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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-7327
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WMX TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2660763
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (708) 572-8800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C> <C>
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE ZURICH STOCK EXCHANGE
CHICAGO STOCK EXCHANGE GENEVA STOCK EXCHANGE
LONDON STOCK EXCHANGE BASLE STOCK EXCHANGE
FRANKFURT STOCK EXCHANGE
</TABLE>
<TABLE>
<S> <C>
LIQUID YIELD OPTION NOTES DUE 2001 NEW YORK STOCK EXCHANGE
8 3/4% DEBENTURES DUE 2018 NEW YORK STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2012 NEW YORK STOCK EXCHANGE
CHEMICAL WASTE MANAGEMENT, INC.
LIQUID YIELD OPTION NOTES DUE 2010 NEW YORK STOCK EXCHANGE
CONVERTIBLE SUBORDINATED NOTES DUE 2005 NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY
$14,457,190,000 AT FEBRUARY 1, 1996 (BASED ON THE CLOSING SALE PRICE ON THE
NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1996, AS REPORTED BY THE
WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 20, 1996, THE REGISTRANT HAD
ISSUED AND OUTSTANDING AN AGGREGATE OF 494,495,743 SHARES OF ITS COMMON STOCK
OF RECORD.
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1995 ANNUAL REPORT TO
STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 10, 1996 DESCRIBED IN PARTS II, III AND IV
HEREOF ARE INCORPORATED BY REFERENCE IN THIS REPORT.
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<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
WMX Technologies, Inc. is a leading international provider of environmental
and related services. Unless the context indicates to the contrary, as used in
this report the terms "Company" and "WMX Technologies" refer to WMX
Technologies, Inc. and its subsidiaries.
The Company provides integrated solid waste management services in North
America through Waste Management, Inc., a wholly owned subsidiary of the
Company (referred to herein, together with its subsidiaries and certain
affiliated companies providing waste management and related services, as
"Waste Management"). The Company's solid waste management services are
provided to commercial, industrial, municipal and residential customers, as
well as to other waste management companies and consist of solid waste
collection, transfer, resource recovery and disposal services. As part of
these services, the Company is engaged in providing, through its Recycle
America(R), Recycle Canada(R) and other programs, paper, glass, plastic and
metal recycling services to commercial and industrial operations and curbside
collection of such materials from residences; in removing methane gas from
sanitary landfill facilities for use in electricity generation; and in
providing medical and infectious waste management services to hospitals and
other health care and related facilities. In addition, through Waste
Management the Company provides street sweeping and parking lot cleaning
services and Port-O-Let(R) portable sanitation services to municipalities and
commercial and special event customers. Since mid-1995, Waste Management also
has managed the scaffolding and other on-site industrial services businesses
owned by the Company's Rust International Inc. subsidiary.
The Company also provides hazardous waste management services in North
America. The Company's chemical waste treatment, storage, disposal and related
services are provided through Waste Management and Chemical Waste Management,
Inc., a wholly owned subsidiary of the Company (referred to herein, together
with its subsidiaries, as "CWM"), and are provided to commercial and
industrial customers, as well as to other waste management companies and to
governmental entities. Through Advanced Environmental Technical Services,
L.L.C., a 60%-owned subsidiary of the Company (referred to herein, together
with its subsidiaries as "AETS"), the Company provides on-site integrated
hazardous waste management services, including hazardous waste identification,
packaging, removal and recycling services to industrial, institutional and
governmental customers. Through its Chem-Nuclear Systems, Inc. wholly owned
subsidiary (referred to herein, together with its subsidiaries, as "Chem-
Nuclear"), the Company also furnishes radioactive waste management services,
primarily to electric utilities and governmental entities.
The Company provides comprehensive waste management and related services
internationally, primarily through Waste Management International plc, a
subsidiary owned approximately 56% by the Company and 12% each by the
Company's Rust International Inc. and Wheelabrator Technologies Inc.
subsidiaries (referred to herein, together with its subsidiaries, as "Waste
Management International"). Waste Management International provides a wide
range of solid and hazardous waste management and related environmental
services (or has interests in projects or companies providing such services)
in ten countries in Europe and in Argentina, Australia, Brazil, Brunei, Hong
Kong, Indonesia, Israel, Malaysia, New Zealand, Taiwan and Thailand. Waste
Management International also has an approximately 20% interest in Wessex
Water Plc, an English publicly traded company providing water treatment, water
distribution, wastewater treatment and sewerage services ("Wessex").
Wheelabrator Technologies Inc., an approximately 58%-owned subsidiary of the
Company (referred to herein, together with its subsidiaries, as "WTI"),
provides a wide array of environmental products and services that are
primarily utilized in meeting the needs of municipalities and industry for
clean energy and clean water. WTI's clean energy group is a leading developer
of facilities and systems for, and provider of services to, the trash-to-
energy, energy, and independent power markets. Through the clean energy group,
WTI develops, arranges financing for, operates and owns facilities that
dispose of trash and other waste materials in an environmentally acceptable
manner by recycling them into electrical or steam energy. Also within this
group are business units which design, fabricate and install technologically
advanced air pollution control and systems and
2
<PAGE>
equipment. WTI's clean water group is principally involved in the design,
manufacture, operation and ownership of facilities and systems used to purify
water, to treat municipal and industrial wastewater, to treat and manage
biosolids resulting from the treatment of wastewater by converting them into
useful fertilizers, and to recycle organic wastes into compost material
useable for horticultural and agricultural purposes. The clean water group
also designs and manufactures various products used in water and wastewater
treatment facilities and industrial processes, precision profile wire screens
for use in groundwater wells and other industrial and municipal applications,
and certain other industrial equipment.
Rust International Inc., a subsidiary owned approximately 60% by the Company
and 40% by WTI (referred to herein, together with its subsidiaries, as
"Rust"), furnishes environmental and infrastructure engineering and consulting
services primarily to clients in federal, state and local government and in
the chemical, petrochemical, nuclear, energy, utility, pulp and paper,
manufacturing, environmental services and other industries. Rust also provides
process engineering, construction, specialty contracting and related services
through a business unit which Rust intends to sell or otherwise discontinue.
Rust also has an approximately 41% interest in NSC Corporation, a publicly
traded provider of asbestos abatement and other specialty contracting services
("NSC"), and an approximately 37% interest in OHM Corporation, a publicly
traded provider of environmental remediation services ("OHM"). See
"Acquisitions and Dispositions" herein.
The Company also owns an approximately 19% interest in ServiceMaster Limited
Partnership, a provider of management services, including management of health
care, education and commercial facilities, and lawn care, pest control and
other consumer services.
The following table shows the respective revenues of the Company's major
business groups for the last three years, excluding the revenues of Rust's
process engineering, construction, specialty contracting and related services
business, which is to be sold or otherwise discontinued and is being treated
as a discontinued operation, and including the revenues of the asbestos
abatement services business of a former subsidiary through the May 1993 sale
of that business and the revenues of the Rust remediation services business
transferred to OHM through the date of the transfer in May 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ---------- -----------
(000'S OMITTED)
<S> <C> <C> <C>
Solid Waste Management and Related
Services................................ $4,702,166 $5,117,871 $ 5,642,857
Hazardous Waste Management and Related
Services................................ 661,860 649,581 613,883
Engineering, Industrial and Related
Services................................ 1,035,004 1,140,294 1,027,430
Trash-to-Energy, Water Treatment, Air
Quality and Related Services 1,142,219 1,324,567 1,451,675
International Waste Management and
Related Services........................ 1,411,211 1,710,862 1,865,081
Elimination of Intercompany Revenue...... (316,344) (388,470) (353,309)
---------- ---------- -----------
Consolidated Revenue..................... $8,636,116 $9,554,705 $10,247,617
========== ========== ===========
</TABLE>
As a result of a strategic review begun in 1994, management and operations
of the Company have been largely realigned on the basis of four principal
global lines of business--waste services, clean energy, clean water and
environmental and infrastructure engineering and consulting. The following
table shows the respective revenues of these continuing lines of business
(i.e., excluding revenues of Rust's process engineering, construction,
specialty contracting and related services business) for the last three years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ---------- -----------
(000'S OMITTED)
<S> <C> <C> <C>
Waste Services (including Scaffolding and
Other On-Site Industrial Services)....... $7,457,371 $8,140,785 $ 8,634,836
Clean Energy.............................. 804,016 888,037 893,513
Clean Water............................... 392,194 489,295 618,472
Environmental and Infrastructure
Engineering and Consulting............... 298,879 425,058 454,105
Elimination of Intercompany Revenue....... (316,344) (388,470) (353,309)
---------- ---------- -----------
Consolidated Revenue...................... $8,636,116 $9,554,705 $10,247,617
========== ========== ===========
</TABLE>
3
<PAGE>
For information relating to expenses and identifiable assets attributable to
the Company's major business groups, see Note 13 to the Company's Consolidated
Financial Statements filed as an exhibit to this report and incorporated by
reference herein. For interim periods, the revenues and net income of certain
of the Company's businesses may fluctuate for a number of reasons, including
there being for some businesses less activity during the winter months.
Regulatory or technological developments relating to the environment may
require companies engaged in environmental services businesses, including the
Company, to modify, supplement or replace equipment and facilities at costs
which may be substantial. Because certain of the businesses in which the
Company is engaged are intrinsically connected with the protection of the
environment and the potential discharge of materials into the environment, a
material portion of the Company's capital expenditures is, directly or
indirectly, related to such items. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition" set forth on pages 16 to 24
of the Company's 1995 Annual Report to Stockholders (which discussion is filed
as an exhibit to this report and incorporated by reference herein) for a
review of property and equipment expenditures by the Company for the last
three years. The Company does not expect such expenditures, which are incurred
in the ordinary course of business, to have a materially adverse impact on its
and its subsidiaries' combined earnings or its or its subsidiaries'
competitive position in the foreseeable future because the Company's
businesses are based upon compliance with environmental laws and regulations
and its services are priced accordingly.
Although the Company strives to conduct its operations in compliance with
applicable laws and regulations, the Company believes that in the existing
climate of heightened legal, political and citizen awareness and concerns,
companies in the environmental services industry, including the Company, will
be faced, in the normal course of operating their businesses, with fines and
penalties and the need to expend funds for remedial work and related
activities with respect to waste treatment, disposal and trash-to-energy
facilities. Where the Company concludes that it is probable that a liability
has been incurred, a provision is made in the Company's financial statements
for the Company's best estimate of the liability based on management's
judgment and experience, information available from regulatory agencies and
the number, financial resources and relative degree of responsibility of other
potentially responsible parties who are jointly and severally liable for
remediation of a specific site, as well as the typical allocation of costs
among such parties. If a range of possible outcomes is estimated and no amount
within the range appears to be a better estimate than any other, then the
Company provides for the minimum amount within the range, in accordance with
generally accepted accounting principles. Such estimates are subsequently
revised, as necessary, as additional information becomes available. While the
Company does not anticipate that the amount of any such revision will have a
material adverse effect on the Company's operations or financial condition,
the measurement of environmental liabilities is inherently difficult 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. Such matters could have a
material adverse impact on earnings for one or more fiscal quarters or years.
While in general the Company's environmental services businesses have
benefited substantially from increased governmental regulation, the
environmental services industry itself is subject to extensive and evolving
regulation by federal, state, local and foreign authorities. Due to the
complexity of regulation of the industry and to public pressure,
implementation of existing and future laws, regulations or initiatives by
different levels of government may be inconsistent and difficult to foresee.
In addition, the demand for certain of the Company's services may be adversely
affected by the amendment or repeal, or reduction in enforcement of, federal,
state and foreign laws and regulations on which the Company's businesses
engaged in providing such services are dependent. Demand for certain of the
Company's services may also be adversely affected by delays or reductions in
funding, or failure of legislative bodies to fund, agencies or programs under
such laws and regulations. The Company makes a continuing effort to anticipate
regulatory, political and legal developments that might affect its operations
but is not always able to do so. The Company cannot predict the extent to
which any legislation or regulation that may be enacted, amended, repealed or
enforced, or any failure or delay in enactment or enforcement of legislation
or regulations or funding of agencies or programs, in the future may affect
its operations.
4
<PAGE>
The Company was incorporated in Delaware in 1968 and subsequently succeeded
to certain businesses owned by its organizers and others. The Company's common
stock is listed on the New York Stock Exchange under the trading symbol "WMX"
and is also listed on the Frankfurt Stock Exchange, the London Stock Exchange,
the Chicago Stock Exchange and the Swiss Stock Exchanges in Basle, Zurich and
Geneva.
Unless the context indicates to the contrary, all statistical and financial
information under Item 1 and Item 2 of this report is given as of December 31,
1995. Also, unless the context indicates to the contrary, statistical and
financial data appearing under the caption "Waste Services" relate only to the
Company's Waste Management, CWM, AETS and Chem-Nuclear groups of subsidiaries
and do not include any data relating to Rust, Rust's scaffolding and other on-
site industrial services business managed by Waste Management, WTI or Waste
Management International. See "International Waste Management and Related
Services," "Clean Energy, Clean Water and Related Services" and "Environmental
and Infrastructure Engineering and Consulting Services."
WASTE SERVICES
The Company's solid waste management and recycling services include
residential, commercial and industrial collection, transfer and disposal
services and related services provided by Waste Management. The Company's
hazardous waste management services include chemical waste treatment, storage,
disposal and related services provided by Waste Management and CWM, on-site
integrated hazardous waste management services provided by AETS and low-level
radioactive waste disposal services provided by Chem-Nuclear. For each of the
three years in the period ended December 31, 1995, such services accounted for
the following percentages of the Company's total North America waste services
revenue (excluding scaffolding and other on-site industrial services revenue):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Solid Waste and Recycling
Collection Services:
Residential.............................................. 20.4% 19.8% 19.4%
Commercial............................................... 26.3 26.4 26.2
Roll-off and Industrial.................................. 20.8 21.5 21.3
Solid Waste Disposal, Transfer and Related Services....... 20.2 21.0 23.3
Hazardous Waste Services................................... 12.3 11.3 9.8
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
SOLID WASTE MANAGEMENT, RECYCLING AND RELATED SERVICES
At December 31, 1995, Waste Management conducted solid waste management,
recycling and related services operations in 48 states, the District of
Columbia, four Canadian provinces and Mexico. During 1993, 1994 and 1995,
operations in California, Florida and Pennsylvania together accounted for
approximately 34%, 30% and 28%, respectively, of North America solid waste
revenue. No customer accounted for as much as 2% of such revenue in 1993 or 1%
in 1994 or 1995.
COLLECTION
Waste Management provides solid waste collection services to approximately
1,072,500 commercial and industrial customers. Collection services are also
provided to approximately 11,982,800 homes and apartment units. These services
include collection of recyclable commodities. See "Recycling and Energy
Recovery--Recycling" for a description of recycling services.
Commercial and Industrial
Many of Waste Management's commercial and industrial customers utilize
containers to store solid waste, including "roll-offs," which are large
containers dropped off at construction or other sites for the deposit of waste
and then hoisted when full onto a truck for transport. These containers,
ranging from 1 to 45 cubic yards
5
<PAGE>
in size, are usually provided to the customer as part of Waste Management's
services. Stationary compactors, which compact the volume of the stored waste
prior to collection, are frequently installed on the premises of large volume
customers and are usually provided to these customers in conjunction with
Waste Management's collection services. Containerization enables Waste
Management to service most of its commercial and industrial customers with
collection vehicles operated by a single employee. Compaction serves to
decrease the frequency of collection.
Commercial and industrial collection services (which include containerized
service to apartment buildings) are generally performed under one- to three-
year service agreements. Fees are determined by such considerations as market
factors, collection frequency, type of equipment furnished, length of service
agreement, type and volume or weight of the waste collected, distance to the
disposal facility and cost of disposal.
Residential
Most of Waste Management's residential solid waste collection services are
performed under contracts with, or franchises granted by, municipalities
giving Waste Management exclusive rights to service all or a portion of the
homes in their respective jurisdictions. Such contracts or franchises usually
range in duration from one to five years. The fees received by Waste
Management are based primarily on market factors, frequency and type of
service, the distance to processing or disposal facilities and cost of
processing or disposal. Residential collection fees are either paid by the
municipalities out of tax revenues or service charges or are paid directly by
the residents receiving the service.
TRANSFER
Waste Management operates 151 solid waste transfer stations. A transfer
station is a facility where solid waste is received from collection vehicles
and then transferred to, and in some cases compacted in, large, specially
constructed trailers for transportation to disposal or resource recovery
facilities. This procedure reduces costs by improving utilization of
collection personnel and equipment and improving the efficiency of
transporting waste to final disposal facilities.
The services of these facilities are provided to municipalities or counties
and in most instances are also used by Waste Management and by other
collection companies. Fees are generally based upon such considerations as
market factors, the type and volume or weight of the waste transferred, the
extent of processing of recyclable materials, the transport distance involved
and the cost of disposal.
RECYCLING AND ENERGY RECOVERY
Recycling
Waste Management provides recycling services in the United States and Canada
through its Recycle America(R), Recycle Canada(R) and other programs.
Recycling involves the removal of reusable materials from the waste stream for
processing and sale or other disposition for use in various applications.
Participating commercial and industrial operations use containers to separate
recyclable paper, glass, plastic and metal wastes for collection, processing
and sale by Waste Management. Fees are determined by such considerations as
market factors, frequency of collection, type and volume or weight of the
recyclable material, degree of processing required, distance the recyclable
material must be transported and value of the recyclable material.
As part of its residential solid waste collection services, Waste Management
engages in curbside collection of recyclable materials from residences in the
United States and Canada, also through its Recycle America(R), Recycle
Canada(R) and other programs. Curbside recycling services generally involve
the collection of recyclable paper, glass, plastic and metal waste materials,
which may be separated by residents into different waste containers or
commingled with other recyclable materials. The recyclable materials are then
typically deposited at a local materials recovery facility where they are
sorted and processed for resale.
6
<PAGE>
The prices received by the Company for recyclable materials fluctuate
substantially from quarter to quarter and year to year depending upon domestic
and foreign demand for such materials, the quality of such materials, prices
for new materials and other factors. In some instances, the Company enters
into agreements with the local governments of municipalities in which it
provides recycling services whereby the governments share in the gains and
losses resulting from fluctuation in prices of recyclable commodities. These
agreements mitigate both the Company's gains and losses from such
fluctuations.
In 1995, Waste Management provided curbside recycling services to
approximately 7,200,000 households pursuant to more than 1,000 contracts in
the United States and Canada. Waste Management has approximately 188,000
commercial and industrial recycling services customers.
Waste Management operates 129 materials recovery facilities for the receipt
and processing of recyclable materials. Such processing consists of separating
recyclable materials according to type and baling or otherwise preparing the
separated materials for sale.
Waste Management also participates in joint ventures with Stone Container
Corporation and American National Can Corporation to engage, respectively, in
the businesses of marketing paper fibre and aluminum, steel, and glass
containers for recycling. In each case Waste Management sells to the joint
venture, or has the joint venture market, the paper fibre or containers
collected by Waste Management to Stone Container, American National Can or
other parties who will process them for reuse. The joint venture with American
National Can also owns and operates three glass processing facilities. During
1995, the joint ventures processed approximately 4,496,000 tons of recyclable
materials. Waste Management also provides tire and demolition and construction
debris recycling services.
Energy Recovery
At 34 Waste Management-owned or -operated sanitary landfill facilities,
Waste Management is engaged in methane gas recovery operations. These
operations involve the installation of a gas collection system into a sanitary
landfill facility. Through the gas collection system, gas generated by
decomposing solid waste is collected and transported to a gas-processing
facility at the landfill site. Through physical processes methane gas is
separated from contaminants. The processed methane gas generally is then
either (i) sold directly to industrial users or (ii) sold to an affiliate of
the Company which uses it as a fuel to power electricity generators.
Electricity generated by these facilities is sold, usually to public utilities
under long-term sales contracts, often under terms or conditions which are
subject to approval by regulatory authorities.
WMX Technologies also engages in other resource recovery activities through
WTI's trash-to-energy and independent power operations and Waste Management
International's operations. See "Clean Energy, Clean Water and Related
Services" and "International Waste Management and Related Services."
DISPOSAL
Waste Management operates 133 solid waste sanitary landfill facilities. Of
this number, 103 are owned by Waste Management and the remainder are leased
from, or operated under contract with, others. Additional facilities are in
various stages of development. Waste Management also provides yard-waste
composting services, bioremediation of petroleum-contaminated soils and
solidification of difficult-to-treat liquid wastes at a number of its disposal
facilities. All of the sanitary landfill facilities are subject to
governmental regulation. See "Regulation--Waste Services--Solid Waste."
A sanitary landfill site must have geological and hydrological properties
and design features which limit the possibility of water pollution, directly
or by leaching. Sanitary landfill operations, which include carefully planned
excavation, continuous spreading and compacting of solid waste and covering of
the waste, are designed to maintain sanitary conditions, insure optimum
utilization of the airspace and prepare the site for ultimate use for other
purposes.
7
<PAGE>
Suitable sanitary landfill facilities and permission to expand existing
facilities may be difficult to obtain in some areas because of land scarcity,
local resident opposition and governmental regulation. As its existing
facilities become filled in such areas, the solid waste disposal operations of
Waste Management are and will continue to be materially dependent on its
ability to purchase, lease or obtain operating rights for additional sites or
expansion of existing sites and to obtain the necessary permits from
regulatory authorities to construct and operate them. In addition, there can
be no assurance that additional sites can be obtained or that existing
facilities can continue to be expanded or operated. However, management
believes that the facilities currently available to Waste Management are
sufficient to meet the needs of its operations in most areas for the
foreseeable future.
To develop a new facility, Waste Management must expend significant time and
capital resources without any certainty that the necessary permits will
ultimately be issued for such facility or that the Company will be able to
achieve and maintain the desired disposal volume at such facility. If the
inability to obtain and retain necessary permits, the failure of a facility to
achieve the desired disposal volume or other factors cause Waste Management to
terminate development efforts for a facility, the capitalized development
expenses of the facility may need to be written off.
In varying degrees, Waste Management utilizes its own sanitary landfill
facilities to accommodate its disposal requirements for collection and
transfer operations. In 1993, 1994 and 1995 approximately 52%, 55% and 57%,
respectively, of the solid waste collected by Waste Management was disposed of
in sanitary landfill facilities operated by it. Usually these facilities are
also used by other companies and government agencies on a noncontract basis
for fees determined by such considerations as market factors and the type and
volume or weight of the waste.
RELATED SERVICES
Waste Management also provides or manages several types of services which
are compatible with its solid waste collection operations. Included in these
operations are scaffolding and other on-site industrial services, medical and
infectious waste management services, portable sanitation services and street
sweeping and parking lot cleaning services.
Waste Management manages the business of Rust Industrial Services Inc., a
subsidiary of Rust ("RIS"), providing scaffolding and other on-site industrial
services. RIS provides scaffolding services primarily to the chemical,
petrochemical and utilities industries. In most cases, the scaffolding
services are provided in conjunction with periodic, routine cleaning and
maintenance of refineries, chemical plants and utilities, although such
services are also performed in connection with new construction projects. RIS
also performs a variety of types of other industrial services--water blasting,
tank cleaning, explosives blasting, chemical cleaning, industrial vacuuming,
catalyst handling, specialty chemicals and separation technologies--primarily
for clients in the petrochemical, chemical, and pulp and paper industries,
utilities and, to a lesser extent, the public sector. RIS also provides on-
site plant services, including providing personnel to perform mechanical and
electrical services, equipment installation, welding, heating, ventilating and
air conditioning ("HVAC"), warehousing and inventory management services and
technical support in the area of industrial hygiene and safety training. RIS
assists clients in the nuclear and utility industries in solving electrical,
mechanical, engineering and related technical services problems. RIS also
provides spent fuel storage (rerack) services to the nuclear power industry.
Waste Management's medical and infectious waste management services consist
of collecting, transporting, treating and disposing of medical and infectious
waste generated by hospitals, pharmaceutical manufacturers, medical clinics,
physician and dentist offices and other sources.
Waste Management also provides portable sanitation services to
municipalities and commercial customers. The portable sanitation services,
which are marketed under the Port-O-Let(R) trade name, are also used at
numerous special events and public gatherings.
Certain of these related services are marketed and performed primarily by
employees operating out of Waste Management's solid waste operations
facilities who also may have responsibility for some phase of solid waste
marketing or operations.
8
<PAGE>
HAZARDOUS WASTE MANAGEMENT AND RELATED SERVICES
CHEMICAL WASTE MANAGEMENT SERVICES
The Company operates chemical waste treatment, storage and disposal
facilities in 16 states and also owns a majority interest in a subsidiary
which operates a resource recovery and storage facility and a disposal
facility in Mexico. The chemical wastes handled by the Company include
industrial by-products and residues that have been identified as "hazardous"
pursuant to the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), as well as other materials contaminated with a wide variety of
chemical substances.
Chemical waste may be collected from customers and transported by Waste
Management or CWM or contractors retained by them or delivered by customers to
their facilities. Chemical waste is transported by Waste Management or CWM
primarily in specially constructed tankers and semi-trailers, including
stainless steel and rubber or epoxy-lined tankers and vacuum trucks, or in
containers or drums on trailers designed to comply with applicable regulations
and specifications of the U.S. Department of Transportation ("DOT") relating
to the transportation of hazardous materials. Waste Management and CWM also
operate several facilities at which waste collected from or delivered by
customers may be analyzed and consolidated prior to further shipment.
The Company's seven secure land disposal facilities either have interim
status or have been issued permits under RCRA. See "Regulation--RCRA." In
general, the Company's secure land disposal facilities have received the
necessary permits and approvals to accept chemical wastes, although some of
such sites may accept only certain chemical wastes. Only chemical wastes in a
stable, solid form which meet applicable regulatory requirements may be buried
in the Company's secure disposal cells. These land disposal facilities are
sited, constructed and operated in a manner designed to provide long-term
containment of such waste. Chemical wastes may be treated prior to disposal.
Physical treatment methods include distillation, evaporation and separation,
all of which basically result in the separation or removal of solid materials
from liquids. Chemical treatment methods include chemical oxidation and
reduction, chemical precipitation of heavy metals, hydrolysis and
neutralization of acid and alkaline wastes and essentially involve the
transformation of wastes into inert materials through one or more chemical
reaction processes. At two of its locations, the Company isolates treated
chemical wastes in liquid form by injection into deep wells. Deep well
technology involves drilling wells in suitable rock formations far below the
base of fresh water and separated from it by other substantial geological
confining layers.
AETS provides on-site integrated hazardous waste management services,
including hazardous waste identification, packaging, removal and recycling
services in North America. These services include on-site hazardous waste data
management, education and training, inventory control and other administrative
services, lab pack services, drum identification services, household hazardous
waste programs, less-than-full load waste pickup and consolidation services,
and related services. AETS provides these services primarily to industrial,
institutional and public sector customers, including laboratories.
In the United States, most chemical wastes generated by industrial processes
are handled "on-site" at the generators' facilities. Since the mid-1970's,
public awareness of the harmful effects of unregulated disposal of chemical
wastes on the environment and health has led to extensive and evolving
federal, state and local regulation of chemical waste management activities.
The major federal statutes regulating the management of chemical wastes
include RCRA, the Toxic Substances Control Act ("TSCA") and the Comprehensive
Environmental Response, Compensation and Liabilities Act of 1980, as amended
("CERCLA" or "Superfund"), all primarily administered by the United States
Environmental Protection Agency ("EPA"). The business is heavily dependent
upon the extent to which regulations promulgated under these or similar state
statutes and their enforcement over time effectively require wastes to be
specially handled or managed and disposed of in facilities of the type owned
and operated by the Company. See "Regulation--Waste Services--Hazardous
Waste," "--RCRA" and "--Superfund." The chemical waste services industry
currently has substantial excess capacity caused by a number of factors,
including a decline in environmental remediation projects generating hazardous
waste for off-site treatment and disposal, continuing efforts by hazardous
waste generators to reduce volume and to manage it on-site, and the uncertain
regulatory environment regarding
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hazardous waste management and remediation requirements. These factors have
led to reduced demand and increased pressure on pricing for chemical waste
management services, consequences which the Company expects to continue for
the foreseeable future.
LOW-LEVEL AND OTHER RADIOACTIVE WASTE SERVICES
Radioactive wastes with varying degrees of radioactivity are generated by
nuclear reactors and by medical, industrial, research and governmental users
of radioactive material. Radioactive wastes are generally classified as either
high-level or low-level. High-level radioactive waste, such as spent nuclear
fuel and waste generated during the reprocessing of spent fuel from nuclear
reactors, contains substantial quantities of long-lived radionuclides and is
the ultimate responsibility of the federal government. Low-level radioactive
waste, which decays more quickly than high-level waste, largely consists of
dry compressible wastes (such as contaminated gloves, paper, tools and
clothing), resins and filters which have removed radioactive contaminants from
nuclear reactor cooling water, solidified wastes from power plants which have
become contaminated with radioactive substances and irradiated hardware.
Chem-Nuclear provides comprehensive low-level radioactive waste management
services in the United States consisting of disposal, processing and various
other special services. To a lesser extent, it provides services with respect
to radioactive waste that has become mixed with regulated chemical waste.
