $12,216,876
Less - Accumulated depreciation and amortization (3,035,398) (3,285,497)
----------- -----------
Total Property and Equipment, Net $ 8,769,459 $ 8,931,379
----------- -----------
OTHER ASSETS:
Intangible assets relating to acquired businesses, net $ 3,461,331 $ 3,683,690
Funds held by trustees 116,949 90,570
Sundry, including other investments 1,139,217 1,198,997
----------- -----------
Total Other Assets $ 4,717,497 $ 4,973,257
----------- -----------
Total Assets $16,264,476 $16,929,526
=========== ===========
</TABLE>
3
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000's omitted except per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, 1993 June 30, 1994
----------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Portion of long-term debt payable within one year $ 754,491 $ 750,525
Accounts payable 818,501 785,261
Accrued expenses 863,474 971,344
Unearned revenue 241,096 258,653
----------- -----------
Total Current Liabilities $ 2,677,562 $ 2,765,783
----------- -----------
DEFERRED ITEMS:
Income taxes $ 448,706 $ 565,908
Investment credit 27,006 25,721
Other 1,457,607 1,425,950
----------- -----------
Total Deferred Items $ 1,933,319 $ 2,017,579
----------- -----------
LONG-TERM DEBT, less portion payable within one year $ 6,145,584 $ 6,187,798
----------- -----------
MINORITY INTEREST IN SUBSIDIARIES $ 1,348,559 $ 1,487,636
----------- -----------
COMMITMENTS AND CONTINGENCIES $ $
----------- -----------
PUT OPTIONS $ - $ 226,591
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $l par value (issuable in series); 50,000,000
shares authorized; none outstanding during the periods $ - $ -
Common stock, $l par value; 1,500,000,000 shares authorized;
496,216,829 shares issued in 1993 and 496,320,716 in 1994 496,217 496,321
Additional paid-in capital 668,470 371,611
Cumulative translation adjustment (245,587) (177,775)
Retained earnings 3,693,108 3,911,854
----------- -----------
$ 4,612,208 $ 4,602,011
Less: Treasury stock; 12,763,884 shares in 1993, at cost 425,097 -
1988 Employee Stock Ownership Plan 27,659 23,694
Employee Stock Benefit Trust (12,539,511 shares) - 334,178
----------- -----------
Total Stockholders' Equity $ 4,159,452 $ 4,244,139
----------- -----------
Total Liabilities and Stockholders' Equity $16,264,476 $16,929,526
=========== ===========
</TABLE>
4
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30
(Unaudited)
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------------ ---------------------------
1993 1994 1993 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $2,290,582 $2,551,722 $4,425,923 $4,835,789
---------- ---------- ---------- ----------
Operating expenses $1,579,851 $1,766,889 $3,058,931 $3,363,800
Selling and administrative
expenses 278,784 297,692 542,894 584,626
Goodwill amortization 23,284 27,721 44,061 54,932
Gains from stock transactions
of subsidiaries (15,109) -- (15,109) --
Interest expense 75,556 78,271 134,999 162,501
Interest income (10,955) (5,643) (21,713) (16,407)
Minority interest 37,525 41,970 66,931 70,750
Sundry income, net (32,516) (12,787) (64,893) (30,197)
---------- ---------- ---------- ----------
Income before income taxes $ 354,162 $ 357,609 $ 679,822 $ 645,784
Provision for income taxes 136,438 154,492 262,813 280,055
---------- ---------- ---------- ----------
NET INCOME FOR THE PERIOD $ 217,724 $ 203,117 $ 417,009 $ 365,729
========== ========== ========== ==========
AVERAGE SHARES AND EQUIVALENT
SHARES OUTSTANDING 484,446 483,915 487,176 483,878
========== ========== ========== ==========
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.45 $ 0.42 $ 0.86 $ 0.76
========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE $ 0.15 $ 0.15 $ 0.28 $ 0.30
========== ========== ========== ==========
</TABLE>
5
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1993
(Unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1988
Employee
Additional Cumulative Stock
Common Paid-In Translation Retained Treasury Ownership
Stock Capital Adjustment Earnings Stock Plan
-------- ----------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $496,203 $708,296 $(166,566) $3,521,190 $204,490 $34,988
Net income for the period - - - 417,009 - -
Cash dividends - - - (135,950) - -
Stock repurchase (8,443,400
shares) - - - - 278,363 -
Stock issued upon exercise
of stock options 13 (4,581) - - (10,035) -
Treasury stock received in
connection with exercise of
stock options - - - - 254 -
Contribution to 1988 Employee
Stock Ownership Plan - - - - - (3,650)
Treasury stock received as
settlement for claims - - - - 2,410 -
Stock issued upon conversion
of Liquid Yield Option
Notes - (3,529) - - (6,075) -
Stock issued for acquisitions - (1,022) - - (7,253) -
Tax benefit of non-qualified
stock options exercised - 1,814 - - - -
Transfer of equity interests
among controlled subsidiaries - (24,815) - - - -
Cumulative translation adjust-
ment of foreign currency
statements - - (34,145) - - -
-------- -------- --------- ---------- -------- -------
Balance, June 30, 1993 $496,216 $676,163 $(200,711) $3,802,249 $462,154 $31,338
======== ======== ========= ========== ======== =======
</TABLE>
6
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1994
(Unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1988
Employee
Additional Cumulative Stock Employee
Common Paid-In Translation Retained Treasury Ownership Stock
Stock Capital Adjustment Earnings Stock Plan Benefit Trust
-------- ----------- ------------ ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $496,217 $ 668,470 $(245,587) $3,693,108 $ 425,097 $27,659 $ -
Net income for the period - - - 365,729 - - -
Cash dividends - - - (146,983) - - -
Stock issued upon exercise
of stock options - (3,939) - - (6,852) - (1,649)
Treasury stock received in
connection with exercise of
stock options - - - - 247 - -
Contribution to 1988 Employee
Stock Ownership Plan - - - - - (3,965) -
Treasury stock received as
settlement for claims - - - - 1,356 - -
Stock issued upon conversion
of Liquid Yield Option
Notes 30 423 - - (56) - -
Common stock issued for
acquisitions 74 1,799 - - - - -
Tax benefit of non-qualified
stock options exercised - 950 - - - - -
Temporary equity related to
put options - (226,591) - - - - -
Proceeds from sale of put
options - 14,718 - - - - -
Establish Employee Stock
Benefit Trust (12,601,609
shares) - (106,327) - - (419,792) - 313,465
Adjustment of Employee Stock
Benefit Trust to market value - 22,362 - - - - 22,362
Transfer of equity interests
among controlled subsidiaries - (254) - - - - -
Cumulative translation adjust-
ment of foreign currency
statements - - 67,812 - - - -