Chem-Nuclear's radioactive disposal operations involve low-level radioactive
waste only. Its Barnwell, South Carolina facility is one of two licensed
commercial low-level radioactive waste disposal facilities in the United
States and has been in operation since 1971. A trust has been established and
funded to pay the estimated cost of decommissioning the Barnwell facility. A
second fund, for the extended care of the facility, is funded by a surcharge
on each cubic foot of waste received. Chem-Nuclear may be liable for
additional costs if the extra charges collected to restore and maintain the
facility are insufficient to cover the cost of restoring or maintaining the
site after its closure (which Chem-Nuclear has no reason to expect). Under
state legislation enacted in 1995, the Barnwell, South Carolina facility is
authorized to operate until its current permitted disposal capacity is fully
utilized, unless such authorization is changed by legislation. However,
presently pending in the South Carolina Supreme Court is a suit challenging
the 1995 legislation, which repealed earlier legislation that would have
closed the Barnwell facility to out-of-state wastes. While Chem-Nuclear
believes the suit (to which it is not a party) lacks merit, it is impossible
to predict the outcome of the suit and its impact on future operations at
Barnwell.
Chem-Nuclear also processes low-level radioactive waste at its customers'
plants to enable such waste to be shipped in dry rather than liquid form to
meet the requirements for receipt at disposal facilities and to reduce the
volume of waste that must be transported. Processing operations include
solidification, demineralization, dewatering and filtration. Other services
offered by Chem-Nuclear include providing electro-chemical, abrasive and
chemical removal of radioactive contamination, providing management services
for spent nuclear fuel storage pools and storing and incinerating liquid
radioactive organic wastes.
INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES
The Company is a leading provider of comprehensive waste management and
related services internationally, primarily through Waste Management
International, which conducts essentially all of the waste management
operations of the Company located outside North America. Waste Management
International's business may broadly be characterized into two areas of
activity, collection services and treatment and disposal services. The
following table shows the derivation of Waste Management International's
revenues for the years indicated and includes revenue from construction of
treatment or disposal facilities for third parties under "Treatment and
Disposal Services":
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Collection Services........................................ 69% 64% 64%
Treatment and Disposal Services............................ 31% 36% 36%
</TABLE>
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The Company has had international operations since the mid-1970's. However,
the bulk of the Company's international operations and revenues are derived
from the acquisition over the last several years of numerous companies and
interests in Europe in various of its service lines. In 1993, major
acquisitions included, in the UK, the acquisition by the joint venture
described below between Waste Management International and Wessex of a solid
waste collection and disposal company; in France, a company engaged primarily
in solid waste collection; in The Netherlands, a company engaged in the
collection and transportation of solid waste and the sorting of demolition
waste; and, in Germany, a group of companies providing waste collection
services and recyclables sorting. In 1994, Waste Management International
completed 50 acquisitions in 10 countries, most of which were small
acquisitions which complemented or expanded existing Waste Management
International operations in various markets. With its acquisition goals
largely completed, Waste Management International engaged in 25 additional
small acquisitions during 1995.
In accordance with its objective of maintaining a local identity, Waste
Management International, in certain cases, operates through companies or
joint ventures in which Waste Management International and its affiliates own
less than a 100% interest. For example, Waste Management International is a
party to a joint venture with Wessex to provide waste management and related
services in the United Kingdom.
Because of the size and timing of projects and acquisitions, Waste
Management International's revenue mix by country varies from year to year.
Countries in which revenue exceeded 10% of Waste Management International's
consolidated total were: Italy (32%) and The Netherlands (11%) in 1993, Italy
(26%) and Germany (12%) in 1994 and Italy (23%), Germany (14%), The
Netherlands (11%) and The United Kingdom (11%) in 1995.
While Waste Management International has considerable experience in
mobilizing for and managing foreign projects, its operations continue to be
subject generally to such risks as currency fluctuations and exchange
controls, the need to recruit and retain suitable local labor forces and to
control and coordinate operations in different jurisdictions, changes in
foreign laws or governmental policies or attitudes concerning their
enforcement, political changes, local economic conditions and international
tensions. In addition, price adjustment provisions based on certain formulae
or indices may not accurately reflect the actual impact of inflation on the
cost of performance.
COLLECTION SERVICES
Collection services include collection and transportation of solid,
hazardous and medical wastes and recyclable material from residential,
commercial and industrial customers. The residential solid waste collection
process, as well as the commercial and industrial solid and hazardous waste
collection process, is similar to that utilized by the Company in the United
States. Waste Management International provided collection services as of
December 31, 1995 to governmental and private customers in ten European
countries, Argentina, Australia, New Zealand and Taiwan. Business is obtained
through public bids or tenders, negotiated contracts, and, in the case of
commercial and industrial customers, direct contracts. Waste Management
International operates 318 collection and staging facilities and 76 waste
transfer facilities.
Residential solid waste collection is normally performed by Waste Management
International pursuant to municipal contracts. Waste Management International
has approximately 1,500 municipal contracts, serving more than 6,800,000
residential properties. The scope, specifications, services provided and
duration of such contracts vary substantially, with some contracts
encompassing landfill disposal of collected waste, street-sweeping and other
related municipal services. The largest number of municipal contracts held by
Waste Management International is in Italy where Waste Management
International services approximately 1,850,000 residential properties. Pricing
for municipal contracts is generally based on volume of waste, number and
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frequency of collection pick-ups, and disposal arrangements. Longer-term
contracts typically have formulae for periodic price increases or adjustments.
Waste Management International also provides curbside recycling services
similar to those provided by Waste Management in North America.
Street, industrial premises, office and parking lot cleaning services are
also performed by Waste Management International, along with portable
sanitation/toilet services for such occasions as outdoor concerts and special
events.
Waste Management International's commercial and industrial solid and
hazardous waste collection services are generally contracted for by individual
establishments. In addition to solid waste collection customers, Waste
Management International provides services to small quantity waste generators,
as well as larger petrochemical, pharmaceutical and other industrial
customers, including collection of hazardous, chemical or medical wastes or
residues. Waste Management International has approximately 285,000 commercial
and industrial customers. Contract terms and prices vary substantially between
jurisdictions and types of customer. Waste Management International also
provides commercial and industrial recycling services.
TREATMENT AND DISPOSAL SERVICES
Treatment and disposal services include processing of recyclable materials,
operation of both solid and hazardous waste landfills, operation of municipal
and hazardous waste incinerators, operation of a trash-to-energy facility,
operation of water and wastewater treatment facilities, operation of hazardous
waste treatment facilities and construction of treatment or disposal
facilities for third parties. The operation of solid waste landfills is
currently Waste Management International's most significant treatment and
disposal service. Treatment and disposal services are provided under contracts
which may be obtained through public bid or tender or direct negotiation, and
are also provided directly to other waste service companies. At December 31,
1995, Waste Management International owned, operated or maintained 23 waste
treatment facilities, 79 recycling and recyclables processing facilities, 9
incinerators and 55 landfills.
Once collected, solid wastes may be processed in a recyclables processing
facility for sale or other disposition for use in various applications.
Unprocessed solid wastes, or the portion of the waste stream remaining after
recovery of recyclable materials, require disposal, which may be accomplished
through incineration (in connection with which the energy value may be
recovered in a trash-to-energy facility) or through disposal in a solid waste
landfill. The relative use of landfills versus incinerators differs from
country to country and will depend on many factors, including the availability
of land, geological and hydrological conditions, the availability and cost of
technology and capital, and the regulatory environment. The main determinant
of disposal method is generally the disposal cost per cubic meter at local
landfills, as incineration is generally more expensive.
At present, in most countries in which Waste Management International
operates, landfilling is the predominant disposal method employed. Waste
Management International owns or operates solid waste landfills in Argentina,
Australia, Brazil, Denmark, France, Germany, Hong Kong, Indonesia, Italy, New
Zealand, Spain, Sweden and the United Kingdom. Landfill disposal agreements
may be separate contracts or an integrated portion of collection or treatment
contracts.
Demand for solid waste incineration is affected by landfill disposal costs
and government regulations. The incineration process for non-hazardous solid
waste has also been influenced by two significant factors in recent years: (i)
increasingly strict control over air emissions from incinerators; and (ii)
increasing emphasis on trash-to-energy incinerators, which utilize heat
produced by incinerators to generate electricity and other energy.
Incineration generates approximately 30% residue (by weight), which is either
landfilled or, if permitted, recycled for use as a road base or in other
construction uses.
Waste Management International's trash-to-energy incinerator in Hamm is a
German-designed plant and the only privately operated trash-to-energy facility
in Germany. It is among the first trash-to-energy facilities to fully
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comply with that country's stringent new air pollution requirements. The
facility serves the household and commercial solid waste incineration needs of
a population of approximately 600,000 in Hamm and nearby towns. Under its
current permits, the facility is able to produce 18 megawatts per hour of
steam-generated electricity and sold approximately 74,000 megawatt hours to
the local power grid in 1995 (enough power for about 17,000 homes). In 1992,
Waste Management International entered into a contract with the County of
Gutersloh, Germany to design, construct, own and operate a trash-to-energy
facility. The facility is designed to convert 268,000 metric tons per year of
municipal waste and sewage sludge into energy. The facility would be capable
of producing enough electricity to power more than 35,000 homes. During 1995,
Waste Management International's permit application to develop and operate the
Gutersloh facility was denied. Waste Management International believes it is
entitled to the permit and is appealing the denial. Waste Management
International also operates seven small conventional municipal solid and other
waste incineration facilities. Waste Management International and WTI have
also formed a joint venture to develop trash-to-energy projects outside
Germany, Italy and North America. See "Competition" below.
Waste Management International owns or operates hazardous waste treatment
facilities in Australia, Finland, France, Germany, Hong Kong, Indonesia,
Italy, The Netherlands, Spain, Sweden and the United Kingdom and has entered
into agreements with respect to the development of hazardous waste treatment
facilities in Argentina and Thailand.
CLEAN ENERGY, CLEAN WATER AND RELATED SERVICES
WHEELABRATOR CLEAN ENERGY
WTI, through Wheelabrator Environmental Systems Inc. and its subsidiaries,
is a leading developer, operator and owner of trash-to-energy and independent
power facilities in the United States. These facilities, either owned or
operated, give WTI approximately 850 megawatts of electric generating
capacity. WTI's trash-to-energy projects utilize proven boiler and grate
technology capable of processing up to 2,250 tons of trash per day per
facility. The heat from this combustion process is converted into high-
pressure steam, which typically is used to generate electricity for sale to
public utility companies under long-term contracts.
WTI's trash-to-energy development activities have historically involved a
number of contractual arrangements with a variety of private and public
entities, including municipalities (which supply trash for combustion),
utilities or other power users (which purchase the energy produced by the
facility), lenders, public debtholders, joint venture partners and equity
investors (which provide financing for the project) and the contractors or
subcontractors responsible for building the facility. In addition, WTI's
activities have often included identifying and acquiring sites for the
facility and for the disposal of residual ash produced by the facility and
obtaining necessary permits and licenses from local, state and federal
regulatory authorities.
WTI also develops, operates and, in some cases, owns independent power
projects, which either cogenerate electricity and thermal energy or generate
electricity alone for sale to utilities. Cogeneration is a technology which
allows the consecutive use of two or more useful forms of energy from a single
primary fuel source, thus providing a more efficient use of a fuel's total
energy content. During 1995, WTI entered into a joint venture for the purpose
of developing small cogeneration projects for district heating applications in
a province of The People's Republic of China.
WTI also designs, fabricates and installs advanced air pollution control and
measurement systems and equipment. WTI offers electrostatic precipitators,
flue-gas desulfurization systems (scrubbers), fabric-filter systems
(baghouses) and nitrogen oxide ("NOx") control systems, which remove
pollutants from the emissions of WTI's trash-to-energy systems, as well as
power plants and other industrial facilities. WTI also designs, constructs and
maintains tall concrete chimneys and storage silos. WTI offers both custom and
pre-engineered systems for emission control. The custom engineering division
licenses a patented process for the removal of hydrogen sulfide from gaseous
and liquid streams. The process controls hazardous gases and sulfur dioxide
emissions, thereby reducing acid rain and odor problems. WTI also provides a
full range of technologies and
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services for destroying or recycling volatile organic compounds ("VOCs") from
air and liquid sources and NOx from air sources. Both VOCs and NOx are
detrimental to air quality and the environment generally. WTI's VOC and NOx
control systems are utilized by customers in a variety of industries,
including oil refineries, chemical plants and automobile production
facilities. Complementing the emission control divisions is a measurement
division which designs and installs continuous emissions monitoring systems
for the utility, trash-to-energy, industrial furnace and petrochemical
industries, all of which are affected by regulations requiring the continuous
monitoring of stack emissions.
WHEELABRATOR CLEAN WATER
Through Wheelabrator Water Technologies, Inc. and its subsidiaries, WTI
develops, operates and owns projects that purify water, treat water and
wastewater, compost organic wastes and treat and manage biosolids. WTI also
provides products and systems used to treat drinking water as well as
industrial and municipal process water and wastewater.
WTI is a leading provider of a broad range of water and wastewater treatment
services to municipalities and industry throughout the United States, Canada
and Mexico, including water and wastewater treatment plant start-up
assistance, plant operations and maintenance, planning and management,
training of plant supervisors, operators and laboratory and maintenance
personnel, refining process systems, management systems for process control,
and plant diagnostic evaluations and energy audits. WTI also provides
specialty repair and cleaning services for industrial water and wastewater
management equipment.
In July 1995, WTI became the first company in the United States to acquire a
publicly owned wastewater treatment plant pursuant to a federal Executive
Order issued in 1992 which was intended to facilitate the privatization of
municipal facilities. The agreement provides for a subsidiary of WTI to
operate the 4.5 million gallon per day MCD Franklin Wastewater Treatment Plant
in Franklin, Ohio for a period of 20 years and to expand the facility as
needed to meet future population growth. In August 1995, WTI was selected by
the City of Wilmington, Delaware to negotiate a similar public-private
partnership, including the acquisition of that City's wastewater treatment
plant.
WTI also provides a range of biosolids management services, including land
application, drying, pelletizing, alkaline stabilization and composting of
non-hazardous biosolids to approximately 450 communities, typically pursuant
to multi-year contracts under which WTI is paid by the generator to make
beneficial use of the biosolids.
Land application involves the application of non-hazardous biosolids as a
natural fertilizer on farmland pursuant to rigorous site-specific permits
issued by applicable state authorities. Biosolids are also used in land-
reclamation projects such as strip mines. Regulations issued by the EPA in
December 1992 under the Clean Water Act encourage the beneficial use of
municipal sewage sludge by recognizing the resource value of biosolids as a
fertilizer and soil conditioner, and establish requirements for land
application designed to protect human health and the environment.
WTI also develops and operates facilities at which biosolids are dried and
pelletized and has four facilities currently in operation, and one other
facility under construction. WTI has approximately 560 dry-tons-per-day of
biosolids drying capacity either in operation or under construction. Biosolids
which have been dried are generally used as fertilizer by farmers, commercial
landscapers and nurseries and as a bulking agent by fertilizer manufacturers.
Development of dryer facilities generally involves various contractual
arrangements with a variety of private and public entities, including
municipalities (which generate the biosolids), lenders, contractors and
subcontractors which build the facilities, and end-users of the fertilizer
generated from the treatment process. WTI also engineers and manufactures a
variety of environmental products and systems. WTI provides single-source,
advanced-systems solutions for the treatment of municipal drinking water,
industrial process water and wastewater and for slurry pumping and high solids
dewatering. It also provides systems designed to remove solids from liquid
streams through the use of self-cleaning bar/filter screens, grinders,
macerators, conveyors and
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compactor systems. WTI also provides high technology water purification and
wastewater treatment systems which utilize a variety of technologies including
demineralizers, reverse osmosis and vacuum degasification products. In
addition, WTI designs and installs process technology systems utilizing
evaporators, crystallizers, electrodialysis, dialysis, reverse osmosis and
ultrafiltration for treating industrial process wastewater. WTI also produces
profile wire screen products for groundwater production, hydrocarbon
processing, food processing and coal/mineral processing. WTI also designs and
supplies enclosed automated composting systems which recycle organic wastes
into beneficial products which are used by commercial landscapers, nurseries
and fertilizer manufacturers. WTI provides a number of these products and
technologies to industrial customers abroad through its operations in
Australia, France, Ireland, Japan, Malaysia, The Netherlands, Singapore, Spain
and Taiwan.
WTI also manufactures a line of nonpolluting materials cleaning systems for
use by a variety of industrial customers, including foundries, steel
processors, automobile producers and rubber and plastics producers, in
cleaning and finishing metal and other materials. WTI also manufactures high-
alloy combustion grates used in the high-temperature furnaces of its trash-to-
energy facilities.
ENVIRONMENTAL AND INFRASTRUCTURE ENGINEERING AND CONSULTING SERVICES
Rust is a leading provider, through its subsidiaries, of environmental and
infrastructure engineering and consulting services, primarily to clients in
government and in the chemical, petrochemical, nuclear, energy, utility, pulp
and paper, manufacturing, environmental services and other industries.
Rust's environmental and infrastructure engineering and consulting services
provide alternative solutions for client problems relating to removing and
disposing of hazardous and toxic substances; managing solid waste, water and
wastewater, groundwater and air resources; design and construction oversight
of transportation facilities; and photogrammetry. Such services are provided
to private industry, as well as federal, state and local governments,
including the Department of Defense (the "DOD") and the Department of Energy
(the "DOE"). The services include performing remedial investigations for the
purpose of characterizing hazardous waste sites, preparing feasibility studies
setting forth recommended alternative remedial actions, and providing
engineering design and construction oversight services for remediation
projects. The services provided also include the siting, permitting, design
and construction oversight of solid and hazardous waste landfills and related
facilities. Study, design and construction oversight services are also
provided, primarily to municipalities, special government agencies and, to
some extent, private industry in connection with wastewater collection and
treatment, potable water supply treatment and distribution, stormwater
management and the building of streets, highways, airports, bridges, waterways
and rail services. Rust also provides architectural services in connection
with these and other activities. Additional services provided through Rust
include environmental assessment services, the design of systems to properly
and safely store, convey, treat and dispose of industrial, hazardous and
radioactive materials and consulting services regarding disposal, waste
minimization methods and techniques, air quality regulation and industrial
hygiene and safety.
Rust also has an international environmental and infrastructure engineering
and consulting, process engineering and construction services and related
services business performing projects in 35 countries. In Europe, Rust has
offices in the United Kingdom, Germany, Sweden and Turkey, and in the Asia-
Pacific region, in Australia, Hong Kong, China, Singapore, Malaysia and
Indonesia. In the Middle East and Africa, Rust also has offices in the United
Arab Emirates, Saudi Arabia and South Africa. Rust's overseas operations
provide such services to the World Bank and associated lending agencies,
national, regional and local governments and to clients in the utility and
industrial power and general manufacturing industries. In addition, Rust
provides such services to Waste Management International worldwide.
In May 1995, Rust sold substantially all of its hazardous and radioactive
remediation services business to OHM. As a result of that transaction, Rust
acquired an approximately 37% interest in OHM. See "Acquisitions and
Dispositions."
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Rust also engages in providing process engineering, construction, specialty
contracting and related services, but has announced its intention to sell or
otherwise discontinue that business in North America and certain locations
outside North America. The process engineering services currently provided by
Rust are of two general types: facility process engineering and facility
design engineering. Process engineers create the processes by which facilities
operate, such as chemical, petrochemical, energy and pulp and paper plants.
Design engineering services provided by Rust encompass the following
disciplines: architectural, electrical, control systems, process piping,
mechanical, structural, HVAC, and civil. The construction services currently
provided by Rust are generally performed in connection with projects on which
Rust has also provided the design engineering services. Rust also requisitions
and procures equipment and construction materials for clients and performs
quality assurance and quality control oversight of vendor manufacturing
practices.
Rust also has scaffolding and other on-site industrial services businesses,
which are managed by Waste Management. See "Waste Services--Solid Waste
Management, Recycling and Related Services--Related Services" above.
REGULATION
While in general the Company's environmental services businesses have
benefited substantially from increased governmental regulation, the
environmental services industry itself has become subject to extensive and
evolving regulation by federal, state, local and foreign authorities. In
particular, the regulatory process requires firms in the Company's industries
to obtain and retain numerous governmental permits to conduct various aspects
of their operations, any of which may be subject to revocation, modification
or denial. As a result of governmental policies and attitudes relating to the
industries, which are subject to reassessment and change, the Company believes
that its ability to obtain applicable permits from governmental authorities on
a timely basis, and to retain such permits, could be impaired. The Company is
not in a position at the present time to assess the extent of the impact of
such potential changes in governmental policies and attitudes on the
permitting processes, but it could be significant. In particular, adverse
decisions by governmental authorities on permit applications submitted by the
Company may result in abandonment of projects, premature closure of facilities
or restriction of operations, which could result in a loss of earnings from a
facility, a write-off of capitalized development expenses or both.
Federal, state, local and foreign governments have also from time to time
proposed or adopted other types of laws, regulations or initiatives with
respect to the environmental services industry. Included among them are laws,
regulations and initiatives to ban or restrict the international, interstate
or intrastate shipment of wastes, impose higher taxes on out-of-state waste
shipments than in-state shipments, reclassify certain categories of hazardous
wastes as non-hazardous and regulate disposal facilities as public utilities.
Certain state and local governments have promulgated "flow control"
regulations, which attempt to require that all waste generated within the
state or local jurisdiction must go to certain disposal sites. The United
States Congress has from time to time considered legislation that would enable
or facilitate such bans, restrictions, taxes and regulations. Due to the
complexity of regulation of the industry and to public pressure,
implementation of existing or future laws, regulations or initiatives by
different levels of government may be inconsistent and difficult to foresee.
Many state and local governments have enacted mandatory or voluntary recycling
laws and bans on the disposal of yard-waste in landfills. The effect of these
and similar laws is to reduce the volume of wastes that would otherwise be
disposed in Company landfills. In addition, municipalities and other
governmental entities with whom the Company contracts to provide solid waste
collection or disposal services, or both, may require the Company as a
condition of securing the business to provide recycling services and operate
recycling and composting facilities, which may cause the Company to incur
substantial costs. The Company makes a continuing effort to anticipate
regulatory, political and legal developments that might affect its operations
but is not always able to do so. The Company cannot predict the extent to
which any legislation or regulation that may be enacted, amended, repealed or
enforced, or any failure or delay in enactment or enforcement of legislation
or regulations or funding of government agencies or programs, in the future
may affect its operations. Such matters could have a material adverse impact
on the Company's earnings for one or more fiscal quarters or years.
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The demand for certain of the services provided by the Company, particularly
its hazardous waste management services, is dependent on the existence and
enforcement of federal, state and foreign laws and regulations which govern
the discharge of hazardous substances into the environment and on the funding
of agencies and programs under such laws and regulations. Such businesses will
be adversely affected to the extent that such laws or regulations are amended
or repealed, with the effect of reducing the regulation of, or liability for,
such activity, that the enforcement of such laws and regulations is lessened
or that funding of agencies and programs under such laws and regulations is
delayed or reduced. In particular, the EPA has recently proposed regulations
under RCRA to redefine the term "hazardous waste" for regulatory purposes.
Under the proposal, wastes containing minimal concentrations of hazardous
substances would no longer be subject to the stringent record-keeping,
handling, treatment and disposal rules applied to hazardous wastes under RCRA.
Other EPA-proposed regulations would cause certain wastes which presently must
be managed in TSCA-approved facilities to be eligible for disposal in
facilities not approved under TSCA. These proposed rules would, if adopted,
reduce the volume of wastes for which the Company's hazardous waste management
services are needed.
In addition to environmental laws and regulations, federal government
contractors, including the Company, are subject to extensive regulation under
the Federal Acquisition Regulation and numerous statutes which deal with the
accuracy of cost and pricing information furnished to the government, the
allowability of costs charged to the government, the conditions under which
contracts may be modified or terminated, and other similar matters. Various
aspects of the Company's operations are subject to audit by agencies of the
federal government in connection with its performance of work under such
contracts as well as its submission of bids or proposals to the government.
Failure to comply with contract provisions or other applicable requirements
may result in termination of the contract, the imposition of civil and
criminal penalties against the Company, or the suspension or debarment of all
or a part of the Company from federal government work, which could have a
material adverse impact upon the Company's financial condition or earnings for
one or more fiscal quarters or years. Among the reasons for debarment are
violations of various statutes, including those related to employment
practices, the protection of the environment, the accuracy of records and the
recording of costs. Some state and local governments have similar suspension
and debarment laws or regulations.
Because of the high level of public awareness of environmental issues,
companies in the environmental service business, including the Company, may in
the normal course of their business be expected periodically to become subject
to judicial and administrative proceedings. Governmental agencies may seek to
impose fines on the Company or revoke, deny renewal of, or modify the
Company's operating permits or licenses. The Company is also subject to
actions brought by private parties or special interest groups in connection
with the permitting or licensing of its operations, alleging violations of
such permits and licenses, or other matters. In addition, increasing
governmental scrutiny of the environmental compliance records of the Company,
CWM, WTI, Rust, Waste Management International or their affiliates could cause
a private or public entity seeking environmental services to disqualify the
Company from competing for one or more projects, on the grounds that these
records display inadequate attention to environmental compliance.
WASTE SERVICES
SOLID WASTE
Operating permits are generally required at the state and local level for
landfills, transfer stations and collection vehicles. Operating permits need
to be renewed periodically and may be subject to revocation, modification,
denial or non-renewal for various reasons, including failure of the Company to
satisfy regulatory concerns. With respect to solid waste collection,
regulation takes such forms as licensing of collection vehicles, truck safety
requirements, vehicular weight limitations and, in certain localities,
limitations on rates, area, time and frequency of collection. With respect to
solid waste disposal, regulation covers various matters, including landfill
location and design, groundwater monitoring, gas control, liquid runoff and
rodent, pest, litter and traffic control. Zoning and land use requirements and
limitations are encountered in the solid waste collection, transfer, recycling
and energy recovery and disposal phases of the Company's business. In almost
all cases the Company is required to obtain conditional use permits or zoning
law changes in order to develop transfer station, resource
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recovery or disposal facilities. In addition, the Company's disposal
facilities are subject to water and air pollution laws and regulations. Noise
pollution laws and regulations may also affect the Company's operations.
Governmental authorities have the power to enforce compliance with these
various laws and regulations and violators are subject to injunctions, fines
and revocation of permits. Private individuals may also have the right to sue
to enforce compliance. Safety standards under the Occupational Safety and
Health Act ("OSHA") are also applicable to the Company's solid waste and
related services operations.
The EPA and various states acting pursuant to EPA-delegated authority have
promulgated rules pursuant to RCRA which serve as minimum requirements for
land disposal of municipal wastes. The rules establish more stringent
requirements than previously applied to the siting, construction, operation
and closure of all but the smallest municipal waste landfill facilities. In
certain cases, the failure of some states to adopt the federal requirements
may increase costs to meet inconsistent federal and state laws applicable to
the same facility. The Company does not believe that continued compliance with
the more stringent minimum requirements will have a material adverse effect on
the Company's operations. See also "RCRA" and "Superfund" below for additional
regulatory information.
In March 1996, the EPA issued regulations that require large, municipal
solid waste landfills to install and monitor systems to collect and control
landfill gas. The regulations apply to landfills that are designed to
accommodate 2.5 million cubic meters or more of municipal solid waste and that
accepted waste for disposal after November 8, 1987, regardless of whether the
site is active or closed. The date by which each affected landfill must have
such gas collection and control system depends on whether the landfill began
operation before or after May 30, 1991. Landfills constructed, reconstructed,
modified or first accepting waste after May 30, 1991 generally must have
systems in place by late 1998. Older landfills generally will be regulated by
the states and will be required to have landfill gas systems in place within
approximately 30 months of EPA's approval of the state program. Many state
solid waste regulations already require collection and control systems. While
the Company has not yet completed its study of the new regulations, compliance
with them is not expected to have a material adverse effect on the Company.
HAZARDOUS WASTE
Waste Management and CWM are required to obtain federal, state, local and
foreign governmental permits for their chemical waste treatment, storage and
disposal facilities. Such permits are difficult to obtain, and in most
instances extensive geological studies, tests and public hearings are required
before permits may be issued. Waste Management's and CWM's chemical waste
treatment, storage and disposal facilities are also subject to siting, zoning
and land use restrictions, as well as to regulations (including certain
requirements pursuant to federal statutes) which may govern operating
procedures and water and air pollution, among other matters. In particular,
Waste Management's and CWM's operations in the United States are subject to
the Safe Drinking Water Act (which regulates deep well injection), TSCA
(pursuant to which the EPA has promulgated regulations concerning the disposal
of PCBs), the Clean Water Act (which regulates the discharge of pollutants
into surface waters and sewers by municipal, industrial and other sources) and
the Clean Air Act (which regulates emissions into the air of certain
potentially harmful substances). In their transportation operations, Waste
Management and CWM are subject to the jurisdiction of the Interstate Commerce
Commission and regulated by the DOT and by regulatory agencies in each state.
Employee safety and health standards under OSHA are also applicable.
Of Waste Management's and CWM's chemical waste treatment or disposal
facilities in the United States, all but one have been issued permits under
RCRA. The facility without an RCRA permit continues to have interim status. A
final permit is to be issued jointly by the authorized state, subject to EPA
oversight, and by the EPA. The regulations governing issuance of permits
contain detailed standards for hazardous waste facilities on matters such as
waste analysis, security, inspections, training, preparedness and prevention,
emergency procedures, reporting and recordkeeping. Once issued, a final permit
has a maximum fixed term of 10 years, and such permits for land disposal
facilities are required to be reviewed five years from the date of issuance.
The issuing agency (either the EPA or an authorized state) may review or
modify a permit at any time during its term.
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The Company believes that Waste Management and CWM maintain each of their
operating treatment, storage or disposal facilities in substantial compliance
with the applicable requirements promulgated pursuant to RCRA and expects that
the facility with interim status ultimately can qualify to be issued a RCRA
permit. It is possible, however, that the issuance or renewal of a permit
could be made conditional upon the initiation or completion of modifications
or corrective actions at facilities, which might involve substantial
additional capital expenditures on the part of Waste Management or CWM.
Although the Company is informed that Waste Management and CWM anticipate the
reauthorization of each permit at the end of its term if the facility's
operations are in compliance with applicable requirements, there can be no
assurance that such will be the case.
The radioactive waste services of Chem-Nuclear are also subject to extensive
governmental regulation. Due to the extensive geological and hydrological
testing and environmental data required, and the complex political
environment, it is difficult to obtain permits for radioactive waste disposal
facilities. Various phases of Chem-Nuclear's low-level radioactive waste
management services are regulated by various state agencies, the United States
Nuclear Regulatory Commission (the "NRC") and the DOT. Regulations applicable
to Chem-Nuclear's operations include those dealing with packaging, handling,
labeling and routing of radioactive materials, and prescribe detailed safety
and equipment standards and requirements for training, quality control and
insurance, among other matters. Employee safety and health standards under
OSHA are also applicable.
See also "RCRA" and "Superfund" below for additional regulatory information.
CLEAN ENERGY, CLEAN WATER AND RELATED SERVICES
WTI's business activities are subject to environmental regulation under
federal, state and local laws and regulations, including the Clean Air Act,
the Clean Water Act and RCRA. The Company believes that WTI's business is
conducted in an environmentally responsible manner in material compliance with
applicable laws and regulations. The Company does not anticipate that WTI's
maintaining compliance with current requirements will result in any material
decrease in earnings. There can be no assurance, however, that such
requirements will not change so as to require significant additional
expenditures. In particular, pursuant to the Clean Air Act Amendments of 1990
it is probable that the air pollution control systems at certain trash-to-
energy projects owned or operated by WTI's subsidiaries will be required to be
modified by the end of the decade to comply with the more stringent
regulations promulgated thereunder. Although the expenditures related to such
modifications, if required, will likely be significant, they are not expected
to have a material adverse effect on WTI's liquidity or results of operations
because WTI has the right to pass on to the majority of long-term contract
users of its facilities increased capital and operating costs resulting from
changes in law. There can be no assurance, however, that in such event WTI
would be able to recover, for each project, all such increased costs from its
customers. Moreover, it is possible that future developments, such as
increasingly strict requirements of environmental laws, and enforcement
policies thereunder, could affect the manner in which WTI operates its
projects and conducts its business, including the handling, processing or
disposal of the wastes, by-products and residues generated thereby.
WTI's energy facilities are also subject to the provisions of various
energy-related laws and regulations, including the Public Utility Regulatory
Policies Act of 1978 ("PURPA"). The ability of WTI's trash-to-energy and small
power production facilities to sell power to electric utilities on
advantageous terms and conditions and to avoid burdensome public utility
regulation has historically depended, in part, upon the continuing
applicability of certain provisions of PURPA, which generally exempts WTI from
state and federal regulatory control over electricity prices charged by, and
the finances of, WTI and its energy-producing subsidiaries. While the recent
changes in Congressional leadership may increase the likelihood of a repeal or
modification of PURPA, it is unlikely that such action would abrogate the
long-term contracts and orders pursuant to which most of WTI's existing
projects sell electricity. Furthermore, the operations of WTI's trash-to-
energy and other small power facilities business is not expected to be
materially and adversely affected if the various benefits of PURPA are
repealed or substantially reduced on a prospective basis, due to the passage
of the Energy Policy Act of 1992 ("EPACT"). EPACT created an alternative
ownership mechanism by which independent power producers can participate in
the electricity generation industry without the burdens of traditional public
utility regulation.
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ENVIRONMENTAL AND INFRASTRUCTURE ENGINEERING AND CONSULTING SERVICES
The practice of engineering and architecture is regulated by state statutes.
All states require engineers and architects to be registered by their
respective state registration boards as a condition to offering or rendering
professional services. Many states also require companies offering or
rendering professional services, such as Rust, to obtain certificates of
authority. Rust's businesses are also subject to OSHA regulations and to NRC
regulations concerning services provided to nuclear power plants.
RCRA
Pursuant to RCRA, the EPA has established and administers a comprehensive,
"cradle-to-grave" system for the management of a wide range of industrial by-
products and residues identified as "hazardous" wastes. States that have
adopted hazardous waste management programs with standards at least as
stringent as those promulgated by the EPA may be authorized by the EPA to
administer their programs in lieu of RCRA.
Under RCRA and federal transportation laws, a transporter must deliver
hazardous waste in accordance with a manifest prepared by the generator of the
waste and only to a treatment, storage or disposal facility having a RCRA
permit or interim status under RCRA. Every facility that treats or disposes of
hazardous wastes must obtain a RCRA permit from the EPA or an authorized state
and must comply with certain operating standards. The RCRA permitting process
involves applying for interim status and also for a final permit. Under RCRA
and the implementing regulations, facilities which have obtained interim
status are allowed to continue operating by complying with certain minimum
standards pending issuance of a permit.
RCRA also imposes restrictions on land disposal of certain hazardous wastes
and prescribes standards for hazardous waste land disposal facilities. Under
RCRA, land disposal of certain types of untreated hazardous wastes has been
banned except where the EPA has determined that land disposal of such wastes
and treatment residuals should be permitted. The disposal of liquids in
hazardous waste land disposal facilities is also prohibited.
The EPA from time to time considers fundamental changes to its regulations
under RCRA that could facilitate exemptions from hazardous waste management
requirements, including policies and regulations that could implement the
following changes: redefine the criteria for determining whether wastes are
hazardous; prescribe treatment levels which, if achieved, could render wastes
non-hazardous; encourage further recycling and waste minimization; reduce
treatment requirements for certain wastes to encourage alternatives to
incineration; establish new operating standards for combustion technologies;
and indirectly encourage on-site remediation. To the extent such changes are
adopted, they can be expected to adversely affect the demand for the Company's
chemical waste management services. In this regard, the EPA has recently
proposed regulations which would have the effect of reducing the volume of
waste classified as hazardous for RCRA regulatory purposes. See "Regulation"
above.
In addition to the foregoing provisions, RCRA regulations require the
Company to demonstrate financial responsibility for possible bodily injury and
property damage to third parties caused by both sudden and nonsudden
accidental occurrences. See "Insurance" below. Also, RCRA regulations require
the Company to provide financial assurance that funds will be available when
needed for closure and post-closure care at its waste treatment, storage and
disposal facilities, the costs of which could be substantial. Such regulations
allow the financial assurance requirements to be satisfied by various means,
including letters of credit, surety bonds, trust funds, a financial (net
worth) test and a guarantee by a parent corporation. Under RCRA regulations, a
company must pay the closure costs for a waste treatment, storage or disposal
facility owned by it upon the closure of the facility and thereafter pay post-
closure care costs. If such a facility is closed prior to its originally
anticipated time, it is unlikely that sufficient funds will have been accrued
over the life of the facility to fund such costs, and the owner of the
facility could suffer a material adverse impact as a result. Consequently, it
may be difficult to close such facilities to reduce operating costs at times
when, as is currently the case in the hazardous waste services industry,
excess treatment, storage or disposal capacity exists.
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SUPERFUND
Superfund provides for EPA-coordinated response and removal actions to
releases of hazardous substances into the environment, and authorizes the
federal government either to clean up facilities at which hazardous substances
have created actual or potential environmental hazards or to order persons
responsible for the situation to do so. Superfund assigns liability for these
response and other related costs to parties involved in the generation,
transfer and disposal of such hazardous substances. Superfund has been
interpreted as creating strict, joint and several liability for costs of
removal and remediation, other necessary response costs and damage to natural
resources. Liability extends to owners and operators of waste disposal
facilities (and waste transportation vehicles) from which a release occurs,
persons who owned or operated such facilities at the time the hazardous
substances were disposed, persons who arranged for disposal or treatment of a
hazardous substance at or transportation of a hazardous substance to such a
facility, and waste transporters who selected such facilities for treatment or
disposal of hazardous substances, as well as to generators of such substances.
Liability may be trebled if the responsible party fails to perform a removal
or remedial action ordered under the law. For additional information
concerning potential Superfund liability, see "Legal Proceedings" below.
Superfund created a revolving fund to be used by the federal government to
pay for the cleanup efforts. In late 1990, federal Superfund spending through
the end of the government's 1994 fiscal year was authorized to a maximum of
$5.1 billion. For the federal government's 1995 fiscal year, a maximum of $1.4
billion of Superfund spending was authorized. As of the date of this report,
the federal government had not approved any 1996 Superfund spending
authorization.
The U. S. Congress is expected to consider reauthorization and revision of
the Superfund statute in 1996. In addition to possible changes in the
statute's funding mechanisms and provisions for allocating cleanup
responsibility, it is possible that Congress also will fundamentally alter the
statute's provisions governing the selection of appropriate site cleanup
remedies. For example, Congress may consider whether to continue Superfund's
current reliance on stringent technology standards issued under other statutes
(such as RCRA) to govern removal and treatment of remediation wastes or to
adopt new approaches such as national or site-specific risk based standards.
This and other potential policy changes could significantly affect the
stringency and extent of site remediation, the types of remediation techniques
that will be employed, and the degree to which permitted hazardous waste
management facilities will be used for remediation wastes. In addition,
Congress may consider revision of the liability imposed by the Superfund law
for remediation of contamination caused prior to a party's acquisition of a
contaminated site, which could reduce the remediation obligations of the
Company and others who currently are jointly and severally liable for
remediation obligations under Superfund.
INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES
Waste Management International's operations are subject to the general
business, liability, land-use planning and other environmental laws and
regulations of the countries where the services are performed and, in Europe,
to European Union ("EU") regulations and directives. The degree of local
enforcement of applicable laws and regulations varies substantially between,
and even within, the various countries in which Waste Management International
operates. In addition to the statutes and regulations imposed by national,
state or provincial, and municipal or other local authorities, many of the
countries in which Waste Management International operates are members of the
EU. The EU has issued and continues to issue environmental Directives and
Regulations covering a broad range of environmental matters and has created a
European Environmental Agency responsible for monitoring and collating member
state environmental data. The Single European Act, passed in 1987, established
three fundamental principles to guide the development of future EU
environmental law: (i) the need for preventative action; (ii) the correction
of environmental problems at the source; and (iii) the polluter's liability
for environmental damage.
The Treaty on European Union, signed in December 1991, came into force in
November 1993. The Treaty applies the principle of "sustainable development"
as a key component of EU policy-making and requires that environmental
protection be integrated into the definition and application of all EU laws.
It also introduced a
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new procedure for the adoption of waste management legislation (other than for
proposals of a primarily fiscal nature) which it is predicted may result in
the speedier implementation of EU waste laws.
The impact of current and future EU legislation will vary from country to
country according to the degree to which existing national requirements
already meet or fall short of the new EU standards and, in some jurisdictions,
may require extensive public and private sector investment and the development
and provision of the necessary technology, expertise, administrative
procedures and regulatory structures. These extensive laws and regulations are
continually evolving in response to technological advances and heightened
public and political concern.
Outside Europe, continuing industrialization, population expansion and
urbanization have caused increased levels of pollution with all of the
resultant social and economic implications. The desire to sustain economic
growth and address historical pollution problems is being accompanied by
investments in environmental infrastructure, particularly in Southeast Asia,
and the introduction of regulatory standards to further control industrial
activities.
The Company believes that Waste Management International's business is
conducted in material compliance with applicable laws and regulations and does
not anticipate that maintaining such compliance will adversely affect the
Company's financial position. There can be no assurance, however, that such
requirements will not change so as to require significant additional
expenditures or operating costs.
Waste Management International operates facilities in Hong Kong which are
owned by the Hong Kong government. Control of the Hong Kong government passes
to the People's Republic of China in 1997. Waste Management International is
unable to predict what impact, if any, this change will have on its operations
in Hong Kong.
COMPETITION
Waste Management encounters intense competition, primarily in the pricing
and rendering of services, from various sources in all phases of its solid
waste management and related operations. In the solid waste collection phase,
competition is encountered, for the most part, from national, regional and
local collection companies as well as from municipalities and counties (which,
through use of tax revenues, may be able to provide such services at lower
direct charges to the customer than can Waste Management) and some large
commercial and industrial companies which handle their own waste collection.
In the solid waste transfer, resource recovery and disposal phases of its
operations, competition is encountered primarily from municipalities,
counties, local governmental agencies, other national or regional waste
management companies and certain large corporations not primarily involved in
the solid waste management services business. The Company also encounters
intense competition in pricing and rendering of services in its medical and
infectious waste management, portable sanitation and street sweeping and
parking lot cleaning services businesses from numerous large and small
competitors.
In its hazardous waste management operations, the Company encounters
competition from a number of sources, including several national or regional
firms specializing primarily in chemical waste management, local waste
management concerns and, to a much greater extent, generators of chemical
wastes which seek to reduce the volume of or otherwise process and dispose of
such wastes themselves. The basis of competition is primarily technical
expertise and the price, quality and reliability of service.
Waste Management International encounters intense competition from local
companies and governmental entities in particular countries, as well as from
major international companies. Pricing, quality of service and type of
equipment utilized are the primary methods of competition for collection
services, and proximity of suitable treatment or disposal facilities,
technical expertise, price, quality and reliability of services are the
primary methods of competition for treatment and disposal services.
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WTI experiences substantial competition in all aspects of its business. It
competes with a large number of firms, both nationally and internationally,
some of which may have substantially greater financial and technical resources
than WTI. The principal competitive factors with respect to its project
development activities include technological performance, service, technical
know-how, price and performance guarantees. Competing for selection as a
project developer may require commitment of substantial resources over a long
period of time, without any certainty of being ultimately selected.
Competition for attractive development opportunities is intense, as there are
a number of competitors in the industry interested in such opportunities.
The service industries in which Rust competes are highly competitive. Rust
encounters intense competition, primarily in pricing, quality and reliability
of services from various sources in all aspects of its environmental and
infrastructure engineering and consulting services operations.
Pursuant to the First Amended and Restated International Business
Opportunities Agreement, dated January 1, 1993, by and among CWM, WTI, Waste
Management International, Inc., Waste Management International, Rust and the
Company (as amended, the "IBOA"), which agreement is also a successor to
certain prior agreements among certain of the parties, each of CWM, WTI, Rust
and the Company has agreed that, until the later of July 1, 2000 or the date
on which the Company ceases to beneficially own a majority of the outstanding
voting equity interests of such subsidiary or ceases to beneficially own a
majority of the outstanding voting equity interests of Waste Management
International, and in each case no longer has an option to obtain such
ownership, such subsidiary or the Company will not engage (except through
Waste Management International) in waste management services; design,
development, construction and operation of trash-to-energy facilities in Italy
or Germany; collection, storage, processing, treatment or disposal of
hazardous wastes (including hazardous substance remediation services); or
design, engineering and construction (where the customer is seeking third-
party operation), operation and maintenance of water, wastewater and sewage
treatment facilities (including facilities for treating hazardous waste
streams whether or not the customer is seeking third-party operation) outside
North America (i.e., the United States, its territories and possessions,
Canada and Mexico) (the "Waste Management International Allocated
Activities"), except with respect to licensing of technology and minor
interests of CWM, WTI or Rust in publicly held entities. WTI may engage
outside North America in the design, engineering, construction, operation and
maintenance of chimneys and air pollution control facilities (the "WTI
Allocated Activities"). Rust may engage outside North America in activities
relating to (i) architectural services, (ii) engineering and design services
and procurement, construction and construction management services (including
marine construction and dredging), other than those relating to the Waste
Management International Allocated Activities and the WTI Allocated
Activities, (iii) scaffolding services, (iv) demolition and dismantling
services, (v) environmental consulting services, and (vi) industrial facility
and power plant maintenance services (the "Rust Allocated Activities"). Sales
by the Company of recyclables, licensing of technology and minor investments
by the Company in publicly held entities are also permitted activities of the
Company outside North America. Waste Management International has agreed that
for the same time periods as are applicable to CWM, WTI, Rust and the Company
above in this paragraph, it will not engage in North America in the type of
activities included within the Waste Management International Allocated
Activities outside North America and will not engage in the WTI Allocated
Activities or the Rust Allocated Activities. Businesses or assets acquired by
a party to the IBOA which are in the domain of another party thereto
(according to the allocations described above) must be offered for sale to the
other party at fair market value.
In addition, WTI and Waste Management International have entered into an
agreement whereby WTI will have primary responsibility for the early-stage
development of trash-to-energy projects outside North America (except in Italy
and Germany) and Waste Management International will have the right to acquire
up to 49% of all equity of any such project available to Waste Management
International, WTI and their affiliates, with WTI or other investors owning
the balance. This arrangement is non-cancellable by WTI or Waste Management
International without the other's consent prior to 2000. If the arrangement is
cancelled, the right to develop trash-to-energy projects reverts to being part
of the Waste Management International Allocated Activities.
By agreement among the parties, the Company is responsible for determining
business allocations among CWM, WTI, Rust, the Company and Waste Management
International which are not controlled by the
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allocations set forth in the preceding two paragraphs. In this connection CWM,
WTI, Rust, the Company and Waste Management International have agreed that in
order to minimize the potential for conflicts of interest among various
subsidiaries under the common control of the Company and for so long as the
Company shall have beneficial ownership of a majority of the outstanding
voting equity interests of such subsidiary (or an option to obtain such
ownership), the Company has the right to direct future business opportunities
to the Company or the Company-controlled subsidiary which, in the Company's
reasonable and good faith judgment, has the most experience and expertise in
that line of business, provided that the Company may not allocate a business
opportunity to a particular subsidiary if such business opportunity would
involve the subsidiary in a breach of its agreement not to compete as
described in the immediately preceding paragraphs. Opportunities outside North
America relating to the provision of future waste management services are
generally to be allocated to Waste Management International, except that
opportunities outside North America relating to the WTI Allocated Activities
and the Rust Allocated Activities are generally to be allocated to WTI and
Rust, as the case may be. Environmental opportunities other than waste
management activities are to be allocated in the Company's good faith
judgment. No party is liable for consequential damages, except for lost
profits, for any breach of the IBOA.
In addition, in connection with the transfer by Rust of its hazardous and
radioactive substance remediation business (see "Acquisitions and
Dispositions" below), the Company, Rust and their respective wholly owned
affiliates agreed with OHM not to engage in providing on-site hazardous and
radioactive substance remediation services in North America prior to 2002.
INSURANCE
While the Company believes it operates professionally and prudently, its
business exposes it to risks such as the potential for harmful substances
escaping into the environment and causing damage or injuries, the cost of
which could be substantial. The Company currently maintains liability
insurance coverage for occurrences under various environmental impairment,
primary casualty and excess liability insurance policies.
The Company's insurance program includes coverage for pollution liability
resulting from "sudden and accidental" releases of contaminants and
pollutants. The Company believes that the coverage terms, available limits of
liability, and costs currently offered by the insurance market do not
represent sufficient value to warrant the purchase of "non-sudden and
accidental" pollution liability insurance coverage. As such, the Company has
chosen not to purchase risk transfer "non-sudden and accidental" pollution
liability insurance coverage. To satisfy existing government requirements, the
Company has secured non-risk transfer pollution liability insurance coverage
in amounts believed to be in compliance with federal and state law
requirements for "non-sudden and accidental" pollution. The Company must
reimburse the insurer for losses incurred and covered by this insurance
policy. In the event the Company continues not to purchase risk transfer "non-
sudden and accidental" pollution liability insurance coverage, the Company's
net income could be adversely affected in the future if "non-sudden and
accidental" pollution losses should occur.
EMPLOYEES
WMX Technologies and its subsidiaries employ a total of approximately 73,200
persons in their worldwide continuing operations. Of this number, the Company
employs approximately 38,700 persons in its North American solid and hazardous
waste management services operations (excluding employees of the Rust
scaffolding and other on-site industrial services business operated by Waste
Management). Of this total, 35,900 persons are engaged in its Waste Management
solid waste and related services operations, including approximately 27,200
persons employed in solid waste collection, transfer, resource recovery and
disposal activities, and approximately 8,700 managerial, executive, sales,
clerical, data processing and other solid waste and related activities.
Approximately 2,800 employees are employed in the Company's hazardous waste
services business, including 100 as managers or executives. Approximately
2,000 are employed in hazardous waste treatment, storage and disposal
activities (including approximately 530 performing technical, analytical or
engineering services), and approximately 700 are employed in sales, clerical,
data processing and other hazardous waste-related activities.
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As of December 31, 1995, Waste Management International employed
approximately 18,500 persons. Of this number, approximately 14,900 persons
were employed in its collection services operations, 2,400 in its treatment
and disposal services operations and 1,200 in administrative functions.
At December 31, 1995, WTI had approximately 4,600 full-time employees.
Rust employed approximately 11,400 persons at December 31, 1995 (excluding
its process engineering and construction, specialty contracting and related
services business which is to be sold or otherwise discontinued, but including
the scaffolding and other on-site industrial services business managed by
Waste Management), of whom approximately 4,200 provided technical or
engineering services (excluding craft personnel hired on a temporary basis).
At December 31, 1995, approximately 6,900 of the Company's employees in
North America were unionized, primarily in the Company's solid waste and
related services operations, under collective bargaining agreements expiring
on various dates through 2002. At December 31, 1995, approximately 13,900
Waste Management International employees were represented by labor unions. The
Company believes its employee relations are acceptable.
ACQUISITIONS AND DISPOSITIONS
Since August 1971, the Company has acquired a number of companies, and
certain assets of other companies, engaged in various phases of the
environmental services industry. See Note 4 to the Company's Consolidated
Financial Statements filed as an exhibit to this report and incorporated
herein by reference. The amounts and types of consideration generally have
been determined by direct negotiations with the owners of the businesses
acquired. In most instances, the owners of the acquired businesses were few in
number, and often certain key former owners have continued to operate the
businesses following acquisition by the Company. During 1995, the Company
continued to acquire additional operations in the environmental services
industry.
Acquisitions have historically contributed significantly to the Company's
growth. However, in recent years the Company's acquisition activity relative
to the size of its revenue base has decreased. The Company's growth prospects
may be affected by the availability of additional business acquisitions at
reasonable prices and the Company's ability to finance such acquisitions. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" filed as an exhibit to this report and incorporated herein by
reference for a discussion of capital expenditures by the Company, including
acquisitions. Other well-capitalized companies also compete intensely for
businesses available to be acquired. The Company is continually engaged in the
process of considering and negotiating additional acquisitions. Some future
acquisitions could be material. The acquisition of businesses also entails
certain inherent risks. Although the Company reviews businesses to be
acquired, because of the nature of the liabilities involved in these
businesses, there can be liabilities which will not become known until after
the transactions are consummated. The Company seeks to minimize the impact of
these liabilities and expenditures by obtaining indemnities and warranties
from the seller which may be supported by deferring payment of a portion of
the purchase price. These indemnities and warranties, if obtained, may not,
however, fully cover the liabilities due to their limited scope, amount, or
duration, the financial limitations of the indemnitor or warrantor, or other
reasons. Businesses purchased may require expenditures to make up for deferred
maintenance and to improve the quality or quantity of assets acquired. In
certain cases, the Company establishes reserves in respect of the anticipated
costs of remediation for acquired sites.
On January 24, 1995, the Company acquired CWM common stock representing the
approximately 21% interest in CWM held at that time by public stockholders.
The acquisition occurred pursuant to a merger (the "Merger") in which all
publicly held shares of CWM common stock were converted into convertible
subordinated notes of the Company due January 24, 2005 and having a principal
amount at maturity of $1,000 per note (the "Notes"), subject to the payment of
cash in lieu of the issuance of fractional Notes. For a description of the
terms of the Notes, see Note 5 to the Company's Consolidated Financial
Statements incorporated herein by reference. The Merger was approved by a
committee of independent directors of CWM
25
<PAGE>
and by a majority of the public stockholders of CWM. As a result of the
Merger, CWM became a wholly owned subsidiary of the Company.
On March 14, 1995, the Company's Board of Directors approved a plan to
reduce the scope of the Company's chemical waste management services business
by selling or otherwise eliminating technologies and service locations which
were not meeting customer service or performance objectives. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition--1995
Operations Compared with 1994--CWM," incorporated by reference in this report,
for further information.
In May 1995, OHM acquired Rust's hazardous and radioactive substance
remediation business in exchange for an approximately 37% interest in OHM. In
exchange for warrants to acquire an additional approximately 2.6% of OHM
common stock, the Company also agreed in that transaction to guarantee up to
$62 million of indebtedness of OHM.
In July 1995, the Company acquired the approximately 4% of Rust's shares
held by the public for $16.35 per share in cash. The transaction was approved
by a special committee of independent directors appointed by the Rust Board of
Directors. As a result of that transaction, Rust became owned 60% by the
Company and 40% by WTI.
Additionally, Rust has announced its intention to sell or otherwise
discontinue its process engineering, construction, specialty contracting and
related services business. The terms of the sale have not yet been determined.
The Company expects the sale of those portions of the business which are to be
sold to be completed in 1996.
In December 1995, the Company contributed its approximately 28% interest in
ServiceMaster Consumer Services L.P. ("SMCS"), a provider of lawn care, pest
control and other consumer services, to ServiceMaster L.P. ("SMLP"), the owner
of the remaining interest in SMCS, in exchange for an approximately 19%
interest in SMLP and an option to purchase up to 1.25 million SMLP limited
partnership shares.
The Company has also acquired numerous companies and interests in companies
internationally through Waste Management International or its predecessors.
See "International Waste Management and Related Services."
ITEM 2. PROPERTIES.
The principal property and equipment of the Company consists of land
(primarily disposal sites), buildings and waste treatment or processing
facilities (other than disposal sites), and vehicles and equipment, which as
of December 31, 1995 represented approximately 18%, 6% and 27%, respectively,
of the Company's total consolidated assets. The Company believes that its
vehicles, equipment and operating properties are well maintained and suitable
for its current operations. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition" filed as an exhibit to this
report and incorporated by reference herein for a discussion of property and
equipment expenditures by the Company for the last three years and the capital
budget for 1996. The Company's subsidiaries lease numerous office and
operating facilities throughout the world. For the year ended December 31,
1995, aggregate annual rental payments on real estate leased by the Company
and its subsidiaries approximated $140,367,000.
The principal fixed assets of Waste Management consist of vehicles and
equipment (which include, among other items, approximately 20,800 collection
and transfer vehicles, 1,568,600 containers and 21,000 stationary compactors
in the United States and Canada). Waste Management owns or leases real
property in most states and Canadian provinces in which it is doing business.
At December 31, 1995, 103 solid waste disposal facilities, aggregating
approximately 65,740 total acres, including approximately 14,290 permitted
acres, were owned by Waste Management in the United States and Canada and 30
facilities, aggregating approximately 13,340 total acres, including
approximately 5,860 permitted acres, were leased from parties not affiliated
with Waste
26
<PAGE>
Management under leases expiring from 1996 to 2085. At December 31, 1995, the
Company owned or leased in the United States a total of nine treatment,
storage or disposal facilities. At such date, the Company's seven chemical
waste facilities with secure land disposal sites aggregated approximately
7,865 acres, including approximately 1,470 permitted acres.
The principal property and equipment of Waste Management International
consist of land (primarily disposal sites) and vehicles and equipment, which
as of December 31, 1995 represented approximately 13.1% and 30.3%,
respectively, of Waste Management International's assets. The principal fixed
assets utilized in Waste Management International's collection services
operations at December 31, 1995 consisted of vehicles and equipment (which
included, among other items, approximately 7,000 collection, transportation,
and other route vehicles and approximately 300 pieces of landfill and other
heavy equipment), and approximately 285,000 containers, including
approximately 3,550 stationary compactors. In addition, Waste Management
International owns approximately 710 pieces of hazardous waste equipment,
consisting predominately of containers and collection vehicles. The principal
fixed assets utilized in Waste Management International's treatment and
disposal services operations at December 31, 1995 consisted of 55 landfills,
23 waste treatment facilities, 79 recycling and recyclables processing
facilities, nine incinerators and various other manufacturing, office and
warehouse facilities owned, leased or operated by Waste Management
International.