-------- --------- --------- ---------- --------- ------- --------
Balance, June 30, 1994 $496,321 $ 371,611 $(177,775) $3,911,854 $ - $23,694 $334,178
======== ========= ========= ========== ========= ======= ========
</TABLE>
7
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30
Increase (Decrease) in Cash
(Unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1993 1994
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income for the period $ 417,009 $ 365,729
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 399,470 438,477
Interest on Liquid Yield Option Notes (LYONs) 18,934 18,719
Gain on sale of property and equipment, and
of investments by subsidiary (9,259) (7,375)
Contribution to 1988 Employee Stock
Ownership Plan 3,650 3,965
Gains from stock transactions of subsidiaries (15,109) -
Changes in assets and liabilities, net of effects
of acquired companies:
Receivables (126,956) (184,971)
Other current assets 3,042 (22,788)
Sundry other assets (3,499) (11,998)
Accounts payable 24,546 (54,060)
Accrued expenses and unearned revenue (155,186) 38,998
Deferred income taxes and investment credit 115,998 129,421
Deferred other items (110,466) (44,896)
Minority interest in subsidiaries 30,809 133,488
----------- ---------
Net cash provided by operating activities $ 592,983 $ 802,709
----------- ---------
Cash flows from investing activities:
Short-term investments $ (68,802) $ 57,778
Capital expenditures (771,444) (651,232)
Proceeds from sale of property and equipment, and
of investments by subsidiary 66,597 105,294
Cost of acquisitions, net of cash acquired (377,113) (109,394)
Other investments (195,341) (41,562)
Purchase of Brand stock related to Rust merger (129,524) -
----------- ---------
Net cash used for investing activities $(1,475,627) $(639,116)
----------- ---------
Cash flows from financing activities:
Cash dividends $ (135,950) $(146,983)
Proceeds from issuance of indebtedness 1,932,038 920,962
Repayments of indebtedness (563,383) (907,522)
Proceeds from exercise of stock options, net 7,027 5,265
Stock repurchases by Company and subsidiaries (302,487) -
Preferred stock redemption by subsidiary (5,000) -
Proceeds from sale of put options - 14,718
----------- ---------
Net cash provided by (used for) financing activities $ 932,245 $(113,560)
----------- ---------
Net increase in cash $ 49,601 $ 50,033
Cash at beginning of period 6,473 -
----------- ---------
Cash at end of period $ 56,074 $ 50,033
=========== =========
The Company considers cash to include currency on
hand and demand deposits with banks.
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 116,065 $ 143,782
Income taxes, net of refunds received $ 186,580 $ 74,909
Supplemental schedule of noncash investing and
financing activities:
LYONs converted into common stock of the Company $ 2,546 $ 509
Exchangeable LYONs exchanged for common stock of
CWM owned by the Company $ 36 $ -
Liabilities assumed in acquisitions of businesses $ 363,213 $ 145,296
Fair market value of Company and subsidiary stock
issued for acquired businesses $ 11,835 $ 4,773
</TABLE>
8
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
($000's omitted in all tables except per share amounts)
The financial statements included herein have been prepared by WMX Technologies,
Inc. ("WMX" or the "Company") without audit, pursuant to the rules and
regulations of the 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 rules and regulations. The financial information
included herein reflects, in the opinion of the Company, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position and results of operations for the periods presented. The
results for interim periods are not necessarily indicative of results for the
entire year.
Certain amounts in previously issued financial statements have been restated to
conform to 1994 classifications.
Income Taxes -
The following table sets forth the provision for income taxes for the three
months and six months ended June 30, 1993 and 1994:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- -------------------------
1993 1994 1993 1994
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Currently payable $ 76,361 $ 84,503 $161,121 $161,470
Deferred 60,807 70,628 103,317 119,869
Amortization of deferred
investment credit (730) (639) (1,625) (1,284)
-------- -------- -------- --------
$136,438 $154,492 $262,813 $280,055
======== ======== ======== ========
</TABLE>
Changes in Accounting Principles -
Effective January 1, 1994, the Company adopted Statements of Financial
Accounting Standards ("FAS") No. 112, Employers' Accounting for Postemployment
Benefits, and No. 115, Accounting for Certain Investments in Debt and Equity
Securities. The adoption of FAS No. 112 and FAS No. 115 did not have a
significant effect on earnings for the first six months of 1994, nor are they
expected to materially impact results of operations for the full year, since the
Company's accounting prior to adoption was substantially in compliance with the
new standards.
Business Combinations -
During 1993, the Company and its principal subsidiaries acquired 97 businesses
for $551,901,000 in cash (net of cash acquired) and notes, 1,046,801 shares of
the Company's common stock and 1,635,471 shares of common stock of Wheelabrator
Technologies Inc. ("WTI"). These acquisitions were accounted for as purchases.
The following summarizes the pro forma effect of businesses acquired and
accounted for as purchases in 1993 as if they had been acquired as of January 1,
1993:
9
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1993
-----------------
<S> <C>
Revenue as reported $4,425,923
Revenue of 1993 purchased businesses for
period prior to acquisition 230,180
----------
Pro forma revenue $4,656,103
==========
Net income as reported $ 417,009
Net income of 1993 purchased businesses for
period prior to acquisition 2,995
Adjustment for interest and goodwill amortization (9,604)
----------
Pro forma net income $ 410,400
==========
Earnings per share as reported $ 0.86
Effect of purchased businesses prior to
acquisition (0.02)
----------
Pro forma earnings per share $ 0.84
==========
</TABLE>
During the six months ended June 30, 1994, the Company and its principal
subsidiaries acquired 26 businesses (excluding minor acquisitions where
consideration paid was less than $1,000,000) for $109,394,000 in cash (net of
cash acquired) and notes, 73,809 shares of the Company's common stock and
156,124 shares of common stock of WTI. These acquisitions were accounted for as
purchases. The pro forma effect of the acquisitions made during 1994 is not
material.
Derivative Financial Instruments -
From time to time, the Company uses derivatives to manage currency, interest
rate and commodity risk. The portfolio of such instruments (which are held for
purposes other than trading) at June 30, 1994, is set forth in the paragraphs
which follow.
INTEREST RATE AGREEMENTS - Waste Management International plc ("WM
International") has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on underlying borrowings. The agreements
are contracts to exchange fixed and floating interest rate payments periodically
over the term without the exchange of the underlying notional amounts. The
notional amounts of such agreements are used to measure interest to be paid or
received and do not represent the amount of exposure to credit loss.
While WM International is exposed to market risk to the extent that receipts and
payments under interest rate agreements are affected by market interest rates,
such agreements are entered into as a hedge against interest rate exposure on
existing debt. Accordingly, differences paid or received under the agreements
are recognized as part of interest expense over the life of the agreements. As
of June 30, 1994, WM International has entered into interest rate agreements in
notional amounts and with terms as follows:
<TABLE>
<CAPTION>
Notional
Currency Amount Duration of Agreement
- -------------------- ----------- -----------------------
<S> <C> <C>
Sterling 50 million Feb. 1994 - Feb. 1995
Sterling 20 million Feb. 1995 - Feb. 1999
Hong Kong dollar 250 million Feb. 1994 - Feb. 1995
Hong Kong dollar 250 million April 1994 - April 1997
Hong Kong dollar 250 million Feb. 1995 - Feb. 1997
Australian dollars 25 million Feb. 1994 - Feb. 1995
Australian dollars 20 million March 1994 - March 1996
</TABLE>
10
<PAGE>
CURRENCY AGREEMENTS - From time to time, the Company and certain of its
subsidiaries use foreign currency derivatives to mitigate the impact of
translation on foreign earnings and income from foreign investees. Although the
purpose for using such derivatives is to mitigate currency risk, they do not
qualify for hedge accounting under generally accepted accounting principles and
accordingly, must be adjusted to market value at the end of each accounting
period. Gains and losses on currency derivatives to date have not been
material.
As of June 30, 1994, the Company was party to the following average rate
currency options expiring December 31, 1994 (all options settle at expiration):
<TABLE>
<CAPTION>
Notional Amount Currency
---------------------------
(in 000's) Hedged Against
---------------- ------------- ------------
<S> <C> <C> <C>
Collars, structured as
offsetting puts and
calls with different
strike prices -
141,500 Sterling Dollar
143,500 French Franc Sterling
68,727 Deutschemark Sterling
5,300 Deutschemark Dollar
210,000 Swedish Krona Sterling
24,000,000 Lira Sterling
Put option sold - 12,000,000 Lira Deutschemark
</TABLE>
In addition, WM International has sold deutschemarks forward for delivery at
various dates in 1994 and 1995. Contracts covering DM 15 million represent
hedges of foreign earnings against the sterling, while contracts for DM 24.71
million represent hedges against construction contracts payable in sterling and
dollars. Gains or losses on the hedges against contractual obligations are
deferred and will be recognized as part of the construction cost.
COMMODITY AGREEMENTS
The Company utilizes collars, calls and swaps to mitigate the risk of price
fluctuations on the fuel used by its vehicles. Quantities hedged equate to
committed fuel purchases or anticipated usage and accordingly, gains and losses
are deferred and recognized as fuel is purchased. The following table
summarizes the Company's positions in commodity derivatives as of June 30, 1994:
<TABLE>
<CAPTION>
Commodity Quantity Expiration
----------- --------------- ----------
<S> <C> <C>
Heating oil 65,000,000 gal. 1994
Gas oil 18,000 tons 1994
Gas oil 40,000 tons 1995
Crude oil 3,000,000 bbls 1995
Crude oil 1,800,000 bbls 1996
Crude oil 1,350,000 bbls 1997
Crude oil 200,000 bbls 1998
Crude oil 100,000 bbls 1999
</TABLE>
In addition, the Company has sold swaptions on 5,500,000 barrels of crude oil
with maturities in 1996 through 1998. Such swaptions give the counterparty the
option, at some future date, to enter into a swap which would require the
Company to pay at the strike price set forth in the agreement in exchange for a
floating crude oil reference price. Until exercised, such contracts do not
qualify for hedge accounting under generally accepted accounting principles and
accordingly, must be marked to market each accounting period. To date, gains
and losses on
11
<PAGE>
such contracts have not been material.
The Company is exposed to credit loss in the event of non-performance by
counterparties on interest rate, currency and commodity derivatives, but in all
cases such counterparties are major financial institutions and the Company does
not anticipate non-performance.
Debt -
In May 1994, the Company issued, at par, $150,000,000 of ten-year Step-Up Notes
due April 30, 2004. The holders may elect to have the Step-Up Notes or any
portion thereof repaid on April 30, 1997 at 100% of their principal amount
together with accrued interest. The interest rate on the Step-Up Notes is 6.22%
through April 29, 1997 and 8% thereafter. The Notes are not redeemable at the
option of the Company prior to maturity.
Environmental Liabilities -
The majority of the businesses in which the Company is engaged are intrinsically
connected with the protection of the environment. As such, a significant
portion of the Company's operating costs and capital expenditures could be
characterized as costs of environmental protection. While the Company is faced,
in the normal course of business, with the need to expend funds for
environmental protection and remediation, it does not expect such expenditures
to have a material adverse effect on its financial condition or results of
operations because its business is based upon compliance with environmental laws
and regulations and its services are priced accordingly. Such costs may
increase in the future as a result of legislation or regulation; however, the
Company believes that in general it benefits from increased government
regulation, which increases the demand for its services, and that it has the
resources and experience to manage environmental risk.