WTI currently owns, operates or leases 16 trash-to-energy facilities, seven
cogeneration and small power production facilities, two coal handling
facilities, five biosolids drying, pelletizing and composting facilities, one
wastewater treatment plant and various other manufacturing, office and
warehouse facilities. Facilities leased or operated (but not owned) by WTI are
under leases or agreements having terms expiring from the years 1996 to 2020,
subject to renewal options in certain cases.
The principal property and equipment of Rust consist of the vehicles,
equipment and scaffolding inventory used in the scaffolding and other on-site
industrial services business managed by Waste Management, which as of December
31, 1995 represented approximately 14% of Rust's total continuing consolidated
assets. Rust believes that its equipment is well maintained and suitable for
its current operations. Rust leases its corporate offices in Greenville, South
Carolina and Birmingham, Alabama and numerous office, warehouse and equipment
and scaffolding yard facilities in various locations throughout the United
States.
ITEM 3. 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 facilities. At December 31, 1995, a
Company subsidiary engaged in providing hazardous waste management services
was involved in one such governmental proceeding and a subsidiary of WTI was
involved in one such proceeding where it is believed that sanctions involved
in each instance may exceed $100,000.
The Company or certain of its subsidiaries have been identified as
potentially responsible parties in a number of governmental investigations and
actions relating to waste disposal facilities which may be subject to remedial
action under Superfund. The majority of these proceedings are based on
allegations that certain
27
<PAGE>
subsidiaries of the Company (or their predecessors) transported hazardous
substances to the facilities in question, often prior to acquisition of such
subsidiaries by the Company. Such proceedings arising under Superfund
typically involve numerous waste generators and other waste transportation and
disposal companies and seek to allocate or recover costs associated with site
investigation and cleanup, which costs could be substantial.
As of December 31, 1995, the Company or its subsidiaries had been notified
that they are potentially responsible parties in connection with 106 locations
listed on the Superfund National Priority List ("NPL"). Of the 106 NPL sites
at which claims have been made against the Company, 19 are sites which the
Company has come to own over time. All of the NPL sites owned by the Company
were initially sited by others as land disposal facilities. At each of the 19
owned facilities, the Company is working in conjunction with the government to
characterize or to remediate identified site problems. In addition, at these
19 facilities the Company has either agreed with other legally liable parties
on an arrangement for sharing the costs of remediation or is pursuing
resolution of an allocation formula. The 87 NPL sites at which claims have
been made against the Company and which are not owned by the Company are at
different procedural stages under Superfund. At some, the Company's liability
is well defined as a consequence of a governmental decision as to the
appropriate remedy and an agreement among liable parties as to the share each
will pay for implementing that remedy. At others, where no remedy has been
selected or the liable parties have been unable to agree on an appropriate
allocation, the Company's future costs are substantially uncertain.
The Company periodically reviews its role, if any, with respect to each such
location, giving consideration to the nature of the Company's alleged
connection to the location (e.g., owner, operator, transporter or generator),
the extent of the Company's alleged connection to the location (e.g., amount
and nature of waste hauled to the location, number of years of site operation
by the Company or other relevant factors), the accuracy and strength of
evidence connecting the Company to the location, the number, connection and
financial ability of other named and unnamed potentially responsible parties
at the location, and the nature and estimated cost of the likely remedy. Where
the Company concludes that it is probable that a liability has been incurred,
a provision is made in the Company's financial statements for the Company's
best estimate of the liability based on management's judgment and experience,
information available from regulatory agencies and the number, financial
resources and relative degree of responsibility of other potentially
responsible parties who are jointly and severally liable for remediation of a
specific site, as well as the typical allocation of costs among such parties.
If a range of possible outcomes is estimated and no amount within the range
appears to be a better estimate than any other, then the Company provides for
the minimum amount within the range, in accordance with generally accepted
accounting principles. Sites subject to state action under state laws similar
to the federal Superfund statute are treated by the Company in the same way as
NPL sites.
The Company's estimates are subsequently revised, as deemed necessary, as
additional information becomes available. While the Company does not
anticipate that the amount of any such revisions will have a material adverse
effect on the Company's operations or financial condition, the measurement of
environmental liabilities is inherently difficult 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. Such matters could have a material adverse impact on
earnings for one or more fiscal quarters or years.
From time to time, the Company and certain of its subsidiaries are named as
defendants in personal injury and property damage lawsuits, including
purported class actions, on the basis of a Company subsidiary's having owned,
operated or transported waste to a disposal facility which is alleged to have
contaminated the environment or, in certain cases, conducted environmental
remediation activities at sites. Some of such lawsuits may seek to have the
Company or its subsidiaries pay the costs of groundwater monitoring and health
care examinations of allegedly affected persons for a substantial period of
time even where no actual damage is proven. While the Company believes it has
meritorious defenses to these lawsuits, their ultimate resolution is often
substantially uncertain due to the difficulty of determining the cause, extent
and impact of alleged contamination (which may have occurred over a long
period of time), the potential for successive groups of complainants to
emerge, the diversity of the individual plaintiffs' circumstances, and the
potential contribution or indemnification obligations of co-defendants or
other third parties, among other factors. Accordingly, it is
28
<PAGE>
possible such matters could have a material adverse impact on the Company's
earnings for one or more fiscal quarters or years.
A subsidiary of the Company has been involved in litigation challenging a
municipal zoning ordinance which restricted the height of its New Milford,
Connecticut landfill to a level below that allowed by the permit previously
issued by the Connecticut Department of Environmental Protection ("DEP").
Although a lower court had declared the zoning ordinance's height limitation
unconstitutional, the Connecticut Supreme Court reversed that ruling and
remanded the case for further proceedings in the Superior Court in the
judicial district of Litchfield. On November 8, 1995, the Superior Court
ordered the Company's subsidiary to apply to the DEP for permission to remove
all waste above the height allowed by the zoning ordinance. The Company
believes that removal of such waste is an inappropriate remedy and its
subsidiary has appealed the Superior Court order to the Connecticut Supreme
Court. The Company is unable to predict the outcome of the appeal or any
removal action that may ultimately be required following further appeals or as
a result of the permitting process. However, if the lower court order as to
removal of the waste is not modified, the subsidiary could incur substantial
costs, which could vary significantly depending upon the nature of any plan
which is eventually approved by applicable regulatory authorities for removing
the waste, the actual volume of waste to be moved and other currently
unforeseeable factors and which could have a material adverse effect on the
Company's financial condition and results of operations in one or more future
periods.
The Company and certain of its subsidiaries are also currently involved in
other civil litigation and governmental proceedings relating to the conduct of
their business. While the outcome of any particular lawsuit or governmental
investigation cannot be predicted with certainty, the Company believes that
these matters will not have a material adverse effect on its results of
operations or financial condition.
The Company has brought suit against a substantial number of insurance
carriers in an action entitled Waste Management, Inc. et al. v. The Admiral
Insurance Company, et al. pending in the Superior court in Hudson County, New
Jersey. In this action the Company is seeking a declaratory judgment that
environmental liabilities asserted against the Company or its subsidiaries, or
that may be asserted in the future, are covered by insurance policies
purchased by the Company or its subsidiaries. The Company is also seeking to
recover defense costs and other damages incurred as a result of the assertion
of environmental liabilities against the Company or its subsidiaries for
events occurring over at least the last 25 years at approximately 130 sites
and the defendant insurance carriers' denial of coverage of such liabilities.
The defendants have denied liability to the Company and have asserted various
defenses, including that environmental liabilities of the type for which the
Company is seeking relief are not risks covered by the insurance policies in
question. The defendants are contesting these claims vigorously. Discovery is
currently underway in this proceeding and is expected to continue for several
years. No trial date has been set. The Company is unable at this time to
predict the outcome of this proceeding. No amounts have been recognized in the
Company's financial statements for any future recoveries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the Company's security holders during the
fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of the Company's executive officers
(as defined by regulations of the Securities and Exchange Commission), the
positions they hold with the Company and summaries of their business
experience. Executive officers are elected by the Board of Directors and serve
at the discretion of the Board.
Dean L. Buntrock, age 64, has been a director of the Company and has served
as Chairman of the Board and Chief Executive Officer of the Company since
1968. From September 1980 to November 1984, he also served as President. Mr.
Buntrock is also a director of WTI, Waste Management International and Boston
Chicken, Inc.
29
<PAGE>
Herbert A. Getz, age 40, has been a Senior Vice President of the Company
since May 1995, a Vice President of the Company since May 1990 and General
Counsel since August 1992. He has also been Secretary of the Company since
January 1988. He also served as Assistant General Counsel of the Company from
December 1985 until August 1992. Mr. Getz has also held the offices of Vice
President, General Counsel and Secretary at Waste Management from April 1989
until December 1993, and Vice President and Secretary of Rust from January
1993 to May 1994. He has also served as Secretary of WTI since July 1995, a
position he previously held, as well as being the General Counsel of WTI, from
November 1990 until May 1993. Mr. Getz commenced employment with the Company
in 1983. He is Chairman of the Board of Directors of NSC and a director of
OHM.
Thomas C. Hau, age 60, has been a Vice President and the Controller and
Principal Accounting Officer of the Company since he commenced employment with
the Company in September 1990. From 1971 until his employment by the Company,
Mr. Hau was a partner of Arthur Andersen LLP.
William P. Hulligan, age 52, has been Executive Vice President of Waste
Management since January 1996, a position he previously held from September
1984 to January 1988. From 1986 to August 1993, he was also a Vice President
of the Company. From August 1992 to March 1996, he also served as President of
certain Waste Management operating groups. He was President of Waste
Management from January 1988 to August 1992. He has been employed by the
Company since 1979.
Joseph M. Holsten, age 43, has been Chief Executive Officer of Waste
Management International since July 1995. From October 1993 to July 1995, he
was Executive Vice President and Chief Financial Officer of Waste Management.
Mr. Holsten was Vice President of Acquisitions and Project Development for
Waste Management International from April 1992 to August 1993 and Vice
President, Chief Financial Officer and Treasurer of Rust from September to
October 1993. Mr. Holsten has been employed by the Company since 1981.
James E. Koenig, age 48, has been a Senior Vice President of the Company
since May 1992, Treasurer of the Company since 1986 and its Chief Financial
Officer since 1989. Mr. Koenig first became a Vice President of the Company in
1986. From 1984 to 1986, Mr. Koenig was Staff Vice President and Assistant to
the Chief Financial Officer of the Company. Mr. Koenig has been employed by
the Company since 1977. Mr. Koenig also served as Vice President, Chief
Financial Officer and Treasurer of WTI from November 1990 to May 1993. He also
serves as a director of WTI, Waste Management International and OHM.
D. P. Payne, age 53, has been a Senior Vice President of the Company since
April 1995, a position he previously held from 1990 to 1993. He also served as
President and Chief Executive Officer and a director of CWM from September
1991 to March 1995. Mr. Payne has been employed by the Company since 1990.
Phillip B. Rooney, age 51, has served as a director of the Company since
1981 and as its President and Chief Operating Officer since November 1984.
Since January 1994, he has also served as Chairman of the Board and Chief
Executive Officer of Waste Management. Mr. Rooney commenced employment with
the Company in 1969 and first became an officer of the Company in 1971. Since
November 1990, he has served as Chairman of the Board and Chief Executive
Officer of WTI. Mr. Rooney is also a director of Waste Management
International, WTI, Illinois Tool Works, Inc., Caremark International Inc.,
Urban Shopping Centers, Inc., and ServiceMaster Management Corporation, the
general partner of ServiceMaster Limited Partnership.
Donald A. Wallgren, age 54, has been Vice President and Chief Environmental
Officer of the Company since 1992 and Vice President of Environmental
Management of Waste Management since January 1995. He was Vice President and
Chief Environmental Officer at Waste Management from 1989 to May 1990. From
1990 to 1992, he served as Vice President-Recycling, Development and
Environmental Management of Waste Management. Mr. Wallgren has been employed
by the Company since 1979.
30
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol "WMX." The following table sets forth
by quarter for the last two years the high and low sale prices of the
Company's common stock on the New York Stock Exchange Composite Tape as
reported by the Dow Jones News Retrieval Service, and the dividends declared
by the Board of Directors of the Company on its common stock.
1994 QUARTERLY SUMMARY
<TABLE>
<CAPTION>
CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
------- ------- ------------------
<S> <C> <C> <C>
First.................................. $30 3/4 $23 $.15
Second................................. 29 3/8 22 5/8 .15
Third.................................. 30 3/8 26 3/8 .15
Fourth................................. 30 24 1/2 .15
1995 QUARTERLY SUMMARY
<CAPTION>
CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
------- ------- ------------------
<S> <C> <C> <C>
First.................................. $29 5/8 $25 3/4 $.15
Second................................. 28 3/4 26 3/4 .15
Third.................................. 32 1/2 28 1/4 .15
Fourth................................. 30 7/8 26 3/8 .15
</TABLE>
At March 20, 1996, the Company had approximately 55,600 stockholders of
record.
Due in part to the high level of public awareness of the business in which
the Company is engaged, regulatory enforcement proceedings or other
unfavorable developments involving the Company's operations or facilities,
including those in the ordinary course of business, may be expected to
engender substantial publicity which could from time to time have an adverse
impact upon the market price for the Company's common stock.
From September 1990 to December 1995, WMX Technologies maintained a program
for the purchase of up to 25,000,000 shares of its common stock from time to
time in the open market or in privately negotiated transactions. During 1992
and 1993 the Company purchased approximately 7,600,000 shares and 8,400,000
shares, respectively, of its common stock under this program. No Company
shares were repurchased in 1994 or 1995. In December 1995, the Company
terminated that program and announced that its Board of Directors had
authorized the repurchase by the Company of up to an additional 25,000,000
shares of the Company's common stock from time to time over the following 24-
month period in open market or privately negotiated transactions.
During 1994 and 1995, the Company sold put options on 31,600,000 shares of
its common stock in conjunction with the repurchase program. The put options
give the holders the right at maturity to require the Company to repurchase
its shares at specified prices. In the event the options are exercised, the
Company may elect to pay the holder in cash the difference between the strike
price and the market price of the Company's shares, in lieu of repurchasing
the stock. Options on 17,900,000 shares expired unexercised in 1994 and 1995,
as the price of the Company's stock was in excess of the strike price at
maturity. Options on 4,700,000 shares were exercised in February 1995, and the
Company elected to settle them for cash in the amount of $12,019,000. The
remaining 9,000,000 options expire at various dates in 1996 at strike prices
ranging from $27.34 to $31.45 per share. For additional information, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Capital Structure" incorporated by reference herein.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information for each of the
five years in the period ended December 31, 1995 is derived from the Company's
Consolidated Financial Statements, which have been audited by Arthur Andersen
LLP, independent public accountants, whose report thereon is incorporated by
reference in this report. The information below should be read in conjunction
with "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the Company's Consolidated Financial Statements, and
the related Notes, and the other financial information which are filed as
exhibits to this report and incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1991(1) 1992(2) 1993(3)(6) 1994(4)(6) 1995(5)(6)
----------- ----------- ----------- ----------- -----------
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue from continuing
operations............. $ 7,550,914 $ 8,661,027 $ 8,636,116 $ 9,554,705 $10,247,617
Income from continuing
operations............. $ 606,323 $ 850,036 $ 442,431 $ 776,491 $ 654,590
Earnings per common and
common equivalent
share--continuing
operations............. $ 1.23 $ 1.72 $ .91 $ 1.60 $ 1.35
Total assets............ $12,572,310 $14,114,180 $16,264,476 $17,423,173 $18,695,308
Long-term debt, less
portion payable within
one year............... $ 3,782,973 $ 4,312,511 $ 6,145,584 $ 6,044,411 $ 6,420,610
Dividends per share..... $ .42 $ .50 $ .58 $ .60 $ .60
</TABLE>
- --------
(1) The results for 1991 include a special charge of $296,000,000 (before tax
and minority interest) primarily to reflect then current estimates of the
environmental remediation liabilities at waste disposal sites previously
used or operated by the Company and its subsidiaries or their
predecessors.
(2) The results for 1992 include a non-taxable gain of $240,000,000 (before
minority interest) resulting from the initial public offering of Waste
Management International, special charges of $219,900,000 (before tax and
minority interest) primarily related to writedowns of the Company's
medical waste business, CWM incinerators in Chicago, Illinois and Tijuana,
Mexico and a former subsidiary's investment in its asbestos abatement
business and certain restructuring costs incurred by the subsidiary and
CWM related to the formation of Rust, and one time after-tax charges
aggregating $71,139,000, or $.14 per share, related to the cumulative
effect of adopting two new accounting standards.
(3) The results for 1993 include a non-taxable gain of $15,109,000 (before
minority interest) relating to the issuance of shares by Rust, as well as
the Company's share of a special asset revaluation and restructuring
charge of $550,000,000 (before tax and minority interest) recorded by CWM
related primarily to a revaluation of CWM's thermal treatment business,
and a provision of approximately $14,000,000 to adjust deferred income
taxes resulting from the 1993 tax law change. See Notes 3 and 14 to the
Company's Consolidated Financial Statements.
(4) The results for 1994 include a charge of $9,200,000 (before tax and
minority interest) recorded by Rust to write off assets and recognize
costs of exiting certain of Rust's service lines and closing offices in a
consolidation of certain of its operating groups. See Note 14 to the
Company's Consolidated Financial Statements.
(5) The results for 1995 include a special charge of $140,600,000 (before tax)
recorded by CWM, primarily to write off its investment in facilities and
technologies that it abandoned because they do not meet customer service
or performance objectives, and a special charge of $194,600,000 (before
tax and minority interest) recorded by Waste Management International
relating to actions it is taking to sell or otherwise dispose of non-core
businesses and investments, as well as core businesses and investments in
low potential markets, abandon certain hazardous waste treatment and
processing technologies, and streamline its country management
organization. See Note 14 to the Company's Consolidated Financial
Statements.
(6) In December 1995, the Rust Board of Directors approved a plan to sell or
otherwise discontinue Rust's process engineering, construction, specialty
contracting and similar lines of business. Accordingly, these
32
<PAGE>
businesses have been segregated as discontinued operations in the financial
statements since 1993. It is not practical to restate periods prior to the
formation of Rust on January 1, 1993 for the discontinued operations. See
Note 15 to the Company's Consolidated Financial Statements.
(7) Certain amounts have been restated to conform to 1995 classifications.
Reference is made to the ratio of earnings to fixed charges for each of the
years in the five-year period ended December 31, 1995, as set forth in Exhibit
12 to this report, which ratios are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Reference is made to Management's Discussion and Analysis of Results of
Operations and Financial Condition set forth on pages 16 to 24 of the
Company's 1995 Annual Report to Stockholders (the "Annual Report"), which
discussion is filed as an exhibit to this report and incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(a) The Consolidated Balance Sheets as of December 31, 1994 and 1995,
Consolidated Statements of Income, Stockholders' Equity and Cash Flows for
each of the years in the three-year period ended December 31, 1995 and Notes
to Consolidated Financial Statements set forth on pages 25 to 45 of the Annual
Report are filed as an exhibit to this report and incorporated herein by
reference.
(b) Selected Quarterly Financial Data (Unaudited) is set forth in Note 17 to
the Consolidated Financial Statements referred to in Item 8(a) above and
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the information set forth in the 15 paragraphs under
the caption "Election of Directors" beginning on page 1 of the Company's proxy
statement for the annual meeting scheduled for May 10, 1996 (the "Proxy
Statement") for a description of the directors of the Company, which
paragraphs are incorporated herein by reference. Information concerning the
executive officers of the Company is set forth above under "Executive Officers
of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information set forth under the caption
"Compensation" on pages 10 through 16 of the Proxy Statement, which
information, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information, including the tables and the footnotes
thereto, set forth under the caption "Securities Ownership of Management" on
pages 5 through 9 of the Proxy Statement, for certain information respecting
ownership of common stock of the Company, WTI and Waste Management
International, which information is incorporated herein by reference.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the paragraph under the caption "Compensation Committee
Interlocks and Insider Participation" on page 16 of the Proxy Statement and
the information set forth under the caption "Certain Transactions" beginning
on page 24 of the Proxy Statement for certain information with respect to
certain relationships and related transactions, which paragraphs are
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K.
(a) Financial Statements, Schedule and Exhibits.
I. Financial Statements--filed as an exhibit hereto and incorporated
herein by reference.
(i)Consolidated Statements of Income for the three years ended
December 31, 1995;
(ii)Consolidated Balance Sheets--December 31, 1994 and 1995;
(iii) Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1995;
(iv)Consolidated Statements of Cash Flows for the three years ended
December 31, 1995;
(v)Notes to Consolidated Financial Statements; and
(vi)Report of Independent Public Accountants.
II. Schedule
(i)Schedule II--Valuation and Qualifying Accounts
(ii)Report of Independent Public Accountants on Schedule
All other schedules have been omitted because the required information is
not significant or is included in the financial statements or the notes
thereto, or is not applicable.
III. Exhibits.
The exhibits to this report are listed in the Exhibit Index elsewhere
herein. Included in the exhibits listed therein are the following exhibits
which constitute management contracts or compensatory plans or
arrangements*:
(i) 1981 Stock Option Plan for Non-Employee Directors of registrant
(Exhibit 19 to registrant's report on Form 10-Q for the quarter
ended June 30, 1982)
(ii) WMX Technologies, Inc. 1982 Stock Option Plan, as amended to
March 11, 1988 (Exhibit 10.3 to registrant's 1988 annual report
on Form 10-K)
(iii) Deferred Director's Fee Plan, as amended (Exhibit 10.3 to
registrant's 1990 annual report on Form 10-K)
(iv) Director's Phantom Stock Plan (Exhibit 10.9 to registrant's 1984
annual report on Form 10-K)
(v) Employment Agreement, dated as of September 1, 1986, by and
between the registrant and Phillip B. Rooney (Exhibit 19.4 to
registrant's report on Form 10-Q for the quarter ended September
30, 1986)
(vi) WMX Technologies, Inc. Corporate Incentive Bonus Plan (Exhibit B
to registrant's Proxy Statement for its 1995 Annual Meeting of
Stockholders)
(vii) WMX Technologies, Inc. Supplemental Executive Retirement Plan,
as amended and restated as of January 25, 1995 (filed with this
report)
34
<PAGE>
(viii) Chemical Waste Management, Inc. 1992 Stock Option Plan (Exhibit
10.19 to Chemical Waste Management, Inc.'s 1991 annual report on
Form 10-K)
(ix) Supplemental Retirement Benefit Agreement, dated as of January
1, 1989, by and between the registrant and Peter H. Huizenga
(Exhibit 10.16 to Post-Effective Amendment No. 2 to registrant's
registration statement on Form S-1, Registration No. 33-13839)
(x) Chemical Waste Management, Inc. 1986 Stock Option Plan, as
amended (Exhibit 10.1 to Chemical Waste Management, Inc.'s 1989
annual report on Form 10-K)
(xi) WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings
Plus Plan (filed with this report)
(xii) Chemical Waste Management, Inc. Deferred Director's Fee Plan
(Exhibit 10.5 to Chemical Waste Management, Inc.'s registration
statement on Form S-1, Registration No. 33-8509)
(xiii) WMX Technologies, Inc. Director's Charitable Endowment Plan
(Exhibit 10.20 to registrant's 1989 annual report on Form 10-K)
(xiv) Supplemental Retirement Benefit Agreement dated as of January 1,
1991 by and between registrant and Donald F. Flynn (Exhibit
10.17 to registrant's 1990 annual report on Form 10-K)
(xv) Restricted Unit Plan for Non-Employee Directors of Wheelabrator
Technologies Inc. as amended through June 10, 1991 (Exhibit
19.03 to the report on Form 10-Q of Wheelabrator Technologies
Inc. for the quarter ended June 30, 1991)
(xvi) 1988 Stock Plan for Executive Employees of Wheelabrator
Technologies Inc. and its subsidiaries (the "WTI 1988 Stock
Plan") (Exhibit 28.1 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
(xvii) Amendments dated as of September 7, 1990 to the WTI 1988 Stock
Plan (Exhibit 19.02 to the 1990 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xviii) Amendment dated as of November 1, 1990 to the WTI 1988 Stock
Plan (Exhibit 19.04 to the 1990 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xix) 1986 Stock Plan for Executive Employees of Wheelabrator
Technologies Inc. and its subsidiaries (the "WTI 1986 Stock
Plan") (Exhibit 28.2 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
(xx) Amendment dated as of November 1, 1990 to the WTI 1986 Stock
Plan (Exhibit 19.03 to the 1990 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxi) Employment Agreement dated as of April 1, 1995 between the
registrant and D. P. Payne (filed with this report)
(xxii) WMX Technologies, Inc. 1992 Stock Option Plan (Exhibit 10.31 to
registrant's registration statement on Form S-1, Registration
No. 33-44849)
(xxiii) WMX Technologies, Inc. 1992 Stock Option Plan for Non-Employee
Directors (Exhibit 10.32 to registrant's registration statement
on Form S-1, Registration No. 33-44849)
(xxiv) Wheelabrator Technologies Inc. 1992 Stock Option Plan (Exhibit
10.45 to the 1991 annual report on Form 10-K of Wheelabrator
Technologies Inc.)
(xxv) Deferred Director's Fee Plan of Wheelabrator Technologies Inc.
adopted June 10, 1991 (Exhibit 19.02 to the quarterly report on
Form 10-Q of Wheelabrator Technologies Inc. for the quarter
ended June 30, 1991)
(xxvi) Waste Management International plc Share Option Plan (Exhibit
10.1 to the registration statement on Form F-1 of Waste
Management International plc, Registration No. 33-46511)
35
<PAGE>
(xxvii) Amendment dated as of December 6, 1991 to the WTI 1986 Stock
Plan (Exhibit 19.01 to the 1991 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxviii) Amendment dated as of December 6, 1991 to the WTI 1988 Stock
Plan (Exhibit 19.02 to the 1991 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxix) Amendment dated as of December 6, 1991 to the Restricted Unit
Plan for Non-Employee Directors of Wheelabrator Technologies
Inc. (Exhibit 19.05 to the 1991 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxx) WMX Technologies, Inc. Long Term Incentive Plan (as amended and
restated as of January 27, 1994) (Exhibit A to registrant's
Proxy Statement for its 1995 Annual Meeting of Stockholders)
- --------
*In the case of reference to documents filed under the Securities Exchange Act
of 1934, the registrant's file number under that Act is 1-7327, Chemical
Waste Management's file number under that Act was 1-9253 and Wheelabrator
Technologies Inc.'s file number under that Act is 0-14246.
(b) Reports on Form 8-K.
During the fourth quarter of 1995, the Company filed reports on Form 8-K
as follows:
(i) a report dated October 17, 1995 reporting under Item 5 the issuance
of a news release concerning the Company's 1995 third quarter results of
operations and a possible 1995 fourth quarter charge by Waste Management
International; and
(ii) a report dated December 12, 1995 reporting under Item 5 the issuance
of news releases concerning (A) the authorization by the Company's Board of
Directors of a Company common stock repurchase program, (B) an increase by
WTI in its program for the repurchase of WTI common stock, (C) a fourth
quarter 1995 exceptional charge by Waste Management International, (D) the
decision by Rust to sell or otherwise discontinue its process engineering,
construction, specialty contracting and similar lines of business and the
possibility of a related 1995 fourth quarter charge, (E) announcement of
below-expectations 1995 fourth quarter earnings by Waste Management
International, and (F) expected 1996 earnings growth by Waste Management
International.
36
<PAGE>
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE
($000'S OMITTED)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EFFECT OF
BALANCE CHARGED ACCOUNTS FOREIGN BALANCE
BEGINNING TO WRITTEN CURRENCY END OF
OF YEAR INCOME OFF OTHER(A) TRANSLATION YEAR
--------- ------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1993--Reserve for
doubtful accounts (B)
(C).................... $56,475 $33,173 $(33,514) $ 7,120 $(1,970) $61,284
======= ======= ======== ======= ======= =======
1994--Reserve for
doubtful accounts (B)
(C).................... $61,284 $34,072 $(40,866) $10,280 $ 1,760 $66,530
======= ======= ======== ======= ======= =======
1995--Reserve for
doubtful accounts (B).. $66,530 $39,930 $(42,038) $ 1,314 $ 1,104 $66,840
======= ======= ======== ======= ======= =======
</TABLE>
- --------
(A) Reserves of companies accounted for as purchases.
(B) Includes reserves for doubtful long-term notes receivable.
(C) Restated to exclude discontinued operations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To WMX Technologies, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the WMX Technologies, Inc.
Annual Report to Stockholders for 1995 filed as an exhibit to and incorporated
by reference in this Form 10-K, and have issued our report thereon dated
February 5, 1996. Our audit was made for the purpose of forming an opinion on
those statements taken as a whole. The schedule included on page 37 of this
Form 10-K is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois,
February 5, 1996
38
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 IN OAK BROOK,
ILLINOIS ON THE 29TH DAY OF MARCH 1996.
WMX Technologies, Inc.