As part of its ongoing operations, the Company provides for estimated closure
and post-closure monitoring costs over the operating life of disposal sites as
airspace is consumed. The Company also has established procedures to evaluate
potential remedial liabilities at closed sites which it owns or operated or to
which it transported waste, including 105 sites listed on the Superfund National
Priority List ("NPL"). The majority of the situations involving NPL sites
relate to allegations that subsidiaries of the Company (or their predecessors)
transported waste to the facilities in question, often prior to the acquisition
of such subsidiaries by the Company. Where the Company concludes that it is
probable that a liability has been incurred, provision is made in the financial
statements.
Estimates of the extent of the Company's degree of responsibility for
remediation of a particular site and the method and ultimate cost of remediation
require a number of assumptions and are inherently difficult, and the ultimate
outcome may differ from current estimates. However, the Company believes that
its extensive experience in the environmental services business, as well as its
involvement with a large number of sites, provides a reasonable basis for
estimating its aggregate liability. As additional information becomes
available, estimates are adjusted as necessary. While the Company does not
anticipate that any such adjustment would be material to its financial
statements, it is reasonably possible that technological, regulatory or
enforcement developments, the results of environmental studies or other factors
could alter this expectation and necessitate the recording of additional
liabilities which could be material. The impact of such future events cannot be
estimated at the current time.
The Company has also filed several lawsuits against numerous insurance carriers
seeking reimbursement for past and future remedial, defense and tort claim costs
12
<PAGE>
at a number of sites. The carriers have denied coverage and are vigorously
defending these claims. No amounts have been recognized in the financial
statements for potential insurance recoveries.
Stockholders' Equity -
During the first six months of 1994, WMX sold put options on 9.0 millon shares
of its common stock. The put options give the holders the right at maturity to
require the Company to repurchase shares of its common stock at specified
prices, which range from $24.375 to $26.518 per share. The options mature in
July, August and November 1994. The proceeds ($14,718,000) from the sale of put
options were credited to additional paid-in capital. The amount the Company
would be obligated to pay if all the put options were exercised has been
reclassified to a temporary equity account. Subsequent to June 30, 1994,
options on 4.7 million shares maturing in July and August expired unexercised,
as the price of the Company's stock was in excess of the strike price. The
remaining options have strike prices of $24.375 to $24.881 per share. In August
1994, WMX initiated a program to sell additional put options to replace those
which expired in July and August. The new options will expire in February 1995
and are expected to have strike prices of approximately $29 per share.
During the first quarter of 1994, the Company established an Employee Stock
Benefit Trust and sold 12.6 millon shares of treasury stock to the Trust in
return for a 30-year, 7.33% note with interest payable quarterly and principal
due at maturity. The Company has agreed to contribute to the Trust each quarter
funds sufficient, when added to dividends on the shares held by the Trust, to
pay interest on the note as well as principal outstanding at maturity. At the
direction of an administrative committee comprised of Company officers, the
trustee will use the shares or proceeds from the sale of shares to pay employee
benefits, and to the extent of such payments by the Trust, the Company will
forgive principal and interest on the note. The shares of common stock issued
to the Trust are not considered to be outstanding in the computation of earnings
per share until the shares are utilized to fund obligations for which the trust
was established.
Subsequent Event -
On July 28, 1994, the Company announced a proposal to acquire all of the
outstanding shares of Chemical Waste Management, Inc. ("CWM") which it does not
already own. Under the proposal, each holder of CWM shares (other than WMX)
would receive .27 WMX shares for each share of CWM common stock held. The
transaction is subject to the approval of both a committee of independent CWM
directors and the holders of a majority of CWM's outstanding shares (other than
shares held by WMX) voting at a stockholders' meeting.
Legal Matters -
See Part II of this Form 10-Q for a discussion of legal matters.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Consolidated -
- ------------
For the three months ended June 30, 1994, WMX Technologies, Inc. and its
subsidiaries ("WMX" or the "Company") had net income of $203,117,000 or $.42 per
share, compared with $217,724,000 or $.45 per share in the year earlier period.
Revenue for the quarter was $2,551,722,000 versus $2,290,582,000 in the 1993
quarter. Second quarter 1993 net income included a gain of approximately $.02
per share relating to the issuance of shares by the Company's Rust International
Inc. ("Rust") subsidiary.
For the six months ended June 30, 1994, net income was $365,729,000 or $.76
per share, compared with $417,009,000 or $.86 per share in the period a year
earlier. Revenue was $4,835,789,000 versus $4,425,923,000 in the six-month
period in 1993. Excluding the gain on issuance of shares by Rust, earnings per
share for the six months of 1993 would have been $.84.
The Company provides comprehensive environmental, engineering and
construction, industrial and related services through five principal
subsidiaries, each of which operates in a relatively discrete industry or
geographic area. Waste Management, Inc. ("WMI") provides integrated solid waste
services and Chemical Waste Management, Inc. ("CWM") provides hazardous waste
collection, transportation, treatment and disposal services in North America.
Waste Management International plc ("WM International") provides these services,
as well as trash-to-energy services, outside North America. Wheelabrator
Technologies Inc. ("WTI") is involved in trash-to-energy and independent power
projects, water and wastewater treatment (including biosolids management) and
air quality control, primarily in North America. Rust, which was formed January
1, 1993, and is owned approximately 56% by CWM and 40% by WTI, serves the
engineering, construction, environmental and infrastructure consulting,
environmental remediation and on-site industrial and related services markets in
the United States and a number of foreign countries. Following is an analysis
of operating results by principal subsidiary.