/s/ Dean L. Buntrock
By __________________________________
Dean L. Buntrock,
Chairman of the Board and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Dean L. Buntrock Director, Chairman of the
____________________________________ Board and Chief Executive
Dean L. Buntrock Officer
/s/ Jerry E. Dempsey Director
____________________________________
Jerry E. Dempsey
/s/ Phillip B. Rooney Director
____________________________________
Phillip B. Rooney
/s/ Donald F. Flynn Director
____________________________________
Donald F. Flynn
/s/ Peter H. Huizenga Director
____________________________________
Peter H. Huizenga
/s/ Peer Pedersen Director
____________________________________
Peer Pedersen
/s/ James R. Peterson Director
____________________________________
James R. Peterson
/s/ Alexander B. Trowbridge Director March 29, 1996
____________________________________
Alexander B. Trowbridge
/s/ Howard H. Baker, Jr. Director
____________________________________
Howard H. Baker, Jr.
/s/ H. Jesse Arnelle Director
____________________________________
H. Jesse Arnelle
/s/ Pastora San Juan Cafferty Director
____________________________________
Pastora San Juan Cafferty
/s/ James B. Edwards Director
____________________________________
James B. Edwards
/s/ Thomas C. Hau Vice President, Controller
____________________________________ and Principal Accounting
Thomas C. Hau Officer
/s/ James E. Koenig Senior Vice President, Chief
____________________________________ Financial Officer,
James E. Koenig Treasurer and Principal
Financial Officer
</TABLE>
39
<PAGE>
WMX TECHNOLOGIES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
<C> <S>
1. Inapplicable
2. Inapplicable
3.1(a) Restated Certificate of Incorporation of registrant, as amended as
of May 24, 1985 (incorporated by reference to Exhibit 4.1 to
registrant's report on Form 10-Q for the quarter ended June 30,
1985)
3.1(b) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, recorded May 23, 1986 (incorporated by reference to
Exhibit 4(c) to registrant's registration statement on Form S-8,
Registration No. 33-6265)
3.1(c) Certificate of Designation of Preferred Stock of registrant, filed
January 30, 1987 (incorporated by reference to Exhibit 3.1(c) to
registrant's 1986 annual report on Form 10-K)
3.1(d) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, recorded May 15, 1987 (incorporated by reference to
Exhibit 4.5(d) to registrant's registration statement on Form S-4,
Registration No. 33-15518)
3.1(e) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, filed May 19, 1989 (incorporated by reference to Exhibit
3(e) to registrant's registration statement on Form S-3,
Registration No. 33-30190)
3.1(f) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, filed May 18, 1990 (incorporated by reference to Exhibit
4(h) to registrant's registration statement on Form S-8,
Registration No. 33-35936)
3.1(g) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, filed May 14, 1993 (incorporated by reference to Exhibit
4(a) to registrant's report on Form 8-K dated May 14, 1993)
3.1(h) Conformed copy of Restated Certificate of Incorporation of
registrant, as amended (incorporated by reference to Exhibit 4(b) to
registrant's report on Form 8-K dated May 14, 1993)
3.2 By-laws of registrant, as amended and restated as of January 28,
1995 (incorporated by reference to Exhibit 3.2 to registrant's 1994
annual report on Form 10-K)
4.1(a) Rights Agreement dated as of February 6, 1987, between the
registrant and Harris Trust and Savings Bank, which includes as
Exhibit A the form of Certificate of Designation of Preferred Stock,
as Exhibit B, the form of Rights Certificate and, as Exhibit C, the
Summary of Rights (incorporated by reference to Exhibit 4 to
registrant's report on Form 8-K dated January 26, 1987)
4.1(b) Certificate of Adjustment relating to April 1987 stock split
pursuant to Section 12 of the Rights Agreement (incorporated by
reference to Exhibit 4.3(b) to registrant's registration statement
on Form S-1, Registration No. 33-13839)
4.1(c) Certificate of Adjustment relating to December 1989 stock split
pursuant to Section 12 of the Rights Agreement (incorporated by
reference to Exhibit 4.3(c) to registrant's 1989 annual report on
Form 10-K)
4.2(a) Trust Indenture dated as of August 1, 1989 (incorporated by
reference to Exhibit 4.3(a) to registrant's 1990 annual report on
Form 10-K)
4.2(b) First Supplemental Indenture dated as of December 1, 1990
(incorporated by reference to Exhibit 4.3(b) to registrant's 1990
annual report on Form 10-K)
</TABLE>
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
<C> <S>
4.3 Trust Indenture dated as of June 1, 1993 (incorporated by reference
to Exhibit 4 to the registrant's current report on Form 8-K dated
July 15, 1993)
5. Inapplicable
6. Inapplicable
7. Inapplicable
8. Inapplicable
9. None
10.1 1981 Stock Option Plan for Non-Employee Directors of registrant
(incorporated by reference to Exhibit 19 to registrant's report on
Form 10-Q for the quarter ended June 30, 1982)
10.2 WMX Technologies, Inc. 1982 Stock Option Plan, as amended to March
11, 1988 (incorporated by reference to Exhibit 10.3 to registrant's
1988 annual report on Form 10-K)
10.3 Deferred Director's Fee Plan, as amended (incorporated by reference
to Exhibit 10.3 to registrant's 1990 annual report on Form 10-K)
10.4 Director's Phantom Stock Plan (incorporated by reference to Exhibit
10.9 to registrant's 1984 annual report on Form 10-K)
10.5 Employment Agreement, dated as of September 1, 1986, by and between
the registrant and Phillip B. Rooney (incorporated by reference to
Exhibit 19.4 to registrant's report on Form 10-Q for the quarter
ended September 30, 1986)
10.6 WMX Technologies, Inc. Corporate Incentive Bonus Plan (incorporated
by reference to Exhibit B to the registrant's Proxy Statement for
its 1995 Annual Meeting of Stockholders)
10.7 WMX Technologies, Inc. Supplemental Executive Retirement Plan, as
amended and restated as of January 24, 1995
10.8 WMX Technologies, Inc. Long Term Incentive Plan, as amended and
restated as of January 27, 1994 (incorporated by reference to
Exhibit A to the registrant's Proxy Statement for its 1995 Annual
Meeting of Stockholders)
10.9 Supplemental Retirement Benefit Agreement, dated as of January 1,
1989, by and between the registrant and Peter H. Huizenga
(incorporated by reference to Exhibit 10.16 to Post-Effective
Amendment No. 2 to registrant's registration statement on Form S-1,
Registration No. 33-13839)
10.10 Chemical Waste Management, Inc. 1986 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.1 to Chemical Waste
Management, Inc.'s 1989 annual report on Form 10-K)
10.11 WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus
Plan
10.12 Chemical Waste Management, Inc. Deferred Director's Fee Plan
(incorporated by reference to Exhibit 10.5 to Chemical Waste
Management, Inc.'s registration statement on Form S-1, Registration
No. 33-8509)
10.13 WMX Technologies, Inc. Director's Charitable Endowment Plan
(incorporated by reference to Exhibit 10.20 to registrant's 1989
annual report on Form 10-K)
10.14 Supplemental Retirement Benefit Agreement dated as of January 1,
1991 by and between registrant and Donald F. Flynn (incorporated by
reference to Exhibit 10.17 to registrant's 1990 annual report on
Form 10-K)
</TABLE>
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
<C> <S>
10.15 Restricted Unit Plan for Non-Employee Directors of Wheelabrator
Technologies Inc. as amended through June 10, 1991 (incorporated by
reference to Exhibit 19.03 to the report on Form 10-Q of
Wheelabrator Technologies Inc. for the quarter ended June 30, 1991)
10.16 1988 Stock Plan for Executive Employees of Wheelabrator Technologies
Inc. and its subsidiaries (the "WTI 1988 Stock Plan") (incorporated
by reference to Exhibit 28.1 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
10.17 Amendments dated as of September 7, 1990 to the WTI 1988 Stock Plan
(incorporated by reference to Exhibit 19.02 to the 1990 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.18 Amendment dated as of November 1, 1990 to the WTI 1988 Stock Plan
(incorporated by reference to Exhibit 19.04 to the 1990 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.19 1986 Stock Plan for Executive Employees of Wheelabrator Technologies
Inc. and its subsidiaries (the "WTI 1986 Stock Plan") (incorporated
by reference to Exhibit 28.2 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
10.20 Amendment dated as of November 1, 1990 to the WTI 1986 Stock Plan
(incorporated by reference to Exhibit 19.03 to the 1990 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.21 Employment Agreement dated as of April 1, 1995 between the
registrant and D. P. Payne
10.22 WMX Technologies, Inc. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.31 to registrant's registration statement on
Form S-1, Registration No. 33-44849)
10.23 WMX Technologies, Inc. 1992 Stock Option Plan for Non-Employee
Directors (incorporated by reference to Exhibit 10.32 to
registrant's registration statement on Form S-1, Registration No.
33-44849)
10.24 Wheelabrator Technologies Inc. 1992 Stock Option Plan (incorporated
by reference to Exhibit 10.45 to the 1991 annual report on Form 10-K
of Wheelabrator Technologies Inc.)
10.25 Deferred Director's Fee Plan of Wheelabrator Technologies Inc.
adopted June 10, 1991 (incorporated by reference to Exhibit 19.02 to
the quarterly report on Form 10-Q of Wheelabrator Technologies Inc.
for the quarter ended June 30, 1991)
10.26 Waste Management International plc Share Option Plan (incorporated
by reference to Exhibit 10.1 to the registration statement on Form
F-1 of Waste Management International plc, Registration No. 33-
46511)
10.27 Amendment dated as of December 6, 1991 to the WTI 1986 Stock Plan
(incorporated by reference to Exhibit 19.01 to the 1991 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.28 Amendment dated as of December 6, 1991 to the WTI 1988 Stock Plan
(incorporated by reference to Exhibit 19.02 to the 1991 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.29 Amendment dated as of December 6, 1991 to the Restricted Unit Plan
for Non-Employee Directors of Wheelabrator Technologies Inc.
(incorporated by reference to Exhibit 19.05 to the 1991 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.30 First Amended and Restated International Business Opportunities
Agreement by and among registrant, Chemical Waste Management, Inc.,
Wheelabrator Technologies Inc., Waste Management International,
Inc., Waste Management International plc and Rust International
Inc., dated as of January 1, 1993 (incorporated by reference to
Exhibit 28 to the registration statement on Form S-3 of Wheelabrator
Technologies Inc., Registration No. 33-59606)
</TABLE>
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
<C> <S>
10.31 Amendment dated as of January 28, 1994 relating to the International
Business Opportunities Agreement (incorporated by reference to
Exhibit 10.19 to the 1993 annual report on Form 10-K of Chemical
Waste Management, Inc.)
10.32 Chemical Waste Management, Inc. 1992 Stock Option Plan (incorporated
by reference to Exhibit 10.19 to the 1991 annual report on Form 10-K
of Chemical Waste Management, Inc.)
10.33 Amendment dated as of July 10, 1995 to the International Business
Opportunities Agreement (incorporated by reference to Exhibit 10 to
the quarterly report on Form 10-Q of Wheelabrator Technologies Inc.
for the quarter ended September 30, 1995)
11. None
12. Computation of ratio of earnings to fixed charges
13.1 Management's Discussion and Analysis of Results of Operations and
Financial Condition
13.2 Financial Statements, Supplementary Data and Report of Independent
Public Accountants
14. Inapplicable
15. Inapplicable
16. None
17. Inapplicable
18. None
19. Inapplicable
20. Inapplicable
21. List of subsidiaries of registrant
22. Inapplicable
23. Consent of Independent Public Accountants
24. None
25. Inapplicable
26. Inapplicable
27. Financial Data Schedule
28. None
</TABLE>
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-4
<PAGE>
Exhibit 10.7
WMX TECHNOLOGIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated as of January 24, 1995)
WMX Technologies, Inc. (formerly "Waste Management, Inc."), a Delaware
corporation, established this Supplemental Executive Retirement Plan effective
as of January 1, 1988 and amended and restated the Plan effective as of May 14,
1993. Effective January 24, 1995, the Plan was further amended and restated to
merge the Chemical Waste Management, Inc. Supplemental Executive Retirement Plan
with and into the Plan and to make other necessary and desirable changes, all as
set forth below.
1. Definitions. Wherever used in this Plan, the following terms shall
have the following meanings, unless a different meaning is clearly required by
the context:
(a) Code: The Internal Revenue Code of 1986, as amended from time to time.
Reference to a section of the Code shall include that section and any
corresponding provisions of any future legislation that amends, supplements or
supersedes that section.
(b) Committee: With respect to participation in the Plan by individuals
who are executive officers of the Company, the term "Committee" shall mean the
Compensation and Stock Option Committee of the Company's Board of Directors.
With respect to participation in the Plan by all other individuals, the term
"Committee" shall mean a management committee composed of the Company's Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and General
Counsel (or one or more persons designated by them).
(c) Company: WMX Technologies, Inc., a Delaware corporation.
(d) Compensation: A Participant's "compensation" for any year is such
Participant's total salary and bonus as accrued in the consolidated financial
records of the Company and its subsidiaries for that year (without regard to any
reduction thereto under any salary reduction agreement entered into under
section 125 or 401(k) of the Code), but excluding any other form of compensation
such as bonuses under the Company's or any subsidiary's long-term incentive
bonus program, income attributable to stock options or Company contributions
under pension, profit sharing or other plans.
(e) Disability: A physical or mental disability as defined for purposes of
the Pension Plan.
(f) Final Average Compensation: The monthly average of a Participant's
Compensation with the Company or a Participating Subsidiary for the three
consecutive calendar years in which such Participant's aggregate Compensation
was the highest out of the last ten calendar years ending on or before such
Participant's date of retirement or other termination of employment.
<PAGE>
(g) Inactive Participant: An individual who became a Participant hereunder
and thereafter ceased to be in the class of employees eligible to participate in
the Plan and who is designated by the Committee as an Inactive Participant. An
Inactive Participant shall continue to be a Participant for purposes of
continuing to accrue Eligibility Service hereunder, but not Benefit Service.
The benefits of an Inactive Participant shall be determined in accordance with
Section 5(c).
(h) Normal Retirement Date: The first day of the month coinciding with or
next following the Participant's 60th birthday.
(i) Participant: Any person who is eligible to participate in this Plan as
provided in Section 3 and who is designated as a Participant by the Committee.
A Participant shall remain a Participant for such period of time as such person
is designated as a Participant by the Committee. Except where the context
requires otherwise, the term "Participant" shall also mean an Inactive
Participant or a retired or terminated Participant who continues to be entitled
to receive retirement benefits under this Plan after retirement or other
termination of employment.
(j) Participating Subsidiary. Waste Management, Inc., Chemical Waste
Management, Inc., any majority-owned subsidiary of either or any other
subsidiary of the Company designated by the Committee from time to time.
(k) Pension Plan: The WMX Technologies, Inc. Pension Plan, as amended from
time to time.
(l) Plan: This WMX Technologies, Inc. Supplemental Executive Retirement
Plan, as amended from time to time (commonly referred to as the "SERP").
(m) Service: A Participant's service for purposes of eligibility for
benefits and amount of benefits, determined as follows:
(i) Benefit Service: A Participant's benefit service as determined
for purposes of the Pension Plan; provided, however, that the Benefit Service of
an Inactive Participant shall be determined on the date immediately preceding
the date the Participant became an Inactive Participant.
(ii) Eligibility Service: A Participant's period of service from the
date the Participant commenced or recommenced participation in the Plan or such
earlier date as is approved by the Committee at the time the Participant is
designated as such, and ending on the later of the date the Participant ceases
to be a Participant hereunder by reason of retirement, death or termination of
employment or the date the Participant ceases to be a Transferred Participant or
an Inactive Participant. Notwithstanding the foregoing, a Participant's period
of participation in the Chemical Waste Management, Inc. Supplemental Executive
Retirement Plan prior to its merger into the Plan shall be counted as
Eligibility Service hereunder.
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Notwithstanding any provision contained herein to the contrary, but subject
to the break in service rules of the Pension Plan with respect to the
determination of Benefit Service, all periods of service shall be aggregated.
All other terms used in both this Plan and in the Pension Plan shall have the
same meaning as in the Pension Plan, and all actuarial calculations under this
Plan shall be made on the same basis as for the similar purpose under the
Pension Plan.
2. Purpose. The purpose of this Plan is to provide a retirement income
to eligible executives of the Company and its subsidiaries to supplement the
pensions payable under the Company's Pension Plan.
3. Eligibility. Any person who is a corporate, group or staff officer of
the Company or a Participating Subsidiary and who is a participant in the
Pension Plan shall be eligible to be designated as a Participant in this Plan by
the Committee. In addition, the Committee may in its discretion from time to
time designate other key employees of the Company or any Participating
Subsidiary as eligible to participate, or to continue participating, in the
Plan.
4. Eligibility for Benefits. Benefits under this Plan shall be payable
in respect of a Participant only if the Participant's retirement, death,
disability or other termination of employment occurs on or after the date such
Participant has completed ten years of Eligibility Service, either as a
Participant or an Inactive Participant, as evidenced in the records of the
Committee. No benefits shall be payable hereunder with respect to any
Participant whose employment termination, death or disability occurs prior to
completing ten years of Eligibility Service.
5. Amount of Benefits.
(a) Normal Retirement. If a Participant retires after having become
eligible for benefits hereunder and on or after such Participant's Normal
Retirement Date, the monthly amount of such Participant's benefits under the
Plan, commencing on or after Normal Retirement Date, shall be (i) 1-1/2% of
Final Average Compensation per year of Benefit Service, reduced by (ii) the
amount of such Participant's monthly benefit under the Pension Plan (determined
without regard to any qualified domestic relations order to which such
Participant's benefit under the Pension Plan is or was subject).
(b) Early Retirement. If a Participant retires or terminates
employment after having become eligible for benefits hereunder, but before his
or her Normal Retirement Date, the monthly amount of such Participant's benefits
shall be determined in accordance with Section 5(a), except that if the
Participant has completed less than 30 years of Benefit Service such amount
shall be reduced at the rate of 2/10 of 1% for each of the first 60 months by
which the benefit commencement date precedes the Participant's Normal Retirement
Date, and for each additional month at such rate as is determined by the
Committee in its discretion. Notwithstanding the foregoing sentence, the
Committee in its discretion may determine with respect to any particular
Participant that any such reduction shall be at a lower rate or that no such
reduction shall apply.
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(c) Inactive Participants. The benefit of a Participant who is an
Inactive Participant at the time of retirement or termination of service with
the Company or an affiliated entity shall be determined as of the date
immediately preceding the date the Participant became an Inactive Participant,
based on Benefit Service, Final Average Compensation and the Participant's
accrued benefit under the Pension Plan as of such date.
6. Disability. If a Participant's employment is terminated because of
Disability after having become eligible for benefits hereunder, but before
Normal Retirement Date, such Participant shall be eligible to receive a benefit
under the Plan beginning on his Normal Retirement Date. The amount of benefit
under this Plan to such a Participant shall be determined in accordance with
Section 5, but shall be reduced for any year by any benefits payable to the
Participant for that year under any long-term disability program of maintained
or contributed to by the Company or a Participating Subsidiary. In computing
the Benefit Service of such a Participant, his Service shall include the period
of Disability determined in the same manner as for purposes of the Pension Plan.
7. Payment of Benefits. Payment of a Participant's benefits under this
Plan shall begin as of the same date as such Participant's pension commencement
date under the Pension Plan, unless an earlier commencement date is specifically
approved by the Committee, in which case the Committee shall provide for such
adjustment in the amount of benefits as it determines in its discretion to be
appropriate. Payment of such benefits shall be in the form of a straight life
annuity and shall continue thereafter monthly for the Participant's life.
However, if payment of a Participant's pension under the Pension Plan is to be
made in the form of a qualified joint and survivor annuity or in any other
optional form, the benefits under this Plan shall be paid in that same form, in
an amount actuarially equivalent to the straight life annuity otherwise payable
hereunder, and with the same contingent annuitant or contingent beneficiary as
under the Pension Plan.
8. Surviving Spouse Benefit.
(a) If a Participant dies (i) after having become eligible for
benefits hereunder and (ii) either (A) before termination of employment or (B)
after termination of employment and before the commencement of benefits under
the Plan, provided in case (B), the Participant and his or her spouse had not
effectively waived the qualified joint and survivor annuity under the Pension
Plan, the Participant's surviving spouse shall be eligible to receive a monthly
benefit for life.
(b) Such surviving spouse benefit shall be in the monthly amount that
would have been payable under this Plan to the Participant's surviving spouse
under the qualified joint and survivor annuity described in Section 7 if:
(i) in the case of a Participant who dies after attaining the
"earliest benefit commencement date" (as defined below), the Participant had
retired on the day before his or her death and elected to commence receiving
benefits under this Plan as of such date, or
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(ii) in the case of a Participant who dies on or before the
earliest benefit commencement date, the Participant had lived and begun to
receive benefits under this Plan on the earlier benefit commencement date and
had died on the day after that date,
calculated in either case on the basis of the Participant's Final Average
Compensation and Benefit Service as of the date of death or termination of
employment, whichever is earlier, or the date the Participant became an Inactive
Participant, if applicable. For purposes of this Section 8(b), a Participant's
"earliest benefit commencement date" is the first day of the month coinciding
with or next following the later of (A) such Participant's 55th birthday or (B)
completion of ten years of participation hereunder.
(c) Payment of the surviving spouse benefit hereunder shall begin as
of the same date as the spouse's benefit payable to the surviving spouse under
the Pension Plan, unless an earlier commencement date is specifically approved
by the Committee, in which case the Committee shall provide for such adjustment
in the amount of benefit as it determines in its discretion to be appropriate.
Payment of such surviving spouse benefit shall continue thereafter monthly for
the spouse's life. However, if the payment of the surviving spouse's benefit
under the Pension Plan is to be made in some other form, the benefits under this
Plan shall be paid in that same form, in an amount actuarially equivalent to the
annuity otherwise payable hereunder, as under the Pension Plan.
9. Conditions on Benefits. If a Participant engages in competition with
the Company or any affiliated entity (without prior authorization in writing) or
is discharged for cause, or performs acts of willful malfeasance or gross
negligence in a matter of material importance to the Company or any affiliated
entity, benefits payable thereafter to the Participant or such Participant's
surviving spouse shall be forfeited at the discretion of the Company's Board of
Directors and the Company shall have no further obligation to the Participant or
spouse under the Plan.
10. Re-employment. If a retired Participant is re-employed by the Company
or a Participating Subsidiary, no benefits shall be payable during the period of
re-employment, and the benefits payable following subsequent retirement shall be
calculated so as to take into account such Participant's additional period of
service and Final Average Compensation, with appropriate actuarial adjustment
for any benefits paid under the Plan following such Participant's earlier
retirement; provided, however, that the amount of such benefit as recalculated,
before taking into account any such actuarial adjustment, shall not be less than
such Participant's benefit immediately following such Participant's earlier
retirement.
11. Administration and Interpretation. The Committee shall be the Plan
administrator. The Committee shall have the authority to control and manage the
operation and administration of the Plan, to adopt rules and regulations
regarding the administration of the Plan, to interpret the Plan, to determine
the conditions subject to which any benefits may be payable, and to make any
other determinations which the Committee believes are necessary or advisable for
the administration of the Plan. The Committee shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and reports
furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the
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Committee with respect to the Plan. Determinations by the Committee shall be
final and binding on all parties with respect to all matters relating to the
Plan. The Committee may delegate all or any part of its authority to any
officer of the Company.
12. Claims Procedure.
(a) If a Participant or other person believes that such person is
entitled to benefits under the Plan, such person may file a claim for benefits
in writing with the Committee. If a claim for benefits is wholly or partially
denied, the Committee shall give the claimant written notice of the denial
within a reasonable period of time after receipt of the claim by the Committee.
Such notice shall set forth:
(i) the specific reason or reasons for the denial,
(ii) specific reference to pertinent provisions of the Plan on
which the denial is based,
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary, and
(iv) an explanation of the claim review procedure.
(b) A claimant whose claim is denied, or such claimant's duly
authorized representative, may submit a written request for review to the
Committee within 60 days after receiving notice of the denial. In connection
with such request, the claimant or his authorized representatives may review
pertinent documents and may submit issues and comments in writing. If such a
request is made, the Committee shall make a full and fair review of the denial
of the claim and shall make a decision not later than 60 days after receipt of
the request, unless special circumstances (such as the need to hold a hearing)
require an extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than 120 days after receipt of the
request. The decision on review shall be in writing and shall include specific
reasons for the decision and specific references to the pertinent provisions of
the Plan on which the decision is based.
13. Amendment and Termination. The Plan may be amended or terminated at
any time by action of the Company's Board of Directors or the Compensation and
Stock Option Committee thereof. However, no such action shall, without the
consent of the Participant, reduce or impair the benefits then currently payable
to a Participant or surviving spouse, nor divest a Participant of any benefits
such Participant would have been entitled to receive had such Participant
resigned from the Company's employ immediately before the effective date of the
amendment or termination.
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14. Miscellaneous.
(a) Spendthrift provision. No interest of any person or entity in, or
right to receive a benefit under the Plan shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other alienation
or encumbrance of any kind; nor may such interest or right to receive a benefit
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in bankruptcy
proceedings.
(b) No Guarantee of Employment. Nothing in the Plan shall be
construed as a contract of employment or be deemed to confer upon any
Participant the right to be retained in the service of the Company or any
affiliated entity, nor shall it interfere with the right of the Company or any
affiliated entity to discharge or otherwise deal with any Participant without
regard to the existence of this Plan.
(c) No Funding. The Plan shall at all times be entirely unfunded and
no provision shall at any time be made with regard to segregating any assets of
the Company for payment of any benefits hereunder. All benefits under the Plan
are payable, as and when they come due, solely from the general assets of the
Company. No Participant, surviving spouse or other person shall have any
interest in any particular assets of the Company by reason of the right to
receive a benefit under the Plan and any such Participant, surviving spouse or
other person shall have only the rights of a general unsecured creditor of the
Company with respect to any rights under the Plan. Nothing contained in the
Plan shall constitute a guaranty by the Company or any other entity or person
that the assets of the Company will be sufficient to pay any benefit hereunder.
(d) Facility of Payment. When, in the Committee's opinion, a
Participant or surviving spouse is under a legal disability or is incapacitated
in any way so as to be unable to manage his or her affairs, the benefits
hereunder may be paid to the Participant or spouse, or to a duly appointed
guardian or conservator, custodian, adult relative, or directly for the benefit,
of the Participant or surviving spouse, as the Committee shall in its discretion
determine. Any such payments shall constitute a complete discharge therefor
with respect to the Plan, the Committee and the Company.
(e) Withholding for Taxes. Notwithstanding any other provisions of
this Plan, all payments hereunder shall be subject to any applicable withholding
for all federal, state and local taxes.
(f) Corporate successors. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other entity,
but the Plan shall be continued after such sale, merger or consolidation only if
and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan. In the event that the Plan is not continued by the
transferee, purchaser or successor entity, then the Plan shall terminate.
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(g) Unclaimed benefit. Each Participant shall keep the Company
informed of his current address and the current address of his spouse. The
Committee shall not be obligated to search for the whereabouts of any person.
If the location of a Participant is not made known to the Company within three
years after the date on which payment of the Participant's benefit may first be
made, payment may be made as though the Participant had died at the end of the
three-year period. If, within one additional year after such three-year period
has elapsed, or, within three years after the actual death of a Participant, the
Committee is unable to locate any surviving spouse of the Participant, then the
Company shall have no further obligation to pay any benefit hereunder to such
Participant or surviving spouse or any other person and such benefit shall be
irrevocably forfeited.
(h) Limitations on liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as an
employee or agent of the Company shall be liable to any Participant, former
Participant, surviving spouse or any other person for any claim, loss, liability
or expense incurred in connection with the Plan.
(i) Governing Law. The Plan shall be construed and administered
according to the laws of the State of Illinois to the extent that such laws are
not preempted by the laws of the United States of America.
(j) Gender and Number. In the Plan, wherever the context admits,
words in the singular include the plural and words in the plural include the
singular, and masculine terms shall be deemed to include the feminine.
(k) Headings. The headings of sections are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of the Plan, the text shall control.
* * *
The foregoing is the true and complete text of the WMX Technologies, Inc.
Supplemental Executive Retirement Plan as amended and restated by the
Compensation and Stock Option Committee of the Board of Directors of WMX
Technologies, Inc. as of January 24, 1995.
/s/ Herbert A. Getz
--------------------------------------
Herbert A. Getz, Secretary
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Exhibit 10.11
WMX TECHNOLOGIES, INC.
NON-QUALIFIED
PROFIT SHARING AND SAVINGS PLUS PLAN
WMX Technologies, Inc., a Delaware corporation, established this Non-
Qualified Profit Sharing and Savings Plus Plan effective as of January 1, 1994,
and subsequently amended and restated the Plan effective as of January 1, 1996.
ARTICLE I
DEFINITIONS
Wherever used in this Plan, the following terms shall have the following
meanings, unless a different meaning is clearly required by the context:
1.1 Account: The record of a Participant's interest under the Plan.
Accounts are kept solely for recordkeeping purposes and shall not require a
segregation of any Company assets. Accounts are subdivided into the (i) Profit
Sharing Plus Account; (ii) Voluntary Deferral Account; and (iii) Matching Plus
Account.
1.2 Before-Tax Account: The record under the Profit Sharing Plan of the
before-tax contributions allocated to a participant thereunder, plus any
earnings and minus any losses.
1.3 Change in Control: The occurrence of any of the following events:
(i) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization less than 75% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or indirectly,
immediately prior to such merger, consolidation or reorganization, other
than the Acquiror or any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(ii) The Company sells all or substantially all of its business
and/or assets to an Acquiror, of which less than 75% of the outstanding
voting securities or other capital interests are owned in the aggregate by
the stockholders of the Company, directly or indirectly, immediately prior
to such sale, other than any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person or group (as the terms "person" and "group" are
used in Section 13(d)(3) or Section
<PAGE>
14(d)(2) of the Exchange Act and the rules and regulations promulgated
thereunder) has become the beneficial owner (as the term "beneficial owner"
is defined under Rule 13d-3 or any successor rule or regulation promulgated
under the Exchange Act) of 20% or more of the issued and outstanding shares
of voting securities of the Company; or
(iv) During any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of
each new director of the Company was approved by a vote of at least two-
thirds of such directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
1.4 Code: The Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code shall include that section and any
corresponding provisions of any future legislation that amends, supplements or
supersedes that section.
1.5 Committee: The Executive Committee of the Company.
1.6 Company: WMX Technologies, Inc., a Delaware corporation.
1.7 Compensation: The amount of a Participant's compensation as defined
in the Profit Sharing Plan from time to time; provided, however, that the
limitations of Section 401(a)(17) of the Code shall not apply to the
determination of Compensation under the Plan.
1.8 Disability: A Participant shall be deemed totally and permanently
disabled when he/she is unable to perform the usual duties of his/her employment
by reason of a medically determinable physical or mental impairment which in the
opinion of a physician selected by or acceptable to the Committee can be
expected to result in death or to be of long-continued or indefinite duration.
1.9 Participant: Any person who participates in the Plan pursuant to
Section 3.1.
1.10 Plan: This WMX Technologies, Inc. Non-Qualified Profit Sharing and
Savings Plus Plan, as amended from time to time.
1.11 Plan Year: The Plan Year shall be each calendar year.
1.12 Profit Sharing Account: The record under the Profit Sharing Plan of
the profit sharing contributions allocated to a participant thereunder, plus any
earnings and minus any losses.
1.13 Profit Sharing Plan: The WMX Technologies, Inc. Profit Sharing and
Savings Plan, as amended from time to time.
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1.14 Termination of Employment: The termination of a Participant's
employment with the Company and all of its majority-owned subsidiaries.
Temporary absence from employment because of illness, vacation, approved leaves
of absence, and transfers of employment among the Company and its subsidiaries,
shall not be considered to terminate employment or to interrupt continuous
employment.
1.15 Voluntary Deferral Election: The election made pursuant to Section
4.3 of the Plan to defer receipt of a portion of a Participant's Compensation.
ARTICLE II
PURPOSE
It is anticipated that amounts otherwise allocable under the Profit Sharing
Plan to certain Participants may be restricted as a result of the limitations
imposed by section 415 of the Code on the amount of annual additions under the
Profit Sharing Plan, the limitations imposed by section 401(a)(17) of the Code
on the amount of annual compensation taken into account under the Profit Sharing
Plan and the limitations imposed by the Plan and Section 402(g) of the Code on
the amount of elective salary deferrals under the Profit Sharing Plan. The
purpose of this Plan is to supplement the Profit Sharing Plan by the allocation
and payment of benefits to those Participants, and their surviving spouses and
other beneficiaries, as to whom benefits otherwise allocable under the Profit
Sharing Plan are so restricted.
ARTICLE III
ELIGIBILITY FOR BENEFITS
3.1 Participation. For any given Plan Year, any employee of the Company
or any of its majority-owned subsidiaries will be eligible to participate in the
Plan if he or she (i) is an active participant in the Profit Sharing Plan and
(ii) is either (a) compensated at a level equal to or greater than the annual
compensation limit of Section 401(a)(17) of the Code, or (b) subject to the
Officer Stock Ownership Policy ("OSOP Officer").
3.2 Vesting. Except as provided in Section 4.6 below, a Participant shall
become vested in his or her Account balances and, therefore, have the right to
receipt of such Account balances upon his or her Termination of Employment as
follows:
(a) A Participant shall become vested in his Profit Sharing Plus
Account balance at the same time and in the same manner as he becomes
vested in his Profit Sharing Account balance; and
(b) A Participant shall always be vested in his Voluntary
Deferral Account balance; and
(c) A Participant shall become vested in each of the annual
credits, if any, to his or her Matching Plus Account after the earliest of:
(i) four consecutive years of employment with the Company or any of its
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majority-owned subsidiaries from the date such credit was made, (ii) the
Participant's retirement on or after age 55 with ten years of service
(within the meaning of the WMX Technologies, Inc. Pension Plan) or (iii)
the Participant's death or Disability while employed by the Company or any
of its majority-owned subsidiaries. Years of employment shall be
determined by the Committee, in its sole discretion, in accordance with
rules uniformly and consistently applied to all Participants in similar
circumstances.
If a Participant has a Termination of Employment prior to becoming fully
vested in his or her Profit Sharing Plus Account or Matching Plus Account, he or
she shall forfeit the unvested portion of such Account. Notwithstanding the
foregoing provisions of this Section, in the event of a Change in Control, a
Participant's Account shall become immediately and fully vested upon the Change
in Control.
ARTICLE IV
BENEFITS
4.1 Allocation to Profit Sharing Plus Accounts. A Participant's Profit
Sharing Plus Account shall be credited as of the end of each Plan Year with an
amount equal to
(a) the profit-sharing contribution that would have been allocated to
the Participant's Profit Sharing Account for the Plan Year if (i) the
restrictions of sections 401(a)(17) and 415 of the Code did not apply and (ii) a
limit on considered compensation equal to $500,000 (as indexed by the Committee
in its sole discretion) did apply, minus
(b) the profit-sharing contribution that was actually allocated to the
Participant's Profit Sharing Account for the Plan Year.
4.2 Allocation to Voluntary Deferral Accounts. Effective January 1, 1996,
each Participant shall, if he so elects, have his Compensation reduced for each
Plan Year by the amount specified in his Voluntary Deferral Election made in
accordance with Section 4.3. A Participant's Voluntary Deferral Account shall
be credited, in the case of deferred base salary, as of the end of each payroll
period, and, in the case of deferred bonus, as of the date the bonus would
otherwise be paid, with an amount equal to such reduction.
4.3 Voluntary Deferral Elections. Prior to the beginning of each Plan
Year beginning on or after January 1, 1996, a Participant may elect, on a form
provided by the Committee, to have his Compensation reduced in increments of 1%
up to a maximum percentage specified from time to time by the Committee in
accordance with such rules and other limitations as the Committee may from time
to time specify. Notwithstanding the foregoing, a Participant may make a
separate election over the portion of his Compensation representing annual bonus
payments.
4.4 Allocation to Matching Plus Account. If a Participant who is an OSOP
Officer elects to defer a portion of his annual bonus pursuant to Section 4.3
above and elects to have that bonus deferral deemed to be invested in Company
common stock pursuant to
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Section 4.5(c), the Participant's Matching Plus Account shall be credited, as of
the date of the annual bonus would otherwise be paid, with an amount equal to
20% of the voluntary bonus deferral amount.
4.5 Deemed Investment. (a) A Participant's Profit Sharing Plus Account
shall be deemed to be invested in the same manner over the same periods of time
as his Profit Sharing Account, and a Participant shall not have any right to
direct otherwise. The Participant's Profit Sharing Plus Account shall be
credited with gains and debited with losses in the amounts which would be
reflected in such Account were it actually invested in a like manner to such
Participant's Profit Sharing Account (other than the investment of any portion
of such Profit Sharing Account in a loan to the Participant).
(b) A Participant's Voluntary Deferral Account shall be deemed to be
invested in the same manner over the same periods of time as his Before-Tax
Account, and a Participant shall not have any right to direct otherwise. The
Participant's Voluntary Deferral Account shall be credited with gains and
debited with losses in the amount which would be reflected in such Account were
it actually invested in a like manner to such Participant's Before-Tax Account
(other than the investment of any portion of such Before-Tax Account in a loan
to the Participant).
(c) Notwithstanding paragraph (b) above, a Participant who is an OSOP
Officer may elect that any or all of the portion of his Voluntary Deferral
Account derived from the deferral of annual bonus be deemed to be invested in
Company common stock. If such an election is made, it will remain in effect
until the payment of the Participant's Account pursuant to Section 4.6.
(d) A Participant's Matching Plus Account shall be deemed to be invested in
Company common stock.
4.6 Payment of Benefits. (a) After a Participant's Termination of
Employment, the Company shall pay the Participant (or his surviving spouse or
other beneficiary in accordance with Section 4.9) his vested Account balances in
a lump sum (i) in the event that the Termination of Employment was caused by the
Participant's death or Disability, as soon as reasonably practicable following
the Participant's Termination of Employment, or (ii) in any other event, as soon
as practicable following the one year anniversary of such Participant's
Termination of Employment.
(b) In the case of Participants who are subject to Section 16(b) of the
Securities Exchange Act of 1934, the payment described in paragraph (a) above
shall be made in cash. In the case of all other Participants, (A) the payment
of any (i) amounts of deferred bonus deemed to be invested in Company stock and
the deemed earnings thereon and (ii) Matching Plus Account balances, shall be
made in Company common stock, and (B) the payment of any amounts not described
in (A) shall be made in cash. In the case of payment in Company common stock,
the stock shall be valued at its fair market value as of the applicable date
(i.e., Termination of Employment or the one year anniversary of Termination of
Employment) which shall, unless the Committee otherwise determines, be the
average of the closing sale prices per share of the Company's common stock on
the New
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<PAGE>
York Stock Exchange Composite Tape (as reported in The Wall Street Journal,
Midwest Edition) (or if the Company's common stock is not then traded on the New
York Stock Exchange, reported on the principal market where such common stock is
actively traded) on each of the ten trading days immediately preceding the
applicable date.
(c) Notwithstanding any other provision of this Plan to the contrary, in
the event the Committee determines, in its sole discretion, that the Participant
violated any agreement not to compete with, or not disclose confidential
information of, the Company or its majority-owned subsidiaries, either before or
after his or her Termination of Employment, the Participant shall forfeit his or
her entire Account balance, whether or not vested.
4.7 Change in Control. Notwithstanding any provision of the Plan to the
contrary, any amounts credited to a Participant's Account hereunder shall be
immediately payable upon a Change in Control, by the Company, or if the Company
is not the survivor of such Change in Control, the Acquiror. The amount payable
by the Company or the Acquiror, as the case may be, shall be in cash or by
certified check and shall be reduced by any taxes required to be withheld.
If any amounts in a Participant's Account are deemed to be invested in
Company common stock at the time of a Change in Control, each share of Company
common stock in such investment shall be valued at the "fair market value per
share". The "fair market value per share" shall be determined by the Committee,
as it existed immediately prior to such Change in Control. The "fair market
value per share" shall mean, (i) except in the case of a merger, consolidation
or reorganization with an Acquiror in which the Company is not the survivor (a
"Termination Merger"), the average of the highest sales price per share of the
Company's common stock on the New York Stock Exchange Composite Tape (as
reported in The Wall Street Journal, Midwest Edition) (or if the Company's
common stock is not then traded on the New York Stock Exchange, reported on the
principal market where such common stock is actively traded) on each of the five
trading days immediately preceding the date of the Change in Control, and (ii)
in the case of a Termination Merger, the higher of (A) the fair market value of
the consideration receivable per share by holders of common stock of the Company
in such Termination Merger, which fair market value as to any securities
included in such consideration shall be the average of the highest sales price
per unit of such security on the New York Stock Exchange Composite Tape (as
reported in The Wall Street Journal, Midwest Edition) (or if such security is
not traded on the New York Stock Exchange, reported on the principal market
where such security is actively traded) on each of the five trading days
immediately preceding the date of the Termination Merger and as to any such
security not actively traded in any market and as to all other property included
in such consideration, shall be the amount determined by the Committee in its
discretion or (B) the amount determined pursuant to clause (i) of this
paragraph.
4.8 Special Allocation for Transferred Participants. In the event a
Participant (i) is transferred during a Plan Year to any entity that is owned at
least 50% by the Company but that has not adopted the Profit Sharing Plan for
the benefit of its employees and (ii) remains employed by that entity (or
another 50% Company owned entity) through December 31 of that Plan Year, such
Participant's Profit Sharing Plus Account shall be
6
<PAGE>
credited with an amount equal to the profit-sharing contribution that would have
been allocated to the Participant's Profit Sharing Account for such Plan Year
if:
(a) the requirement that the Participant be an active participant in
the Profit Sharing Plan on December 31 of the Plan Year did not apply,
(b) the Participant's considered compensation was equal to the
compensation he had been earned for the year through the last day he was an
active participant in the Profit Sharing Plan,
(c) the restrictions of sections 401(a)(17) and 415 of the Code did
not apply, and
(d) a limit on considered compensation equal to $500,000 (as indexed
by the Committee in its sole discretion) did apply.
4.9 Beneficiaries.
(a) A deceased Participant's Account shall be distributed to the
persons effectively designated by the Participant as his/her beneficiaries under
the Profit Sharing Plan. Unless a Participant has effectively elected otherwise
in accordance with the Profit Sharing Plan, the Participant's beneficiary shall
be his/her surviving spouse. In determining the identity or status of a
surviving spouse, the Committee or its designee may rely upon records of the
Plan or employer and any action taken in reliance thereon shall relieve the
Plan, the Committee and the Company of any further obligation thereto unless the
Committee has actual knowledge that said information is not correct.
(b) (i) If a Participant dies, and to the knowledge of the Committee
after reasonable inquiry leaves no surviving spouse, has not filed an effective
beneficiary designation or has revoked all such designations, or has filed an
effective designation but the beneficiary or beneficiaries predeceased him, the
distributable portion of the Participant's Account shall be paid to the executor
or administrator of the Participant's estate.
(ii) If the beneficiary, having survived the Participant, shall die
prior to the final and complete distribution of the Participant's Account, then
the distributable portion of said Account shall be paid:
(A) to the contingent or successive beneficiary named in the most
recent effective beneficiary designation filed by the Participant in accordance
with such designation filed by the Participant in accordance with such
designation; or
(B) if no such beneficiary has been named, to the executor or
administrator of the beneficiary's estate.
7
<PAGE>
ARTICLE V
ADMINISTRATION
5.1 Administration and Interpretation. The Committee shall be the
Plan administrator. The Committee shall have the authority to control and
manage the operation and administration of the Plan, to adopt rules and
regulations regarding the administration of the Plan, to interpret the Plan, to
determine the conditions subject to which any benefits may be credited or
payable, and to make any other determinations which the Committee believes are
necessary or advisable for the administration of the Plan. The Committee shall
be entitled to rely conclusively upon all tables, valuations, certificates,
opinions, and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Committee with respect to the Plan.
Determinations by the Committee shall be final and binding on all parties with
respect to all matters relating to the Plan. The Committee may delegate all or
any part of its authority to any officer of the Company.
5.2 Claims Procedure.
(a) If a Participant or other person believes that he is entitled to
benefits under the Plan, he may file a claim for benefits in writing with the
Committee. If a claim for benefits is wholly or partially denied, the Committee
shall give the claimant written notice of the denial within a reasonable period
of time after receipt of the claim by the Committee. Such notice shall set
forth:
(i) the specific reason or reasons for the denial,
(ii) specific reference to pertinent provisions of the Plan on
which the denial is based,
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary, and
(iv) an explanation of the claim review procedure.
(b) A claimant whose claim is denied, or his duly authorized
representative, may request a review upon written application to the Committee
within 60 days after receiving notice of the denial. In connection with such
request, the claimant or his authorized representative may review pertinent
documents and may submit issues and comments in writing. If such a request is
made, the Committee shall make a full and fair review of the denial of the claim
and shall make a decision not later than 60 days after receipt of the
application, unless special circumstances (such as the need to hold a hearing)
require an extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than 120 days after receipt of the
request. The decision on review shall be in writing and shall include specific
reasons for the decision and specific references to the pertinent provisions of
the Plan on which the decision is based.
8
<PAGE>
5.3 Amendment and Termination. This Plan may be amended, curtailed or
terminated at any time by action of the Company's Board of Directors or the
Executive Committee thereof. However, no such action shall reduce the Account of
any Participant under this Plan below the amount which as of the date of such
action would have been payable under this Plan if the Participant had terminated
as of that said date and this Plan had continued in effect without change.
ARTICLE VI
MISCELLANEOUS
6.1 Anti-alienation Provision. No interest of any person or entity in, or
right to receive a benefit under the Plan shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other alienation
or encumbrance of any kind; nor may such interest or right to receive a benefit
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in bankruptcy
proceedings.
6.2 No Guarantee of Employment. Nothing in the Plan shall confer upon any
Participant the right to be retained in the service of the Company or any of its
subsidiaries, nor shall it interfere with the right of the Company or any of its
subsidiaries to discharge or otherwise deal with any Participant without regard
to the existence of this Plan.
6.3 No Funding. The Plan shall at all times be entirely unfunded and no
provision shall at any time be made with regard to segregating any assets of the
Company for payment of any benefits hereunder. All benefits under the Plan are
payable solely from the general assets of the Company. No Participant, surviving
spouse or other person shall have any interest in any particular assets of the
Company by reason of the right to receive a benefit under the Plan and any such
Participant, surviving spouse or other person shall have only the rights of a
general unsecured creditor of the Company with respect to any rights under the
Plan. Nothing contained in the Plan shall constitute a guaranty by the Company
or any other entity or person that the assets of the Company will be sufficient
to pay any benefit hereunder.
6.4 General Conditions. Except as otherwise expressly provided herein, all
terms and conditions of the Profit Sharing Plan applicable to (i) a Profit
Sharing Account shall also be applicable to a Profit Sharing Plus Account
hereunder and (ii) a Before-Tax Account shall also be applicable to a Voluntary
Deferral Account hereunder. Any benefit payable under the Profit Sharing Plan
shall be paid solely in accordance with the terms and conditions of the Profit
Sharing Plan and nothing in this Plan shall operate or be construed in any way
to modify, amend or affect the terms and provisions of the Profit Sharing Plan.
6.5 Incapacity of Recipient. If any person entitled to a benefit payment
under the Plan is deemed by the Committee to be incapable of personally
receiving and giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Committee may provide for such payment or any
part thereof to be made to any other person or institution
9
<PAGE>
then contributing toward or providing for the care and maintenance of such
person. Any such payment shall be a payment for the account of such person and
a complete discharge of any liability of the Company and the Plan therefor.
6.6 Corporate Successors. The Plan shall not be automatically terminated by
a transfer or sale of assets of the Company or by the merger or consolidation of
the Company into or with any other corporation or other entity, but the Plan
shall be continued after such sale, merger or consolidation only if and to the
extent that the transferee, purchaser or successor entity agrees to continue the
Plan. In the event that the Plan is not continued by the transferee, purchaser
or successor entity, then the Plan shall terminate.
6.7 Unclaimed Benefit. Each Participant shall keep the Company informed of
his current address and the current address of his spouse. The Committee shall
not be obligated to search for the whereabouts of any person. If the location of
a Participant is not made known to the Company within three years after the date
on which payment of the Participant's benefit may first be made, payment may be
made as though the Participant had died at the end of the three-year period. If,
within one additional year after such three-year period has elapsed, or, within
three years after the actual death of a Participant, the Committee is unable to
locate any surviving spouse of the Participant, then the Company shall have no
further obligation to pay any benefit hereunder to such Participant or surviving
spouse or any other person and such benefit shall be irrevocably forfeited.
6.8 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as an
employee or agent of the Company shall be liable to any Participant, former
Participant, surviving spouse or any other person for any claim, loss, liability
or expense incurred in connection with the Plan.
6.9 Governing Law. The Plan shall be construed and administered according
to the laws of Illinois to the extent that such laws are not preempted by the
laws of the United States of America.
6.10 Gender and Number. Except when the context indicates to the contrary,
when used herein, masculine terms shall be deemed to include the feminine, and
singular the plural.
6.11 Headings. The headings of paragraphs are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
6.12 Severability. If all or any part of this Plan is declared by any court
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of this Plan not declared
to be unlawful or invalid. Any section or part of a section so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such section or part of a section to the fullest extent
possible while remaining lawful and valid.
10
<PAGE>
The foregoing is the true and complete text of the WMX Technologies, Inc.
Non-Qualified Profit Sharing and Savings Plus Plan as amended and restated by
the Executive Committee of the Board of Directors of WMX Technologies, Inc. on
December 29, 1995.
/s/ Herbert A. Getz
-----------------------------------
Herbert A. Getz
Senior Vice President and Secretary
11
<PAGE>
Exhibit 10.21
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), effective as of this 1st day of April,
1995, by and between WMX TECHNOLOGIES, INC., a Delaware corporation (hereinafter
referred to as the "Company") and D. P. PAYNE (hereinafter referred to as
"Payne"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Payne was previously appointed as President of the Company's
Chemical Waste Management, Inc. subsidiary (hereinafter referred to as "CWM")
and the Company desires to retain the skill, management expertise and experience
of Payne; and
WHEREAS, the Company has re-acquired all of the outstanding publicly held
shares of stock of CWM; and
WHEREAS, the Company is willing to enter into this Agreement in order to
induce Payne to become an officer of the Company; and
WHEREAS, Payne is willing to resign his position as President of CWM, and
to become an officer of the Company upon the terms and conditions of this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. EMPLOYMENT. Upon the execution of this Agreement, Payne shall be
employed as an officer of the Company and shall have such duties and
responsibilities as to the Company and its subsidiaries as may be designated by
the Chairman or the President of the Company. Incident to the performance of
such duties, Payne shall be provided by the Company with office space,
facilities and secretarial assistance reflecting his position.
2. TERM. The term of Payne's employment hereunder shall be for a period
beginning on the date hereof and ending on December 31, 1999 (the "Term").
3. COMPENSATION.
(a) Base Salary. The Company agrees to pay Payne during the Term a
minimum annual base salary of $400,000.00. The salary shall be payable at
intervals not less often than monthly and otherwise in accordance with the
Company's policies. Such salary shall be reviewed annually by the Company's
Board of Directors (or a duly constituted and empowered committee thereof) and
may be increased in accordance with the Company's policies governing management
compensation.
(b) Incentive Compensation. Payne shall be entitled to a participate
in all incentive compensation programs available
<PAGE>
to senior management of the Company as may now exist or hereinafter come into
existence during the Term.
(c) Supplemental Employee Retirement. Payne shall be entitled to
participate in the Company's Supplemental Executive Retirement Plan, upon the
terms and conditions of such Plan.
(d) Other Benefits. During the Term, Payne shall be entitled to
participate in all other employee benefits, perquisites, vacation days, benefit
plans or programs of the Company which are available generally to officers and
employees of the Company in accordance with the terms of such plans, benefits or
programs.
(e) Expenses. Payne shall be reimbursed for his reasonable expenses
related to and for promoting the business of the Company including expenses for
entertainment, travel and similar items that arise out of Payne's performance of
services under this Agreement, and any such expenses paid by Payne from his own
funds shall be promptly reimbursed to him by the Company, in accordance with the
policies and procedures of the Company in effect from time to time.
4. EXTENT OF SERVICE. Payne shall devote his entire time, attention and
energies to the business of the Company, and shall not during the term of this
Agreement be engaged (whether or not during normal business hours) in any other
business or professional activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing Payne from (a) investing his personal assets in businesses which do
not compete with the Company or any of its "Affiliates" (as hereinafter defined)
in such form or manner as will not require any services on the part of Payne in
the operation or the affairs of the companies in which such investments are made
and in which his participation is solely that of an investor; (b) purchasing
securities in any corporation whose securities are publicly traded provided that
such investments do not result in a violation of Payne's covenants under Section
5 hereof; or (c) accepting appointments to the boards of directors of other
companies provided that the Chairman of the Company approves of such
appointments and Payne's performance of his duties on such boards does not
result in a violation of his covenants under Section 5 hereof.
5. CONFIDENTIAL INFORMATION AND COVENANT NOT TO COMPETE. All payments
and benefits to Payne under the Agreement shall be subject to Payne's compliance
with the provisions of this Section 5.
(a) Confidential Information. Payne acknowledges that in his
employment he is or will be making use of, acquiring or adding to the Company's
confidential information which includes, but is not limited to, drawings,
memoranda and other materials or records of a proprietary nature; engineering
and technical information regarding the operations of the Company; and records,
- 2 -
<PAGE>
policy and strategy matters relating to acquisitions, finance, personnel,
management, legal matters, accounting, marketing, and operations (including,
insofar as operations are concerned, customer and prospective customer lists,
price lists, customer service requirements, costs of providing services,
supplies and equipment maintenance costs). Therefore, in order to protect the
Company's confidential information and to protect other employees who depend on
the Company for regular employment, Payne agrees that he will not in any way
utilize any of said confidential information except in connection with his
employment by the Company and except in connection with the business of the
Company he will not copy, reproduce, or take with him the original or any copies
of said confidential information and will not directly or indirectly divulge any
of said confidential information to anyone without the prior written consent of
the Company.
(b) Litigation Support. Payne shall, upon reasonable notice, furnish
such information and proper assistance to the Company as may reasonably be
required by the Company in connection with any litigation in which the Company
or any of its Affiliates is, or may become a party. Payne's reasonable expenses
(including travel and reasonable attorneys fees) incurred in complying with this
covenant shall be promptly reimbursed.
(c) No Solicitation of Employees. Payne agrees that during the Term
of this Agreement and continuing for a period of two years after the termination
of this Agreement, neither Payne nor any person or enterprise controlled by
Payne will solicit for employment any person employed by the Company or any of
its Affiliates.
(d) Covenant Not to Compete. Payne agrees that during the Term of
this Agreement and for a period of two years after the termination of this
Agreement he will not (without prior written consent of the Chairman of the
Board of Directors) engage directly or indirectly in any business financially as
an investor or lender or as an employee, director, officer, partner, independent
contractor, consultant or owner or in any other capacity calling for the
rendition of personal services or acts of management, operation or control which
is in any respect competitive with the business of the Company, or with any
business controlling, controlled by or under common control with the Company (an
"Affiliate"), in any area of the United States in which the Company or any
Affiliate does business during such period. Notwithstanding the foregoing,
Payne shall be entitled to own securities of any corporation conducting a
business competitive with the business of the Company or any of its Affiliates
so long as the securities of such corporation are listed on a national
securities exchange and the securities owned directly or indirectly by Payne do
not represent more than 2% of any class of the outstanding securities of such
company.
(e) Non-Solicitation of Customers. Payne agrees that during the Term
of this Agreement and continuing for a period of
- 3 -
<PAGE>
two years after the end of the Term, neither he nor any business in which he
engages directly or indirectly will (i) directly or indirectly induce any
customers of the Company or its Affiliates to patronize any business similar to
that of the Company, (ii) canvass, solicit or accept any similar business from
any customer of the Company or any Affiliates, (iii) directly or indirectly
request or advise any customer of the Company or Affiliates to withdraw, curtail
or cancel such customer's business with the Company or Affiliates, (iv) directly
or indirectly disclose to any other person, firm or corporation the names or
addresses of any of the customers of the Company or Affiliates, or (v) compete
with the Company or Affiliates in acquiring or merging with any other business
or acquiring the assets of such other business.
(f) Remedies for Breach of Covenants. In the event that a covenant
included in this Agreement shall be deemed by any court to be unreasonably broad
in any respect, it shall be modified in order to make it reasonable and shall be
enforced accordingly; provided, however, that in the event that any court shall
refuse to enforce any of the covenants contained in subsections 5(a) through
(e), then the unenforceable covenant shall be deemed eliminated from the
provisions of this Agreement for the purpose of those proceedings to the extent
necessary to permit the remaining covenants to be enforced so that the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
If Payne violates any of the covenants contained in this Section 5, then
the Company's obligation to make any payments to Payne otherwise due him under
this Agreement shall immediately cease. In addition, Payne acknowledges that any
material breach of his covenants contained in this Section 5 will cause
irreparable harm to the Company which will be difficult if not impossible to
ascertain, and the Company shall be entitled to equitable relief, including
injunctive relief, against any actual or threatened breach hereof, without bond
and without liability should such relief be denied, modified or vacated. Neither
the right to obtain such relief or the obtaining of such relief shall be
exclusive of or preclude the Company from any other remedy.