WMI -
- ---
WMI revenues by line of business for the second quarter and first six
months of 1994 compared to the same periods in 1993 are shown in the following
table ($000's omitted):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------------------- ---------------------------------
1994 1993 Increase 1994 1993 Increase
---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Residential $ 286,245 $ 276,454 3.5% $ 562,144 $ 543,266 3.5%
Commercial 377,952 350,165 7.9 743,534 690,651 7.7
Rolloff and
industrial 317,392 282,151 12.5 599,667 533,692 12.4
Disposal, transfer
and other 305,567 282,138 8.3 557,315 536,798 3.8
---------- ---------- ---------- ----------
$1,287,156 $1,190,908 8.1% $2,462,660 $2,304,407 6.9%
========== ========== ==== ========== ========== ====
</TABLE>
1993 revenue for the periods was favorably impacted by a contract to
dispose of debris from Hurricane Andrew, and revenue from the Modulaire(R)
mobile
14
<PAGE>
office business that was sold at the end of the first quarter of 1994. These
factors resulted in revenue of approximately $30 million in the second quarter
and $55 million for the six months in 1993 that did not recur in 1994.
Pricing was responsible for approximately 1% of the revenue growth for the
three months ended June 30, 1994, and a nominal revenue increase for the six-
month period, as compared to the corresponding periods in 1993. Volume
increases accounted for approximately 7% revenue growth for both the quarter and
the six months, while acquisitions approximately offset dispositions and the
1993 unusual items. WMI continues to focus on pricing on a customer by customer
basis and to seek increases where appropriate. Pricing in the solid waste
industry in North America appears to have bottomed and may be trending up.
Operating margins in the second quarter of 1994 were down slightly, to
20.6%, compared to 21.6% in the second quarter of 1993, but were higher than the
fourth quarter of 1993 and the first quarter of 1994. Operating expenses were
68.8% of second quarter 1994 revenue compared to 67.2% in the 1993 quarter, a
result of weak pricing in the industry over the past 18 months. Selling and
administrative expenses declined to 10.6% of revenue in the 1994 quarter
compared to 11.3% in the 1993 quarter, a result of fixed costs being spread over
increased volumes, administrative cost reduction programs, and increased
productivity from the late 1992 investment in an expanded sales and marketing
organization.
CWM (Core Business) -
- -------------------
Revenue for CWM's core business (excluding Rust) increased in the 1994
periods compared to 1993, from $167,094,000 to $185,339,000 in the second
quarter and from $325,860,000 to $331,675,000 for the six months. The 1994
second quarter benefitted significantly from the acceleration of low-level
radioactive waste volumes received at CWM's Barnwell, South Carolina, disposal
facility in anticipation of a state deadline which denies access to the Barnwell
facility to customers outside an eight-state region in the southeastern United
States (the "Southeast Compact") after June 30, 1994. South Carolina has
previously adopted legislation which allows the Barnwell site to continue
operating until December 31, 1995, to serve customers located within this
region. However, the Barnwell disposal operations are not expected to
contribute significantly to CWM's future operating results. In December 1993,
the North Carolina Low Level Radioactive Waste Management Authority voted to
select a site for development by CWM as a replacement regional disposal facility
for the Southeast Compact. CWM is unable to predict when, if ever, its efforts
to develop a replacement site will be successful.
The remainder of CWM's core business experienced declining revenues and a
shift to lower margin services in the second quarter of 1994 compared to the
second quarter of 1993. Changes which have affected the hazardous waste
industry, including the decline in off-site waste volumes from environmental
cleanup projects, the lack of regulatory "drivers," the shift of special waste
to subtitle D facilities, waste minimization and recycling, and overcapacity in
the incineration market, continue to have a negative impact on CWM's revenue
mix. Additionally, pricing in the business continues to be very competitive.
These factors and the severe weather in the northeastern United States
experienced in the first quarter of 1994 limited the core business revenue
increase to $5.8 million or 1.8% in the first half of 1994 compared to the first
half of 1993. Event business (generally large, non-recurring projects) revenue
declined 25.0% in the second quarter of 1994 compared to the year earlier
quarter, primarily as a result of the general decline in off-site disposal from
environmental clean-ups. Event business was 8.7% of revenue in the 1994 second
quarter, compared to 12.9% in the same quarter a year earlier. In the first six
months of 1994, event business was 8.5% of revenue compared to 11.2% for the
first six months of 1993. The following table analyzes core business revenue
changes for the three- and six-month periods ended June 30, 1994, compared to
1993:
15
<PAGE>
<TABLE>
Three Six
Months Months
-------- --------
<S> <C> <C>
Price (2.8%) (3.2%)
Volume 11.7 2.0
Purchased Business 2.0 3.0
---- ----
10.9% 1.8%
==== ====
</TABLE>
Operating expenses declined as a percentage of revenue in both the three-
month and six-month periods of 1994 compared to 1993, a result of increased
volume and the benefits of cost savings achieved from the 1993 restructuring
discussed below. These benefits were partially offset, however, in the six-
month period as a result of severe weather in the northeast portion of the
United States during the first quarter, which delayed projects and hampered
operations. Selling and administrative expenses declined on an absolute basis,
as a result of the 1993 restructuring, and as a percentage of revenue, due to
the higher revenue base, in both the second quarter and six-month periods of
1994 compared to 1993.
In the third quarter of 1993, CWM recorded a revaluation and restructuring
charge of $550 million, including $381 million to write down assets, primarily
incinerators, and $169 million for probable cash expenditures related to a
program to reduce costs, improve efficiency, and structure CWM to meet then
current demand levels. Of the amount provided for probable cash expenditures,
CWM has spent $60.1 million through June 30, 1994, including $16.8 million
related to personnel actions. CWM expects the balance, except for closure and
post-closure costs, to be expended by the end of 1994. In both the second
quarter and first six months of 1994, the estimated annualized overhead
reduction resulting from CWM's actions was approximately $60 million.
WTI -
- ---
WTI revenue was $321,661,000 and $602,993,000 for the three-month and six-
month periods ended June 30, 1994, respectively, in each case an increase of 15%
over revenue for comparable 1993 periods. Approximately half of the revenue
growth reflects the impact of water businesses acquired during the most recent
twelve months, with the balance reflecting internal growth, including the third
quarter 1993 commencement of commercial operations at the New York Organic
Fertilizer Company ("NYOFCO") biosolids pelletizer facility, construction
revenue from the Lisbon, Connecticut trash-to-energy facility being built by
WTI, and the growth of existing businesses. WTI's energy, water and air
businesses contributed 51%, 35% and 14%, respectively, of revenue during the
second quarter of 1994, compared with 52%, 28% and 20% in the second quarter of
1993. Similarly, these businesses contributed 52%, 34% and 14%, respectively,
of revenue for the six months ended June 30, 1994, compared to 53%, 29% and 18%,
respectively, during the same period in 1993. 1994 revenue from the air
business declined from 1993 levels due to completion in 1993 of certain
contracts related to Phase I of the Clean Air Act Amendments of 1990.
Operating expenses constituted 67.9% and 68.7% of revenue for the second
quarter and first six months of 1994, respectively, compared with 69.2% and
69.5% of revenue in the corresponding 1993 periods. These reductions reflect
improved operating performance at certain of WTI's energy facilities and the
addition of the NYOFCO facility. In addition, second quarter 1994 margins were
augmented by revenue associated with weather-delayed landspreading activities.
Selling and administrative expenses declined as a percent of revenue to 9.2% for
both the second quarter and first half of 1994, versus 9.7% and 9.6% of revenue
for the comparable year earlier periods. The decline is primarily attributable
to the integration of acquired businesses, to ongoing administrative cost
containment activities, and to revenue growth in excess of associated selling
and administrative cost increases.
16
<PAGE>
WM International -
- ----------------
WM International is a United Kingdom corporation which prepares its
financial statements in pounds sterling under accounting principles prevailing
in the U.K. Such accounting principles differ in certain respects from those
generally accepted in the United States ("U.S. GAAP"). The following discussion
and analysis is based on U.S. GAAP financial statements with pounds sterling
translated to U.S. dollars at the rates used to translate WM International
financial statements for inclusion in the Company's consolidated financial
statements (one pound = $1.5042 in 1994 and one pound = $1.5101 in 1993).
Revenues were $435,365,000 for the quarter ended June 30, 1994, versus
$359,635,000 for the comparable quarter of 1993. For the six months ended June
30, revenues were $816,672,000 in 1994 compared to $688,201,000 in 1993.
Components of the change in revenue are shown in the following table:
<TABLE>
<CAPTION>
Increase(Decrease) in 1994
Compared to 1993
----------------------------
Three Months Six Months
-------------- ------------
<S> <C> <C>
Price 1.9% 1.9%
Volume 13.6 12.0
Acquisitions 8.1 9.0
Currency translation (2.6) (4.2)
---- ----
Total 21.0% 18.7%
==== ====
</TABLE>
WM International's ability to implement price increases continues to be
adversely affected by economic conditions, particularly in parts of Europe.
However, price increases were obtained in certain European countries, as well as
in Argentina. WM International should benefit from improved pricing as the
European economies improve. 1994 revenue volume increased as a result of
construction activity on the SENT Landfill in Hong Kong, but for the six months
were adversely impacted by severe weather in much of Europe during the first
quarter.
A significant portion of WM International's revenue arises in currencies
other than pounds sterling (its reporting currency) or U.S. dollars. As a
result, foreign currency movement has had and will continue to have an impact on
reported revenue, expenses and net income. Both the Company and WM
International periodically engage in hedging transactions intended to mitigate
currency translation risk. See Notes to Consolidated Financial Statements.
Operating expenses were 72.0% of revenue in the second quarter of 1994
compared to 71.9% in the same quarter of 1993, and for the six months were 72.1%
in 1994 versus 72.2% in 1993. Selling and administrative expenses improved to
13.3% of revenue for the second quarter compared to 13.9% for the same quarter
in 1993, and 13.5% in 1994 for six months compared to 14.1% in 1993. The
improvements result from an increased revenue base over which to spread the
fixed portion of such costs, integration of acquired businesses, and continued
efforts to improve productivity and reduce administrative costs.
Rust -
- ----
Rust is an engineering and construction company with two broad lines of
business: engineering, construction and environmental and infrastructure
consulting services, and environmental remediation and other on-site industrial
services. Through the first four months of 1993, Rust also operated an asbestos
abatement business. This business was transferred to NSC Corporation ("NSC") on
May 3, 1993, in exchange for a 41% equity interest in NSC and NSC's interest in
two industrial services businesses.
17
<PAGE>
Excluding the effect of the asbestos abatement business, Rust revenues
increased 10.5% for the second quarter and 13.7% for the six months of 1994
compared to the same periods in 1993. Revenue by business line is shown in the
following table (000's omitted):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Engineering, construction and
consulting services $241,436 $192,674 $446,786 $367,659
Remediation and
industrial services 170,242 179,966 351,032 334,139
Asbestos abatement - 9,549 - 31,765
-------- -------- -------- --------
Total $411,678 $382,189 $797,818 $733,563
======== ======== ======== ========
</TABLE>
For engineering, construction and consulting services, the increase in
revenue for the quarter and for the first six months of 1994 compared to 1993
was the result of acquisitions. This was offset by volume declines of $18
million in the first quarter of 1994, primarily related to severe weather in
parts of the U.S. and customer delays on projects. Volume in the second quarter
was relatively flat in 1994 compared to 1993. Backlog in this business line at
June 30, 1994, was $1,057 million.
The six-month 1994 increase in remediation and industrial services revenue
over 1993 was the result of acquisitions, offset by volume declines of $5.2
million during the first quarter of 1994 due to severe weather, and $37.8
million in the second quarter of 1994, primarily due to scaffolding and
industrial services customers' delay of scheduled plant maintenance. In
addition, the expected award of several large federal remediation contracts has
been delayed. Backlog in this business line at June 30, 1994, was $570 million.
The combined backlog for the two business lines includes approximately $340
million of Total Environmental Restoration Contracts ("TERCS") awarded to Rust
by the U.S. Army Corps of Engineers in 1993. There is no assurance that
specific projects identified and performed by Rust pursuant to the TERCS will
result in aggregate revenues of $340 million over the term of the contracts.
Revenue from affiliated companies was 13.6% of Rust revenue for the first
six months of 1994 compared to 15.3% for the first six months of 1993.