6. TERMINATION.
(a) Death or Disability. If Payne should die or become physically or
mentally disabled and unable to perform duties hereunder for a continuous period
in excess of ninety (90) days (in the reasonable opinion of the Company), which
event shall result in the termination of Payne's employment hereunder, the
Company shall continue to pay Payne's current base salary (less the amount of
any disability benefit payments paid or payable to Payne during such period from
disability benefits maintained and paid for by the Company) for the balance of
the calendar year in which such death or disability occurs, but in no event for
not less than one hundred eighty (180) days, plus any bonus payments which have
fully accrued at the date of termination pursuant to this Section 6(a). In
addition, in the event of disability,
- 4 -
<PAGE>
Payne's participation in any medical, health, accident, disability, death, life
insurance or similar plan in which Payne was participating immediately prior to
termination shall continue for the period in which payments are being made under
this Section at the Company's expense (subject to any normal employee
contributions, if any), although any continuation of health coverage shall count
toward the "COBRA" continuation of coverage period. The payments to be made
under this Section shall be made to Payne, or in the event of Payne's death, to
such beneficiary as Payne may designate in writing for that purpose, or if Payne
has not so designated, then the spouse of the Payne, or if none is surviving,
then to the personal representative of the estate of Payne. This Section shall
not be effective after any Termination pursuant to Section 6(b) or (c).
(b) Termination for Cause. The Company shall have the right to
terminate this Agreement for Cause upon thirty (30) days prior written notice
if, in the reasonable determination of the Company, Payne has engaged in
misconduct so as to constitute Cause. For purposes of this Agreement, "Cause"
shall mean:
(a) the breach by Payne of his covenants under Sections 5(a)
through 5(e) hereof;
(b) a substantial failure by Payne to perform his duties under
this Agreement, and which failure is determined by the Board of
Directors of the Company to be injurious to the business or
interests of the Company;
(c) Conviction (or a plea) of a felony or conviction of a crime
(or a plea) involving moral turpitude which adversely affects the
ability of Payne to perform his material duties under this
Agreement or is materially injurious to the Company's business or
reputation; or
(d) any act of fraud or defalcation involving the assets or
business of the Company.
If this Agreement is terminated for Cause pursuant to this Section 6(b),
the Company shall have no further obligations to Payne under this Agreement.
However, Payne's covenants under Section 5 hereof shall remain in full force and
effect.
(c) Termination by Company. If the Company terminates the employment
of Payne during the Term hereof, for any reason other than as specified in
Sections 6(a) or 6(b), Payne shall be entitled to the following liquidated
damages: (i) an amount equal to base salary until the end of the Term and (ii)
any unpaid but fully accrued annual bonus for the prior calendar year payable
under the Company's Corporate Incentive Bonus Plan.
(d) Termination by Payne. If Payne voluntarily terminates his
employment prior to the expiration of the Term of
- 5 -
<PAGE>
this Agreement, this Agreement shall terminate forthwith and all obligations of
each party to the others shall terminate immediately, except for Payne's
obligations under Section 5 hereof.
7. WITHHOLDING OF TAXES. The Company may withhold from any benefits
payable under the Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
8. FACILITY OF PAYMENT. If the Company shall find that any person to whom
any amount is or was payable hereunder is unable to care for his affairs because
of illness or accident, or is a minor, or has died, then the Company, if it so
elects, may direct that any payment due him or his estate (unless a prior claim
therefore has been made by a duly appointed legal representative) or any part
thereof, be paid or applied for the benefit of such person or to or for the
benefit of his spouse, children or other dependents, an institution maintaining
or having custody of such person, any other person deemed by Board of Directors
of the Company to be a proper recipient on behalf of such person otherwise
entitled to payment, or any of them, in such manner and proportion as the Board
may deem proper. Any such payment shall be in complete discharge of the
liability of the Company therefor.
9. UNSECURED CREDITOR STATUS. Nothing contained in the Agreement, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and Payne,
his beneficiaries, legal representative or any other person. To the extent that
any person acquires a right to receive payments under the Agreement, such right
shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts.
10. NON-ALIENATION OF BENEFITS. Except insofar as applicable law may
otherwise require, no amount payable to or in respect of Payne at any time under
the Agreement shall be subject in any manner to alienation by anticipation,
sale, transfer, assignment, bankruptcy, pledge, attachment, charge or
encumbrance of any kind, and any attempt to so alienate, sell, transfer, assign,
pledge, attach, charge or otherwise encumber any such amount, whether presently
or thereafter payable, shall be void; provided, however, that nothing in this
Section 10 shall preclude Payne from designating a beneficiary or beneficiaries
to receive any benefit on his death.
11. SEVERABILITY. If any provision of this Agreement, as applied to any
party or to any circumstance, shall be found by a court to be void, invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement the application
- 6 -
<PAGE>
of any such provision in any other circumstance, or the validity or
enforceability of this Agreement.
12. ENTIRE UNDERSTANDING. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter contained herein and
supersedes all prior and collateral agreements, understandings, statements and
negotiations of the parties. Each party acknowledges that no representations,
inducements, promises, or agreements, oral or written, with reference to the
subject matter hereof have been made other than as expressly set forth herein.
This Agreement cannot be changed, rescinded or terminated orally.
13. NOTICES. Any notice required or permitted to be given under this
Agreement shall he in writing and shall be deemed to have been given when
deposited in the U.S. mail in a registered, postage prepaid envelope addressed:
If Payne, at his address set forth below, if to the Company, Attention: General
Counsel, 3003 Butterfield Road, Oak Brook, Illinois 60521.
14. ASSIGNMENT. Payne may not assign his obligations hereunder. The rights
of Payne and the rights and obligations of the Company hereunder shall inure to
the benefit of and shall be binding upon their respective heirs, personal
representatives, successors and assigns.
15. MISCELLANEOUS.
(a) This Agreement shall be subject to and governed by the laws of the
State of Illinois.
(b) Failure to insist upon strict compliance with any provisions
hereof shall not be deemed a waiver of such provisions or any other provision
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
WMX TECHNOLOGIES, INC.
By /s/ Dean L. Buntrock
------------------------------
Dean L. Buntrock, Chairman
/s/ D. P. Payne
--------------------------------
Name:
Address: 358 Hampton Place
Hinsdale, IL 60521
- 7 -
<PAGE>
Exhibit 12
WMX TECHNOLOGIES, INC.
Ratio of Earnings to Fixed Charges
(Unaudited)
(millions of dollars, except ratio)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1991(1) 1992(2) 1993(3)(6) 1994(4)(6) 1995(5)(6)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income From Continuing Operations
Before Income Taxes,
Undistributed Earnings from
Affiliated Companies, Minority
Interest, Extraordinary
Item and Cumulative Effect of
Accounting Changes................ $ 1,139.4 $ 1,555.2 $ 841.0 $ 1,461.1 $ 1,267.5
Interest Expense.................... 279.9 311.0 393.6 439.7 506.2
Capitalized Interest... (111.4) (87.9) (100.6) (104.5) (81.5)
One-Third of Rents Payable
in the Next Year.................. 46.7 44.7 48.5 53.9 56.8
---------- ---------- ---------- ---------- ----------
Income From Continuing Operations
Before Income Taxes,
Undistributed Earnings from
Affiliated Companies, Minority
Interest, Extraordinary
Item, Cumulative Effect of
Accounting Changes, Interest and
One-Third of Rents................ $ 1,354.6 $ 1,823.0 $ 1,182.5 $ 1,850.2 $ 1,749.0
========== ========== ========== ========== ==========
Interest Expense.................... $ 279.9 $ 311.0 $ 393.6 $ 439.7 $ 506.2
One-Third of Rents Payable in the
Next Year......................... 46.7 44.7 48.5 53.9 56.8
---------- ---------- ---------- ---------- ----------
Interest Expense plus One-Third
of Rents.......................... $ 326.6 $ 355.7 $ 442.1 $ 493.6 $ 563.0
========== ========== ========== ========== ==========
Ratio of Earnings to Fixed
Charges........................... 4.15 to 1 5.13 to 1 2.67 to 1 3.75 to 1 3.11 to 1
</TABLE>
- ----------------------
(1) The results for 1991 include a special charge ($296.0 million before tax
and minority interest) primarily to reflect then current estimates of the
environmental remediation liabilities at waste disposal sites previously used or
operated by the Company and its subsidiaries or their predecessors.
(2) The results for 1992 include a non-taxable gain ($240.0 million before
minority interest) resulting from the initial public offering of 75 million
newly issued ordinary shares of Waste Management International plc in April 1992
and special charges ($219.9 million before tax and minority interest). The
results for 1992 exclude the cumulative effect of accounting changes ($71.1
million after tax and minority interest) related to the adoption of Statements
of Financial Accounting Standards Nos. 106 and 109.
(3) The results for 1993 include a non-taxable gain ($15.1 million before
minority interest) relating to the issuance of shares by Rust International Inc.
as well as a special asset revaluation and restructuring charge ($550.0 million
before tax and minority interest) related primarily to a revaluation of Chemical
Waste Management, Inc.'s thermal treatment business.
(4) The results for 1994 include a charge ($9.2 million before tax and
minority interest) recorded by Rust International Inc. to write off assets and
recognize costs of exiting certain of Rust's service lines and closing offices
in a consolidation of certain of its operating groups.
(5) The results for 1995 include a special charge ($140.6 million before tax)
recorded by Chemical Waste Management, Inc., primarily to write off its
investment in facilities and technologies that it abandoned because they do not
meet customer service or performance objectives, and a special charge ($194.6
million before tax and minority interest) recorded by Waste Management
International plc relating to actions it is taking to sell or otherwise dispose
of non-core businesses and investments, as well as core businesses and
investments in low potential markets, abandon certain hazardous waste treatment
and processing technologies and streamline its country management organization.
<PAGE>
(6) In 1995, the Rust International Inc. Board of Directors approved a plan
to sell or otherwise discontinue that company's process engineering,
construction, specialty contracting and similar lines of business. Accordingly,
these businesses have been segregated as discontinued operations in the
financial statements since 1993. It is not practical to restate periods prior
to the formation of Rust International Inc. on January 1, 1993, for the
discontinued operations. The ratio of earnings to fixed charges for 1993 and
1994 have been restated.
<PAGE>
EXHIBIT 13.1
WMX Technologies, Inc. and Subsidiaries
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
CONSOLIDATED Consolidated 1995 revenue from continuing operations of WMX
Technologies, Inc. and its subsidiaries ("WMX" or the "Company") was $10.25
billion compared with $9.55 billion in 1994 and $8.64 billion in 1993.
Consolidated 1995 net income was $603.9 million or $1.24 per share, compared
with $784.4 million or $1.62 per share in 1994 and $452.8 million or $0.93 per
share in 1993. Net income from continuing operations was $654.6 million or $1.35
per share in 1995, $776.5 million or $1.60 per share in 1994, and $442.4 million
or $0.91 per share in 1993.
Earnings from continuing operations during the three years were impacted by
special charges, gains from stock transactions of subsidiaries, and an increase
in U.S. tax rates. The following table reconciles reported earnings per share
from continuing operations to earnings excluding such items:
<TABLE>
<CAPTION>
1993 1994 1995
- --------------------------------------------------------------------
<S> <C> <C> <C>
Reported amount $ 0.91 $1.60 $1.35
Gains on stock transactions
of subsidiaries (0.02) -- --
Special charges (see Note 14
to Consolidated Financial
Statements) -
Chemical Waste
Management, Inc. ("CWM") 0.59 -- 0.19
Waste Management International plc
("WM International") -- -- 0.23
Rust International Inc. ("Rust") -- 0.01 --
Costs related to early
extinguishment of debt -- -- 0.01
Adjustment to deferred income taxes
resulting from 1993 tax law change 0.03 -- --
------ ----- -----
Amount excluding above items $ 1.51 $1.61 $1.78
====== ===== =====
</TABLE>
The environmental service business has undergone significant change over the
three-year period. Overcapacity in the hazardous waste segment, an emphasis on
waste minimization and recycling as opposed to land disposal, increased
competition for landfill volume, changes in government regulation, and slow
growth in the trash-to-energy market have affected the industry globally. In
addition, political uncertainty in Italy and economic conditions in France and
Germany have further affected the Company's international operations.
The Company has taken a number of steps to realign and restructure its
business in response to these changing conditions and to position itself for
growth and improved profitability into the 21st century. Hazardous waste
operations have been downsized and management of land disposal facilities has
been integrated into the Waste Management, Inc. ("WMI") North American solid
waste management organization. WMI itself was reorganized during late 1993 to
flatten the organization and bring decision-making closer to the customer.
During 1994, the Company commenced a major strategic review of its operations,
focusing on streamlining business units, enhancing management and planning
processes, reducing operating costs and improving profitability, improving
customer satisfaction, and increasing returns on capital and cash flow. As an
outcome of these efforts, management was realigned on the basis of four
principal global lines of business - waste services, clean energy, clean water,
and environmental and infrastructure engineering and consulting services.
Executives were named to head each of these global lines of business. The shares
of CWM and Rust owned by the public were purchased by the Company. The
management and sales organizations of Rust Industrial Services were integrated
into the waste services line of business to provide a seamless offering to
industrial customers. Rust exchanged its remediation business in 1995 for an
equity interest in OHM Corporation ("OHM"). Wheelabrator Technologies Inc.
("WTI") and WM International formed a joint venture in 1995 to develop trash-to-
energy projects on a worldwide basis outside Germany, Italy and North America. A
new management team at WM International completed an extensive review of its
operations and management structure to refocus on its core waste services
business, and as a result adopted a plan to sell or otherwise dispose of non-
core businesses and investments, as well as core businesses and investments in
low potential markets, abandon certain hazardous waste treatment and processing
technologies, and streamline its country management organization. During the
fourth quarter of 1995, the Company announced that Rust would sell or
discontinue its process engineering, construction, specialty contracting and
similar lines of business and focus on the environmental and infrastructure
engineering and consulting business. Operating results of the businesses to be
discontinued have been segregated from continuing operations in the Consolidated
Statements of Income and are not included in the analysis which follows.
The analysis of results of continuing operations which follows reflects the
Company's traditional management structure of five principal subsidiaries, each
of which has operated in a relatively discrete portion of the environmental
services industry or geographic area. WMI has provided integrated solid waste
services and CWM has provided hazardous waste collection, transportation,
treatment and disposal services in North America. WM International has provided
these services, as well as trash-to-energy services, outside North America. WTI
has been involved in trash-to-energy and independent power projects, water and
wastewater treatment, and air quality control, primarily in North America. Rust
has served the engineering, construction, environmental and infrastructure
consulting, and on-site industrial and related services market in the United
States and a number of foreign countries.
Beginning in 1996, to conform to its new management structure, the Company
will report operating results along the four major business lines discussed
above. Note 13 to the Consolidated Financial Statements shows results of
continuing operations for 1993, 1994 and 1995 on a line-of-business basis, as
well as on the basis of the traditional management structure.
16
<PAGE>
- --------------------------------------------------------------------------------
1994 OPERATIONS COMPARED WITH 1993
WMI WMI's revenue grew 8.8% to $5.12 billion in 1994 compared with $4.70
billion in 1993. Revenue growth occurred in all service lines as shown in the
following table:
<TABLE>
<CAPTION>
<S> <C>
Residential 4.6%
Commercial 8.1
Rolloff and industrial 11.1
Disposal, transfer and other 11.8
</TABLE>
Price increases accounted for revenue growth of approximately 1.5%. WMI
focused on pricing on a customer-by-customer basis and sought increases when and
where appropriate. Pricing in the commercial, rolloff and industrial lines
generally continued the positive trend begun in the fourth quarter of 1993.
Residential work remained extremely competitive and disposal pricing varied by
region, but generally improved during the year. Higher recyclable commodity
prices, which can vary significantly from year to year, helped 1994 results.
Volume increases accounted for revenue growth of 7.8%, despite the negative
impact of the loss of volume from the contract to dispose of debris from
Hurricane Andrew in 1993 and the loss of a disposal contract for the City of
Philadelphia as of July 1, 1994. The increase in disposal, transfer and other
revenue was aided by special waste volume, which increased over 20%, and
recycling, which grew 29% (including the impact of higher commodity prices
discussed above). Revenue decreases due to businesses sold exceeded revenue from
acquisitions by approximately 0.5% in 1994, primarily the result of the sale
during the first quarter of that year of WMI's Modulaire(R) mobile office
business and certain other under-performing businesses, coupled with reduced
acquisition activity.
Operating margins strengthened throughout the year following the 1993
reorganization discussed previously, and were 20.8% of revenue compared with
20.4% in 1993. This improvement resulted from productivity increases,
particularly in the selling and administrative areas where expenses remained
relatively constant in dollars and declined as a percentage of revenue, stronger
pricing and increased volume, partially offset by higher costs of operating
disposal facilities to comply with more stringent environmental regulations.
CWM CWM revenue continued to decline in 1994, to $649.6 million from $661.9
million in 1993. The following table analyzes revenue changes in 1994 compared
with 1993:
<TABLE>
<CAPTION>
Percentage
Increase/(Decrease)
- -------------------------------------------------
<S> <C>
Price 2.9%
Volume (7.2)
Purchased businesses 2.4
----
Total (1.9)%
====
</TABLE>
Price and volume increases for low-level radioactive waste services, which
increased revenue by 3.1%, were more than offset by a continuation of industry
conditions which negatively impacted the remainder of the hazardous waste
industry. The strong results in the low-level radioactive waste services line
resulted from the acceleration of volume received at CWM's disposal facility in
Barnwell, South Carolina, in anticipation of a state deadline which denied
access to that facility to customers outside an eight-state region in the
southeastern United States ("Southeast Compact") after June 30, 1994. Event
business (revenue from relatively larger, typically non-recurring projects) was
9.0% of revenue in 1994 compared to 10.6% in 1993. The decline in event business
revenue was primarily the result of reduced off-site disposal from environmental
cleanup projects.
During 1993, CWM completed a study of its business and began a strategic
reconfiguration of its operations to meet then-current market demand. In
connection therewith, CWM recorded a charge of $550 million before tax,
including $381 million to write down assets, primarily incinerators, and $169
million for cash expenditures to be made as part of a program to reduce costs
and improve efficiency. This restructuring was completed in 1994 and
substantially all cash expenditures were made. As a result, overhead, including
depreciation and amortization, was reduced in 1994 by approximately $60 million
on an annualized basis.
Operating expenses declined as a percentage of revenue in 1994 to 70.0%
compared to 76.5% in 1993. Benefits from the restructuring were partially offset
by severe weather in the northeast portion of the United States during the first
quarter, which delayed projects and hampered operations, and a shift of revenue
mix toward lower margin services. Selling and administrative expenses declined
$22.3 million in 1994 on an absolute basis and were reduced from 19.3% of
revenue to 16.3%, primarily as a result of the restructuring.
WTI WTI revenue increased 16% to $1.32 billion in 1994. Businesses acquired in
1993 and 1994 contributed approximately 47% of the revenue increase, while
incremental operating and construction revenue from new energy and water
development projects accounted for the remainder. Revenue from existing
businesses was flat in 1994 compared to 1993.
Consolidated revenue for the energy business line (which includes WTI's air
business) grew $83.1 million, or 11%, in 1994 to $844.7 million. Revenue from
trash-to-energy and independent power facility operations grew $98.2 million
from the prior year level and generated approximately 82% of the 1994 revenue
for this business line compared with 78% in 1993. Air-related businesses were
responsible for the balance of the revenue during both periods. Construction
revenue on the Lisbon, Connecticut, trash-to-energy facility provided half of
the energy business growth. The third quarter 1994 commencement of commercial
operations at the Falls Township trash-to-energy facility in Pennsylvania and
the wood waste and scrap tire-fueled Ridge Generating Station in Florida
provided an additional 25% of the revenue growth. Excellent plant operating
performances, coupled with a shift in the mix of waste received at the trash-to-
energy plants from lower-priced spot tons to generally higher-priced contract
tonnage accounted for the remainder. Air business revenue fell in 1994 primarily
because of an expected lull in air pollution control retrofit activity by
utilities between Phases I and II of the Clean Air Act Amendments of 1990. In
addition, many industrial customers delayed awards for air quality control
equipment purchases in response to economic uncertainty and to rule-making
delays and limited enforcement activities by the U.S. Environmental Protection
Agency.
Energy operating income increased to $247.0 million or 29.2% of revenue in
1994, versus $208.7 million, or 27.4% of revenue, in 1993. The addition of the
Falls Township and Ridge
17
<PAGE>
- --------------------------------------------------------------------------------
facilities, modest improvement in gross margin, and a decline in selling and
administrative expense were responsible for this improvement, despite Lisbon
construction revenue having no associated margin recognition. Integration of
acquired air businesses and a decrease in energy-related project development
expenditures in response to limited market opportunities caused selling and
administrative costs to decrease in 1994 in both absolute terms and as a
percentage of revenue.
Water revenue increased $97.1 million to $489.3 million in 1994, a 25%
increase from the 1993 level of $392.2 million. Acquisitions contributed
approximately $81.5 million or 84% of this revenue growth, and expanded WTI's
presence in the industrial water and wastewater treatment markets while
increasing the breadth of WTI's technology and process offerings. The full year
impact of the New York Organic Fertilizer Company ("NYOFCO") biosolids
pelletizer facility, which began commercial operations in the third quarter of
1993, accounted for an additional $35.5 million of incremental 1994 revenue.
Increased 1994 revenue from sales of water process systems and equipment to
industrial customers was offset by a decline in revenue from water, wastewater,
and biosolids contract service operations and curtailed equipment procurement by
municipal customers.
Operating income from the water business line increased 22% to $41.1 million
or 8.4% of revenue in 1994 compared with $33.7 million or 8.6% of revenue in
1993. Gross margin declined to 24.5% of revenue in 1994 versus 24.9% in 1993
because of competitive pricing pressures in the equipment product lines and
faster relative growth of the process systems business, which is typically lower
margin in nature. Selling and administrative expenses declined slightly in 1994
as a percentage of revenue as a result of consolidation of acquisitions
partially offset by increased own/operate development expenditures.
WM INTERNATIONAL WM International is a U.K. corporation which prepares its
financial statements in pounds sterling under accounting principles prevailing
in the United Kingdom. Such accounting principles differ in certain respects
from those generally accepted in the United States ("US GAAP"). The discussion
and analysis of WM International is based on US GAAP financial statements with
pounds sterling translated to U.S. dollars at the rate used to translate WM
International financial statements for inclusion in the Company's consolidated
financial statements.
Stated in U.S. dollars, WM International revenue grew by $299.7 million or
21.2% to $1.71 billion in 1994 compared with $1.41 billion in 1993. Components
of revenue change are as follows:
<TABLE>
<CAPTION>
Percentage Increase
- ---------------------------------------------------
<S> <C>
Price 1.7%
Volume (including start-ups) 8.9
Purchased businesses 9.4
Foreign currency translation 1.2
----
Total 21.2%
====
</TABLE>
Lower inflation and weak economic conditions in many European countries
constrained WM International's ability to increase prices in 1994. In Italy,
where a substantial portion of its business is municipal contracts, renewals
during much of 1994 were consistently at reduced prices. However, a price
increase was obtained on the municipal contract in Buenos Aires, Argentina. The
volume increase in 1994 related primarily to construction activity on the solid
waste SENT landfill in Hong Kong. Economic and competitive pressures caused
volume declines in Italy, France, and Germany, which were more than offset by
volume increases in other countries.
Revenue increases from acquisitions slowed in 1994 compared to 1993. With WM
International well positioned in many of its markets, it focused primarily on
"tuck-in" acquisitions (small acquisitions in markets where it already had a
support staff) and became more selective with respect to acquisitions.
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, stated in both pounds sterling and
U.S. dollars. Both the Company and WM International periodically engage in
hedging transactions intended to mitigate currency risk. See "Derivatives."
Operating expenses increased to 72.7% of revenue in 1994 compared to 71.5% in
1993 due to higher labor costs and pricing pressure in Italy, pricing pressure
in Germany and France, and flow control issues and landfill permitting delays in
Italy and France. Selling and administrative expenses decreased to 13.4% of
revenue in 1994 compared with 14.1% in 1993 as a result of the impact of "tuck-
in" acquisitions, a higher revenue base to absorb the cost of corporate and
country management and administrative infrastructure, integration of acquired
businesses, and a continued focus on improved productivity and administrative
cost reduction.
RUST Rust's 1994 revenue from continuing operations was $1.14 billion compared
with $1.04 billion in 1993, an increase of 10.2%. Revenue growth by line of
business is shown in the following table ($000's omitted):
<TABLE>
<CAPTION>
Percentage
1993 1994 Increase
- -----------------------------------------------------------
<S> <C> <C> <C>
Engineering and
consulting services $ 298,879 $ 425,058 42.2%
Remediation and
industrial services 704,360 715,236 1.5%
Asbestos abatement 31,765 -- N/A
---------- ----------
Total $1,035,004 $1,140,294 10.2%
========== ==========
</TABLE>
In May 1993, Rust transferred its asbestos abatement business to NSC
Corporation ("NSC") in exchange for a 41% equity interest in NSC and NSC's
ownership interest in two industrial services businesses. Excluding the effect
of the asbestos abatement business, revenue increased 13.7% in 1994 compared
with 1993.
Engineering and consulting services revenue grew by 42.2% in 1994. The full
year impact of 1993 acquisitions and domestic and foreign 1994 acquisitions
resulted in revenue growth of 35.5%. The balance came from increases in existing
businesses.
Remediation and industrial services revenue grew by 1.5% in 1994. Growth was
the result of the full year impact of 1993 acquisitions. Revenue in existing
businesses declined due to severe weather in the first quarter and delays by
scaffolding and industrial customers of scheduled plant maintenance. In
addition, the anticipated award of a large Federal remedial contract was
delayed.
18
<PAGE>
- --------------------------------------------------------------------------------
In December 1994, Rust signed an agreement with OHM to acquire an
approximately 37% interest in OHM in exchange for Rust's remediation services
business. This transaction was completed in May 1995. For 1994, the business
transferred had revenue of $231.1 million and operating income (after operating,
selling and administrative expenses) of $6.0 million.
Revenue from affiliated companies was $118.3 million in 1994 compared with
$112.8 million in 1993.
Excluding the charge discussed in the following paragraph, operating expenses
were 79.7% of revenue in 1994 compared with 78.1% in 1993, partially the result
of severe weather in the first quarter and delayed projects which resulted in
less efficient personnel utilization. In addition, 1994 saw a shift in revenue
mix in favor of lower margin businesses. Selling and administrative expenses
were 13.2% of 1994 revenue compared with 12.7% of 1993 revenue. The increase in
1994 is attributable to the lower revenue base in existing businesses and to
acquisition activity, which typically initially increases these costs, although
it is anticipated that such expenses will decline as a percentage of revenue as
the acquired companies are integrated into existing operations.
In 1994, Rust recorded a pretax charge of $9.2 million for the write-off of
assets and the recognition of one-time costs incurred in the fourth quarter in
connection with the discontinuance of its marine construction and dredging
operations, and the closing of offices in a consolidation of its other
operations. After tax and minority interest, the charge reduced the Company's
net income by $0.01 per share.
- --------------------------------------------------------------------------------
1995 OPERATIONS COMPARED WITH 1994
WMI Revenue for WMI was $5.64 billion in 1995 compared with $5.12 billion in
1994, an increase of 10.3%. 1995 revenue growth by line of business is shown in
the following table:
<TABLE>
<CAPTION>
<S> <C>
Residential 6.3%
Commercial 7.5
Rolloff and industrial 7.5
Disposal, transfer and other 20.3
</TABLE>
Revenue growth came from price (2.5 to 3%) and volume (6 to 6.5%) increases,
with acquisitions accounting for 1%. Prices of recyclable commodities continued
the 1994 upward trend during the first six months of 1995, but then began moving
downward and by the fourth quarter were below the levels of the same period in
the prior year. Beginning 1996, commodity prices have been significantly below
levels which were achieved in 1995 and management does not foresee these prices
recovering to 1995 levels during 1996. Volume growth was helped by a relatively
mild winter in 1995, whereas severe weather over a large part of the country
adversely affected the first quarter of 1994. Volumes in 1995 were adversely
impacted by the loss of the disposal contract for the City of Philadelphia as of
July 1, 1994. Revenue from recycling increased 71.9% in 1995 compared with 1994
as a result of the favorable pricing discussed above, as well as WMI's marketing
efforts and acquisition and construction of additional material recovery
facilities.
Operating expenses were 67.5% of revenue in 1995 and 68.4% in 1994. Milder
weather in 1995, WMI's pricing effectiveness program, improved safety
performance, higher recyclable commodity prices, internalization of recycling
processing, and continuing productivity enhancements all contributed to the
improvement. Selling and administrative expenses were 10.2% of revenue in 1995
compared with 10.8% in 1994. Although such expenses increased in absolute
dollars, productivity enhancements have enabled WMI to manage a higher revenue
base with relatively modest selling and administrative expense increases, the
majority of which result from acquisitions and pay-for-performance compensation
plans.
CWM CWM revenue again declined in 1995 as waste minimization, recycling, over-
capacity and shifting governmental regulation and enforcement continued to
adversely affect the hazardous waste industry. Total 1995 revenue was $613.9
million compared with $649.6 million in 1994. Pricing and volume growth were
both negative, only partially offset by the 1995 acquisition of a 60% interest
in Advanced Environmental Technology Corporation. In addition, unusually high
revenue in the second quarter of 1994 at CWM's Barnwell, South Carolina, low-
level radioactive waste disposal facility adversely impacted 1995 comparisons.