Operating expenses were 82.5% of revenue for both the second quarter and
first six months of 1994, compared to 81.7% in the second quarter and 82.0% for
the first six months of 1993. The increases are partially attributable to the
severe weather in the first quarter of 1994 and delayed projects, which resulted
in less efficient utilization of personnel. Because a portion of operating
expenses is fixed, as volumes decline, operating expenses increase as a
percentage of revenue. In addition, 1994 has seen a shift in the revenue mix in
favor of lower margin businesses.
Selling and administrative expenses as a percentage of revenue were 10.7%
for the second quarter and 11.0% for the first six months of 1994, compared to
9.9% and 10.1% in the corresponding periods of 1993. These increases are
attributable to the revenue volume decline and increased acquisition activity in
1993 and early 1994. The level of selling and administrative expenses of
acquired companies was higher than that of existing operations. Acquisitions
tend to initially increase costs as a percentage of revenue, but the situation
generally reverses as the acquired businesses are integrated into existing
operations.
18
<PAGE>
Interest -
- --------
The following table sets forth the components of consolidated interest,
net, for the three-month and six-month periods ended June 30, 1994 and 1993
(000's omitted):
<TABLE>
<CAPTION>
Three Months Six Months
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest expense $106,638 $103,088 $216,069 $186,644
Interest income (5,643) (10,955) (16,407) (21,713)
Capitalized interest (28,367) (27,532) (53,568) (51,645)
-------- -------- -------- --------
Interest expense, net $ 72,628 $ 64,601 $146,094 $113,286
======== ======== ======== ========
</TABLE>
Net interest expense for the second quarter and first six months of 1994
increased over the comparable periods in 1993 primarily as a result of debt
increases during 1993 to fund stock repurchase programs, acquisitions, capital
expenditures and approximately $130 million paid to former stockholders of The
Brand Companies, Inc. ("Brand") who elected to receive cash in connection with
the 1993 merger of Brand into a wholly-owned subsidiary of Rust.
Gains From Stock Transactions of Subsidiaries -
- ---------------------------------------------
During the second quarter of 1993, CWM and WTI recognized a gain in
connection with shares issued by Rust as part of the Brand merger.
Minority Interest -
- -----------------
The increase in minority interest for the three-month and six-month periods
ended June 30, 1994, compared to the corresponding 1993 periods results from
increased earnings from the Company's less than wholly-owned subsidiaries, as
well as a larger minority interest recorded by WM International as a result of
higher earnings from operations in the U.K. and Hong Kong where there are
minority shareholders.
Sundry Income, Net -
- ------------------
Sundry income for the first six months of 1993 included a gain realized by
CWM on the sale of WTI shares held by CWM for investment.
Income Taxes -
- ------------
The Company's income tax rate has increased in 1994 compared to 1993 as a
result of the Omnibus Budget Reconciliation Act of 1993, which increased U.S.
income tax rates for the Company and its domestic subsidiaries. In addition,
the gains recognized on the issuance of shares by Rust in the Brand merger in
1993 were non-taxable. The Company's tax rate with respect to the earnings of
WM International also varies, depending upon the tax rate in the country where
the earnings originate and the amount of income taxable to the corporate U.S.
stockholders under Subpart F.
Derivative Financial Instruments -
- --------------------------------
From time to time, the Company uses derivatives to manage currency,
interest rate and commodity risk. Gains and losses on such instruments
recognized in income to date have not been material. See Notes to Consolidated
Financial Statements for further discussion of the use of and accounting for
such instruments.
19
<PAGE>
FINANCIAL CONDITION:
Liquidity and Capital Resources -
- -------------------------------
The Company is in a service industry and has neither significant inventory
nor seasonal variation in receivables. Therefore, cash flow from operating
activities is used primarily for the purchase of property and equipment and the
acquisition of businesses and, in 1993, to fund stock repurchase programs. The
Company has placed emphasis on generating positive cash flow to reduce debt in
1994. The Company had working capital of $259,107,000 at June 30, 1994,
compared to $99,958,000 at December 31, 1993.
Long-term and short-term debt increased approximately $38 million from
December 31, 1993, to June 30, 1994, but declined approximately $123 million in
the second quarter of 1994, as a result of the Company's emphasis on improved
cash flow from operations and proceeds from the sale of assets and businesses by
WMI as part of its strategic refocusing of its business. The increase since
December 31, 1993, resulted from translation of WM International debt due to the
strengthening of the pound sterling against the U. S. dollar during that period.
Acquisitions, Divestitures and Capital Expenditures -
- ---------------------------------------------------
Capital expenditures, excluding property and equipment of purchased
businesses, were $651,232,000 for the six months ended June 30, 1994, and
$771,444,000 for the comparable period in 1993. In addition, the Company and
its principal subsidiaries acquired 26 businesses for $109,394,000 in cash and
notes, 73,809 shares of WMX common stock and 156,124 shares of WTI common stock
during the first six months of 1994. For the six months ended June 30, 1993,
the Company and its principal subsidiaries acquired 57 businesses for
$377,113,000 in cash and notes, 211,016 shares of WMX common stock, and 194,411
shares of WTI common stock. See Notes to Consolidated Financial Statements for
a discussion of the proforma effect of acquisitions.
During the first six months of 1994, WMI sold several businesses, including
its Modulaire(R) mobile office business. Revenue and net income from businesses
sold were not material to the consolidated financial statements.
Capital Structure -
- -----------------
The Boards of Directors of each of WMX, CWM and WTI have authorized their
respective companies to repurchase shares of their own common stock in the open
market or in privately negotiated transactions. The programs extend to November
1994 in the case of CWM and into 1996 in the case of WMX and WTI. No shares
were repurchased by any of the companies during the first six months of 1994.
Subsequent to June 30, 1994, the Board of Directors of Rust approved a similar
repurchase program, covering up to 500,000 Rust shares, which expires in August
1996.
During the first six months of 1994, WMX sold put options on 9 million
shares of its common stock. The put options give the holders the right at
maturity to require the Company to repurchase its common stock at specified
prices. Options on 4.7 million shares, with strike prices ranging from $24.810
to $26.518, expired unexercised subsequent to June 30, 1994, as the price of the
Company's common stock was in excess of the strike price at maturity. The
remaining options expire during November 1994 at strike prices ranging from
$24.375 to $24.841 per share. In August 1994, WMX initiated a program to sell
additional put options to replace those which expired in July and August. The
new options will expire in February 1995 and are expected to have strike prices
of approximately $29 per share.
During the first six months of 1994, the Company formed an Employee Stock
Benefit Trust and sold 12.6 million shares of treasury stock to the Trust in
20
<PAGE>
return for a thirty-year, 7.33% note with interest payable quarterly and
principal due at maturity. At the direction of an administrative committee
comprised of Company officers, the Trustee will use the shares or proceeds from
the sale of shares to pay employee benefits, and to the extent of such payments
by the Trust, the Company will forgive principal and interest on the note. See
Notes to Consolidated Financial Statements for additional information.
SUBSEQUENT EVENT:
On July 28, 1994, the Company announced a proposal to acquire all of the
outstanding shares of CWM which it does not already own. Under the proposal,
each holder of CWM shares (other than WMX) would receive .27 WMX shares for each
share of CWM common stock held. The transaction is subject to the approval of
both a committee of independent CWM directors and the holders of a majority of
CWM's outstanding shares (other than shares held by WMX) voting at a
stockholders' meeting.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
-----------------
Some of the businesses in which the Company is engaged are intrinsically
connected with the protection of the environment and the potential for the
unintended or unpermitted discharge of materials into the environment. In the
ordinary course of conducting its business activities, the Company becomes
involved in judicial and administrative proceedings involving governmental
authorities at the federal, state and local level including, in certain
instances, proceedings instituted by citizens or local governmental authorities
seeking to overturn governmental action where governmental officials or agencies
are named as defendants together with the Company or one or more of its
subsidiaries, or both. In the majority of the situations where proceedings are
commenced by governmental authorities, the matters involved relate to alleged
technical violations of licenses or permits pursuant to which the Company
operates or is seeking to operate or laws or regulations to which its operations
are subject or are the result of different interpretations of the applicable
requirements. From time to time the Company pays fines or penalties in
environmental proceedings relating primarily to waste treatment, storage or
disposal or trash-to-energy facilities. As of June 30, 1994, CWM or its
subsidiaries (other than Rust) were involved in three such proceedings, WTI or
its subsidiaries were involved in two such proceedings and a subsidiary of Rust
was involved in one such proceeding where it is believed that sanctions involved
in each instance may exceed $100,000. The Company believes that these matters
will not have a material adverse effect on its results of operations or
financial condition. However, the outcome of any particular proceeding cannot
be predicted with certainty, and the possibility remains that technological,
regulatory or enforcement developments, the results of environmental studies, or
other factors could materially alter this expectation at any time.
After the end of the quarter, several purported class action lawsuits
seeking injunctive relief and unspecified money damages were filed in the
Chancery Court for New Castle County, Delaware against the Company, CWM and the
individual directors of CWM in connection with a July 28, 1994, proposal by the
Company to acquire all of the shares of CWM's common stock which the Company
does not own (the "Company Proposal"). The Company Proposal contemplates a
merger in which CWM's stockholders (other than the Company) would receive .27 of
a Company share for each CWM share held, subject to the approval of both a
committee consisting of CWM's independent directors and the holders of a
majority of CWM's outstanding shares (other than shares held by the Company)
voting at a stockholders' meeting. The lawsuits allege, among other things,
that the defendants have breached their fiduciary duties to CWM's minority
stockholders because the merger consideration contemplated by the Company
Proposal is inadequate and unfair and no adequate means exists to ensure that
the interests of such stockholders will be protected in respect of the Company
Proposal. WMX believes that its actions and those of CWM and its Board of
Directors in connection with the Company Proposal have been in accordance with
Delaware law. Accordingly, the Company intends to contest these lawsuits
vigorously.
22
<PAGE>
ITEM 4. Submission of Matter to Vote of Security Holders
------------------------------------------------
At the Company's annual meeting of stockholders on May 13, 1994, a proposal
to elect the nominees listed in the following table as directors of the Company
was submitted to the vote of the Company's stockholders. The following table
also shows the results of voting as to each nominee:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- ----------- --------------
<S> <C> <C>
Dean L. Buntrock 395,784,172 3,779,105
Howard H. Baker, Jr. 395,856,889 3,706,388
Peter H. Huizenga 395,935,527 3,627,750
Peer Pedersen 395,874,552 3,688,725
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
The exhibits to this report are listed in the Exhibit Index elsewhere
herein.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the quarter ended June 30,
1994.
23
<PAGE>
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.
WMX TECHNOLOGIES, INC.
/s/ JAMES E. KOENIG
---------------------------------------
James E. Koenig - Senior Vice President
and Chief Financial Officer
August 12, 1994
24
<PAGE>
WMX TECHNOLOGIES, INC.
EXHIBIT INDEX
Number and Description of Exhibit*
---------------------------------
2 None
4 None
10 None
11 None
12 Computation of Ratios of Earnings to Fixed Charges
15 None
18 None
19 None
22 None
23 None
24 None
99 None
- ----------------------------
* Exhibits not listed are inapplicable.
25
<PAGE>
EXHIBIT 12
WMX TECHNOLOGIES, INC.
Ratio of Earnings to Fixed Charges
(Unaudited)
(millions of dollars, except ratio)
<TABLE>
<CAPTION>
Six Months
Ended June 30
---------------------
1993 1994
--------- ---------
<S> <C> <C>
Income Before Income Taxes and Minority
Interest...................................... $746.8 $716.5
Interest Expense................................ 186.6 216.1
Capitalized Interest............................ (51.6) (53.6)
One-Third of Rents Payable in the Next Year..... 21.3 23.6
------ ------
Income Before Income Taxes, Minority Interest,
Interest and One-Third of Rents............... $903.1 $902.6
====== ======
Interest Expense................................ $186.6 $216.1
One-Third of Rents Payable in the Next Year..... 21.3 23.6
------ ------
Interest Expense plus One-Third of Rents........ $207.9 $239.7
====== ======
Ratio of Earnings to Fixed Charges.............. 4.34 to 1 3.77 to 1
</TABLE>
26