However, during June 1995, South Carolina approved legislation which extended
the authorized life of the Barnwell site until its permitted disposal capacity
is fully utilized; previously, the site had been required to close at December
31, 1995. The legislation also again permitted acceptance of waste from outside
the Southeast Compact. Event business continued to decline in 1995, to 7.7% of
revenue versus 9.0% in 1994.
Operating expenses increased as a percentage of revenue in 1995 to 75.6%
compared to 70.0% in 1994. The increase was a function of pressure on pricing, a
lower revenue base, and a shift in revenue mix toward lower margin technical
services, which offset the benefit from personnel reductions. Selling and
administrative expenses declined in both absolute terms and as a percentage of
revenue as a result of personnel reductions.
During the first quarter of 1995, CWM recorded a pretax charge of $140.6
million, primarily to write off its investment in facilities and technologies
that it abandoned because they did not meet customer service or performance
objectives in the current market environment. The percentages above exclude this
charge.
WTI WTI revenue increased 9.6% to $1.45 billion in 1995. Energy business line
revenue was essentially flat as higher revenue from operating energy plants was
offset by lower construction revenue on the Lisbon facility and by a further
decline in air business revenue. Approximately 85% of the $42.3 million growth
in revenue from operating plants was accounted for by the Falls Township and
Ridge Generating Station facilities which began operations in 1994. Contractual
price escalation on long-term trash disposal and energy sale contracts, partly
offset by curtailment of electrical purchases by certain utility customers,
accounted for the balance of the operating plant revenue growth. Spot pricing,
on the whole, was stable, although there were increases in certain markets
offset by declines in others, particularly Florida and the metropolitan New York
City area. Air business revenue declined $30.7 million to 15% of total energy
revenue, reflecting a continuation of the industry-wide decrease in activity in
the face of regulatory uncertainty.
Operating income from the energy business line grew $5.4 million to $252.4
million in 1995 and also increased as a percentage of revenue to 30.1% from
29.2%. Selling and administrative costs
19
<PAGE>
- -------------------------------------------------------------------------------
were flat compared to 1994 both as a percent of revenue and in absolute dollars,
but operating margins improved due to cost containment efforts at operating
energy facilities and less revenue on the Lisbon facility where no margin was
recognized. Development activity increased slightly because of activities
associated with the July 1995 joint venture agreement with WM International.
Revenue in the water business line increased $129.2 million from $489.3
million in 1994 to $618.5 million in 1995, a 26% increase. The full year impact
of businesses acquired in 1994 provided approximately 64% of this increase. In
1995, WTI successfully completed the privatization of the Miami Conservancy
District wastewater treatment plant in Franklin, Ohio, the first privatization
of a municipal wastewater treatment plant under Executive Order 12803 issued by
President George Bush in 1992. Approximately 4% of the 1995 revenue growth came
from the Baltimore I pelletizer facility, which began commercial operations at
the start of the year. Existing businesses accounted for the remainder of the
revenue growth as WTI increased its biosolids landspreading activities in
California and experienced strong worldwide demand for its surface cleaning and
screen products.
Operating income grew $9.6 million, or 23%, to $50.7 million and represented
8.2% of 1995 water revenue. Faster relative growth of the process systems
business, which typically is lower margin in nature, and costs incurred to
consolidate office and manufacturing locations were the principal reasons for
the slight operating margin decline as a percent of revenue compared with 1994.
Margins in the contract services business improved compared with 1994 due to
cost reduction efforts, while equipment margins remained relatively stable and
process systems margins declined slightly. Selling and administrative costs
increased $11.3 million in 1995 because of the full year impact of 1994
acquisitions, but declined as a percent of revenue to 14.5%, a result of a
higher revenue base and the integration of acquisitions into existing
businesses.
WM INTERNATIONAL WM International revenue, in U.S. dollars, grew $154.2
million or 9.0% to $1.87 billion in 1995 compared with $1.71 billion in 1994.
Components of revenue change are as follows:
<TABLE>
<CAPTION>
Percentage
Increase/(Decrease)
- --------------------------------------------------
<S> <C>
Price 1.8%
Volume (including start-ups) (3.2)
Purchased businesses 4.5
Foreign currency translation 5.9
---
Total 9.0%
====
</TABLE>
The major cause of the 1995 volume decline was the completion of the
construction phase of the SENT landfill in Hong Kong, which opened during the
year. A new pricing mechanism introduced by the Hong Kong government in March
1995, which requires generators to absorb a portion of the disposal cost for
waste brought to the Hong Kong incinerator, has resulted in volume declines in
certain waste streams, but the impact has been offset with other volumes. The
future impact of these charges, on the incinerator and on the SENT landfill
should they be extended to that facility, is uncertain. Pricing in Europe was
negatively impacted in 1995 by relatively low inflation, highly competitive
conditions in the solid waste market in France, softness in segments of the
hazardous waste market, and a continuation of lower prices on rebids of
municipal contracts in Italy. Acquisition activity continued to be below WM
International's historical levels and focused particularly on "tuck-in"
acquisitions which can complement or expand existing operations in a given
market. WM International also increased its emphasis on acquisition and
construction of material recovery facilities to take advantage of a continued
emphasis on recycling as an alternative to land disposal.
Operating expenses (excluding the special charge discussed below) increased to
75.6% of revenue in 1995 compared with 72.7% in 1994, a result of higher labor
costs in Italy, continuing pressures on pricing, particularly in Italy and
France, and disruption of operations in France during the fourth quarter due to
widespread strikes and industrial action against the government. Selling and
administrative costs increased 2.5% in absolute terms but declined as a
percentage of revenue to 12.6% in 1995 from 13.4% in 1994 due to the higher
revenue base, the benefit of "tuck-in" acquisitions, and continued emphasis on
productivity improvements.
Following a thorough review of its operations and management structure by a
new management team, WM International announced a fourth quarter pretax special
charge of $194.6 million, related to actions it is taking to sell or otherwise
dispose of non-core businesses and investments, as well as core businesses and
investments in low potential markets, abandon certain hazardous waste treatment
and processing facilities, and streamline its country management organization.
Approximately $34.3 million of this charge represents cash costs related to
severance of personnel and rents under non-cancelable leases. Approximately
$11.2 million of the cash costs were paid prior to December 31, 1995. The
majority of the balance will be paid in early 1996, although certain rent
payments on leased facilities will continue into the future. WM International
expects that upon completion of these actions, overhead will be reduced by
approximately $20 million annually, which management plans to invest in new
marketing initiatives and operational productivity enhancements. However, the
full benefit of these new programs will not be reflected in the short term, and
management has cautioned WM International shareholders not to expect more than
5% to 10% growth in 1996 earnings.
RUST Rust revenue from continuing operations decreased $112.9 million or 9.9%
to $1.03 billion in 1995 compared with $1.14 billion in 1994. Revenue by
business line is shown in the following table ($000's omitted):
<TABLE>
<CAPTION>
Percentage
1994 1995 Increase/(Decrease)
- --------------------------------------------------------------------
<S> <C> <C> <C>
Engineering and
consulting services $ 425,058 $ 454,105 6.8%
Industrial and
other services 484,178 511,102 5.6
Remediation 231,058 62,223 N/A
---------- ----------
Total $1,140,294 $1,027,430 (9.9)%
========== ==========
</TABLE>
In May 1995, Rust exchanged its remediation business for an approximately 37%
equity interest in OHM. Excluding the effect of the remediation business,
revenue increased 6.2% in 1995 compared with 1994. This increase was the result
of additional volume across existing businesses as the impact of acquisitions
was not significant. Revenue from affiliated companies declined to $89.7 million
in 1995 from $118.3 million in 1994.
20
<PAGE>
- --------------------------------------------------------------------------------
Backlog in continuing operations at December 31, 1995, was $476 million, down
from $671 million at December 31, 1994. Approximately $177 million of the 1994
backlog relating to the remediation business was transferred to OHM. The backlog
shown above does not include approximately $349 million at December 31, 1995,
for several Department of Defense contracts, including two Total Environmental
Restoration Contracts. There is no assurance that specific projects identified
and performed under these contracts will generate aggregate revenue of $349
million over their remaining terms; in addition, a portion of any projects
performed may be remediation work which would now be performed by OHM.
Operating expenses were 79.5% of revenue in 1995 compared with 79.7% in 1994.
Selling and administrative expenses also decreased to 13.1% of 1995 revenue from
13.2% of 1994 revenue. These slight improvements were primarily the result of
the elimination of the relatively low margin remediation business.
- --------------------------------------------------------------------------------
OTHER ITEMS
INTEREST The following table sets forth the components of consolidated
interest expense, net ($000's omitted):
<TABLE>
<CAPTION>
1993 1994 1995
- ---------------------------------------------------------
<S> <C> <C> <C>
Interest expense $ 393,631 $ 439,687 $506,207
Interest income (41,198) (34,488) (39,804)
Capitalized interest (100,591) (104,512) (81,471)
--------- --------- --------
Interest expense, net $ 251,842 $ 300,687 $384,932
========= ========= ========
</TABLE>
Net interest expense has increased during the three-year period, partially the
result of an earlier management decision to increase the leverage of the
Company. Debt levels increased in 1993 to fund stock repurchase programs,
acquisitions and capital expenditures, and approximately $130 million paid to
acquire the minority interest in a subsidiary of Rust. Debt levels remained flat
during 1994 but interest expense increased as a result of higher U.S. interest
rates and the full-year impact of the 1993 borrowings. The increase in debt in
1995 is primarily a result of the acquisition of the public ownership of CWM and
Rust. Capitalized interest also declined substantially in 1995 as a number of
significant capital projects were completed and became operational near the end
of 1994. See "Financial Condition - Capital Structure."
MINORITY INTEREST The minority interest in 1993 reflected the lower earnings
of the Company's subsidiaries in that year and the minority interest
(approximately $78.6 million) in the special charge recorded by CWM. Minority
interest in 1995 reflects the repurchase of the public shares of CWM and Rust,
as well as the minority interest (approximately $41.3 million) in the special
charge recorded by WM International.
SUNDRY INCOME, NET Sundry income relates primarily to earnings recorded on the
equity method from the Company's investments in less than 50%-owned affiliates.
In addition, CWM recognized a gain in the first quarter of 1993 on the sale of
shares of common stock of WTI it had held for investment.
INCOME TAXES In August 1993, the U.S. Congress passed and the President signed
the Omnibus Budget Reconciliation Act of 1993, which, among other things,
increased U.S. Federal income taxes for the Company and its domestic
subsidiaries, retroactive in certain cases to January 1, 1993. The provision for
1993 income taxes includes approximately $14.0 million to adjust deferred income
taxes as a result of this law. The consolidated income tax rate increased
slightly in 1995 as a result of shifts in the sources of taxable income and the
inability to realize tax benefits on a portion of the special charges.
- --------------------------------------------------------------------------------
ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("FAS") No. 112 - Employers' Accounting for Postemployment Benefits -
and FAS No. 115 - Accounting for Certain Investments in Debt and Equity
Securities. The adoption of FAS No. 112 did not have a material impact on the
Company's financial statements as its previous accounting was substantially in
compliance with the new standard. Other than for short-term investments which
were previously accounted for in accordance with FAS No. 115, the Company does
not have significant investments of the type covered by that standard.
The Financial Accounting Standards Board ("FASB") has issued FAS No. 121 -
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of - which is effective for fiscal years beginning after December
15, 1995. The Company does not believe the adoption of FAS No. 121 will have a
material impact on the financial statements.
In October 1995, the FASB issued FAS No. 123 - Accounting for Stock-Based
Compensation - which the Company also must adopt in 1996. FAS No. 123 provides
an optional new method of accounting for employee stock options and expands
required disclosure about stock options. If the new method of accounting is not
adopted, the Company will be required to disclose pro forma net income and
earnings per share as if it were. The Company is studying FAS No. 123 and is
gathering data necessary to calculate compensation in accordance with its
provisions, but has not decided whether to adopt the new method or quantified
its impact on the financial statements.
- --------------------------------------------------------------------------------
DERIVATIVES
From time to time the Company and certain of its subsidiaries use derivatives to
manage currency, interest rate, and commodity (fuel) risk. Derivatives used are
simple agreements which provide for payments based on the notional amount, with
no multipliers or leverage. All derivatives are related to actual or anticipated
instruments or transactions of the Company. While the Company is exposed to
credit risk in the event of non-performance by counterparties to derivatives, in
all cases such counterparties are highly rated financial institutions and the
Company does not anticipate non-performance. In addition, maximum credit
exposure is represented by the fair value of contracts with a positive fair
value; at December 31, 1995, such amounts were not material. The impact of
derivatives on the Company's financial statements has not been significant. See
Note 6 to Consolidated Financial Statements for further discussion of the use
and accounting for such instruments. Also see "Financial Condition - Capital
Structure" for a discussion of the Company's sale of put options in connection
with its authorized stock repurchase program.
21
<PAGE>
- --------------------------------------------------------------------------------
ENVIRONMENTAL MATTERS
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 its 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 governmental 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. Such costs include a final cap and cover on the site,
methane gas and leachate management, and groundwater monitoring.
The Company has also established procedures to evaluate potential remedial
liabilities at closed sites which it owns or operated or to which it transported
waste, including 106 sites listed on the Superfund National Priority List
("NPL") as of December 31, 1995. In the majority of situations, the Company's
connection with NPL sites relates to allegations that its subsidiaries (or their
predecessors) transported waste to the facilities in question, often prior to
the acquisition of such subsidiaries by the Company. The Company routinely
reviews and evaluates sites requiring remediation, including NPL sites, giving
consideration to the nature (e.g., owner, operator, transporter, or generator),
and the extent (e.g., amount and nature of waste hauled to the location, number
of years of site operation by the Company, or other relevant factors) of the
Company's alleged connection with the site, the accuracy and strength of
evidence connecting the Company to the location, the number, connection and
financial ability of other named and unnamed potentially responsible parties
("PRPs"), and the nature and estimated cost of the likely remedy. Where the
Company concludes that it is probable that a liability has been incurred,
provision is made in the financial statements. Cost estimates are based upon
management's judgment and experience in remediating such sites for the Company
as well as for unrelated parties, information available from regulatory agencies
as to cost of remediation, and the number, financial resources and relative
degree of responsibility of other PRPs who are jointly and severally liable for
remediation of the specific site, as well as the typical allocation of costs
among PRPs. These estimates sometimes involve a range of possible outcomes. In
such cases, the Company provides for the amount within the range which
constitutes its best estimate. If no amount within the range appears to be a
better estimate than any other amount, then the Company provides for the minimum
amount within the range in accordance with FAS No. 5. See Note 7 to Consolidated
Financial Statements for additional details regarding the Company's
environmental liabilities.
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 spent $34.8 million, $58.8 million and $50.1 million on remedial
activities at closed sites in 1993, 1994 and 1995, respectively, and anticipates
expenditures of approximately $48.5 million in 1996.
The Company has filed suit against numerous insurance carriers seeking
reimbursement for past and future remedial, defense and tort costs at a number
of sites. The carriers involved have denied coverage and are defending these
claims. No amounts have been recognized in the financial statements for any
future insurance recoveries.
The Company and certain of its subsidiaries are named as defendants in
personal injury and property damage lawsuits, including purported class actions,
on the basis of a Company subsidiary's having owned, operated or transported
waste to a disposal facility which is alleged to have contaminated the
environment or, in certain cases, conducted environmental remediation activities
at such sites. See "Financial Condition - Risks and Uncertainties."
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES The Company had working capital deficits of
$400.1 million at December 31, 1995, and $115.6 million at December 31, 1994,
the result of emphasis on minimizing working capital requirements. The Company
operates in a service industry with neither significant inventory nor seasonal
variation in receivables, and accordingly, minimizing working capital typically
does not significantly affect operations. Cash flow from operating activities,
less net capital expenditures (other than acquisitions) and dividends, which the
Company defines as "owners' cash flow," is available to make acquisitions,
reduce debt, or repurchase common stock. The Company has increased its emphasis
on raising the level of owners' cash flow, which was $518 million in 1995 and,
based on budgeted levels of net income, capital expenditures net of
dispositions, and working capital, is expected to exceed $600 million in 1996.
The Company believes that it has adequate liquidity and resources to meet its
current needs for replacement capital and finance anticipated growth.
22
<PAGE>
- --------------------------------------------------------------------------------
ACQUISITIONS AND CAPITAL EXPENDITURES Capital expenditures, including $443.5
million, $56.8 million and $154.1 million for property and equipment of
purchased businesses in 1993, 1994 and 1995, respectively, are shown in the
following table ($000's omitted):
<TABLE>
<CAPTION>
1993 1994 1995
- -------------------------------------------------------------
<S> <C> <C> <C>
Land (primarily
disposal sites) $ 660,226 $ 582,287 $ 517,162
Buildings and leasehold
improvements 195,472 141,164 148,818
Vehicles 373,055 226,005 345,768
Containers 231,586 167,936 181,225
Other equipment 702,374 395,022 348,102
---------- ---------- ----------
Total $2,162,713 $1,512,414 $1,541,075
========== ========== ==========
</TABLE>
During 1993, the Company and its principal subsidiaries acquired 189
businesses for $715.7 million in cash and debt (including debt assumed),
1,046,801 shares of WMX common stock and 1,635,471 shares of WTI common stock.
During 1994, 119 businesses were acquired for $214.5 million in cash and debt
(including debt assumed), 73,809 shares of the Company's common stock and
156,124 shares of WTI common stock. 136 businesses were acquired in 1995 for
$302.0 million in cash and debt (including debt assumed) and 2,236,354 shares of
the Company's common stock. The Board of Directors has approved a capital
expenditure budget of $1.2 billion (excluding acquisitions) for 1996. The
Company currently expects to finance capital expenditures, as well as any
acquisition activity, through cash flow from operations. The Company believes
that it has adequate resources to finance any attractive acquisitions that
become available.
CAPITAL STRUCTURE Through 1993, the Company financed capital expenditures and
acquisitions primarily through the use of debt, taking advantage of favorable
interest rates. Beginning in 1994, increased emphasis has been placed on cash
flow and reducing leverage. The following table reflects the impact of these
strategies. However, although the Company generated $518 million of owners' cash
flow in 1995, the debt to equity ratios were adversely impacted by the purchase,
discussed below, of the public shares of CWM and Rust, as these transactions
reduced minority interest and increased debt.
<TABLE>
<CAPTION>
December 31 1993 1994 1995
- -------------------------------------------------------
<S> <C> <C> <C>
Long-term debt as a percent
of total capital 49.4% 45.6% 46.5%
Short-term and long-term debt
as a percent of short-term debt
and total capital 52.5% 49.4% 50.7%
</TABLE>
The above ratios include minority interest in subsidiaries and put options as
part of total capital, and exclude project debt of WTI. A significant portion of
WTI's debt is project debt, the interest and principal of which is expected to
be paid by cash generated from operations of specific projects.
In January 1995, the Company acquired all of the approximately 21.4% of the
outstanding shares of CWM that it did not already own, in return for convertible
subordinated debt (see Note 5 to Consolidated Financial Statements). In July
1995, WMX acquired the approximately 3.1 million Rust shares held by the public
for $16.35 per share in cash.
The Boards of Directors of WMX and WTI have authorized their respective
companies to repurchase shares of their own common stock (up to 25 million
shares in the case of WMX and 20 million shares in the case of WTI) in the open
market or in privately negotiated transactions. These programs extend into 1997.
WTI repurchased approximately 3.3 million shares in 1994 and approximately 7.2
million shares in 1995. WMX has not repurchased any of its shares in the last
two years.
During 1994 and 1995, in conjunction with its authorized repurchase program,
WMX sold put options on 31.6 million shares of its common stock. The put options
give the holders the right at maturity to require the Company to repurchase its
shares at specified prices. Proceeds from the sale of put options are credited
to additional paid-in capital. In the event the options are exercised, the
Company may elect to pay the holder in cash the difference between the strike
price and the market price of the Company's shares, in lieu of repurchasing the
stock.
Options on 17.9 million shares expired unexercised, as the price of the
Company's stock was in excess of the strike price at maturity. Options on 4.7
million shares were exercised in February 1995, and the Company elected to
settle them for cash in the amount of $12.0 million, which was charged to paid-
in capital. The remaining 9.0 million options expire at various dates in 1996,
at strike prices ranging from $27.34 to $31.45 per share. The Company may sell
additional put options in 1996.
During 1994, the Company formed an Employee Stock Benefit Trust and sold 12.6
million 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.
RISKS AND UNCERTAINTIES During the first quarter of 1995, WM International
received an assessment of approximately 417 million Krona (approximately $62
million) from the Swedish Tax Authority, relating to a transaction completed in
1990. WM International believes that all appropriate tax returns and disclosures
were filed at the time of transaction and intends to vigorously contest the
assessment.
A subsidiary of WMI has been involved in litigation challenging a municipal
zoning ordinance which restricted the height of its New Milford, Connecticut
landfill to a level below that allowed by the permit previously issued by the
Connecticut Department of Environmental Protection ("DEP"). Although a lower
Court had declared the zoning ordinance's height limitation unconstitutional,
during 1995 the Connecticut Supreme Court reversed this ruling and remanded the
case for further proceedings in the Superior Court. In November 1995, the
Superior Court ordered the WMI subsidiary to apply to the DEP for permission to
remove all waste above the height allowed by the zoning ordinance. The Company
believes that removal of such waste is an inappropriate remedy and has appealed
the Superior Court order to the state Supreme Court. The Company is unable to
predict the outcome of the
23
<PAGE>
- --------------------------------------------------------------------------------
appeal or the nature and extent of the removal action that may ultimately be
required following further appeals or as a result of the permitting process.
However, if the Superior Court order as to removal of the waste is not modified,
the subsidiary could incur substantial costs, which could vary significantly,
depending upon the nature of any plan which is eventually approved by applicable
regulatory authorities for removing the waste, the actual volume of waste to be
moved, and other currently unforeseeable factors, and which could have a
material adverse effect on the Company's financial condition and results of
operations in one or more future periods.
Since 1994, WTI had been involved in litigation concerning permits for the
construction and operation of the Lisbon, Connecticut, trash-to-energy plant.
These matters were resolved during 1995 and the plant began commercial
operations in January 1996.
From time to time, the Company and certain of its subsidiaries are named as
defendants in personal injury and property damage lawsuits, including purported
class actions, on the basis of a Company subsidiary's having owned, operated or
transported waste to a disposal facility which is alleged to have contaminated
the environment or, in certain cases, conducted environmental remediation
activities at such sites. Some of such lawsuits may seek to have the Company or
its subsidiaries pay the cost of groundwater monitoring and health care
examinations of allegedly affected persons for a substantial period of time,
even where no actual damage is proven. While the Company believes that it has
meritorious defenses to these lawsuits, their ultimate resolution is often
substantially uncertain due to the difficulty of determining the cause, extent
and impact of alleged contamination (which may have occurred over a long period
of time), the potential for successive groups of complainants to emerge, the
diversity of the individual plaintiffs' circumstances, and the potential
contribution or indemnification obligations of co-defendants or other third
parties, among other things. Accordingly, it is possible such matters could have
a material adverse impact on the Company's earnings for one or more fiscal
quarters or years.
In the ordinary course of conducting its business, the Company becomes
involved in lawsuits, administrative proceedings and governmental
investigations, including antitrust and environmental matters. Some of these
proceedings may result in fines, penalties or judgments being assessed against
the Company which, from time to time, may have an impact on earnings for a
particular quarter or year. The Company does not believe that these proceedings,
individually or in the aggregate, are material to its business or financial
condition.
OUTLOOK Although the Company believes that the actions taken over the past
three years position it for long-term growth and improved profitability in a
rapidly changing environmental services market, a number of challenges remain.
The current low level of recyclable commodity prices and severe weather in many
portions of the United States at the beginning of 1996 have adversely impacted
WMI. As a result of slow growth in the domestic trash-to-energy business, WTI's
revenue mix has been shifting to the lower margin water business. Consequently
WTI management does not anticipate 1996 earnings growth in excess of 10%. WM
International continues to confront political and economic uncertainty in some
of its largest markets.
To the extent they are within its control, the Company is responding to these
challenges with increased management focus on core businesses, higher
productivity through use of technology, and greater coordination among business
units. Increased emphasis is also being placed on cash flow and control of
capital expenditures. However, in light of the risk factors highlighted above,
the Company anticipates that 1996 earnings per share growth (on continuing
operations before special charges) will be in the range of 5% to 10% ($1.87 to
$1.96).
<PAGE>
Report of Independent Public Accountants EXHIBIT 13.2
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF WMX TECHNOLOGIES, INC.:
We have audited the accompanying consolidated balance sheets of WMX
Technologies, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1994 and 1995, and the related consolidated statements of income, cash flows,
and stockholders' equity for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WMX Technologies, Inc. and
Subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- ---------------------------
Arthur Andersen LLP
Chicago, Illinois
February 5, 1996
24
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the three years ended December 31, 1995
(000's omitted except per share amounts)
1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $8,636,116 $9,554,705 $10,247,617
- ----------------------------------------------------------------------------------------------------------------------
Operating Expenses $5,907,097 $6,543,687 $ 7,045,070
Special Charges 550,000 -- 335,193
Goodwill Amortization 92,994 108,093 117,482
Selling and Administrative Expenses 1,104,024 1,159,500 1,174,636
Gains from Stock Transactions of Subsidiaries (15,109) -- --
Interest Expense 293,040 335,175 424,736
Interest Income (41,198) (34,488) (39,804)
Minority Interest 52,749 145,760 94,359
Sundry Income, Net (95,779) (66,487) (75,688)
- ----------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations Before Income Taxes $ 788,298 $1,363,465 $ 1,171,633
Provision For Income Taxes 345,867 586,974 517,043
- ----------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations $ 442,431 $ 776,491 $ 654,590
- ----------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Income from operations, less applicable income taxes and
minority interest of $15,765 in 1993, $11,757 in 1994 and $15,040 in 1995 $ 10,345 $ 7,890 $ 11,958
Provision for loss on disposal, less applicable
income tax benefit and minority interest of $34,151 -- -- (62,649)
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 452,776 $ 784,381 $ 603,899
======================================================================================================================
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 485,374 484,144 485,972
======================================================================================================================
Earnings per Common and Common Equivalent Share:
Continuing Operations $.91 $1.60 $1.35
Discontinued Operations--
Income from operations .02 .02 .02
Provision for loss -- -- (.13)
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $.93 $1.62 $1.24
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
As of December 31, 1994 and 1995
($000's omitted except per share amounts)
1994 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 123,348 $ 189,031
Short-term investments 19,704 36,243
Accounts receivable, less reserve of
$64,361 in 1994 and $66,840 in 1995 1,878,064 1,880,934
Employee receivables 9,859 8,787
Parts and supplies 194,445 210,864
Costs and estimated earnings in excess of billings on uncompleted contracts 347,064 334,786
Prepaid expenses 379,895 360,404
- ------------------------------------------------------------------------------------------------------------
Total Current Assets $ 2,952,379 $ 3,021,049
- ------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, at cost
Land, primarily disposal sites $ 4,158,612 $ 4,575,117
Buildings 1,332,568 1,572,821
Vehicles and equipment 7,118,714 7,498,718
Leasehold improvements 91,180 87,986
- ------------------------------------------------------------------------------------------------------------
$12,701,074 $13,734,642
Less--Accumulated depreciation and amortization (3,477,317) (3,968,943)
- ------------------------------------------------------------------------------------------------------------
Total Property and Equipment, Net $ 9,223,757 $ 9,765,699
- ------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Intangible assets relating to acquired businesses, net $ 3,718,282 $ 4,205,031
Sundry, including other investments 1,345,104 1,572,977
Net assets of discontinued operations 183,651 130,552
- ------------------------------------------------------------------------------------------------------------
Total Other Assets $ 5,247,037 $ 5,908,560
- ------------------------------------------------------------------------------------------------------------
Total Assets $17,423,173 $18,695,308
============================================================================================================
CURRENT LIABILITIES
Portion of long-term debt payable within one year $ 890,686 $ 1,094,165
Accounts payable 971,796 1,072,372
Accrued expenses 940,507 991,539
Unearned revenue 265,024 263,029
- ------------------------------------------------------------------------------------------------------------
Total Current Liabilities $ 3,068,013 $ 3,421,105
- ------------------------------------------------------------------------------------------------------------
DEFERRED ITEMS
Income taxes $ 669,566 $ 956,525
Environmental liabilities 704,015 622,952
Other 607,694 684,452
- ------------------------------------------------------------------------------------------------------------
Total Deferred Items $ 1,981,275 $ 2,263,929
- ------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, less portion payable within one year $ 6,044,411 $ 6,420,610
- ------------------------------------------------------------------------------------------------------------
MINORITY INTEREST IN SUBSIDIARIES $ 1,536,165 $ 1,385,366
- ------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES $ $
- ------------------------------------------------------------------------------------------------------------
PUT OPTIONS $ 252,328 $ 261,959
- ------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value (issuable in series);
50,000,000 shares authorized; none outstanding during the years $ -- $ --
Common stock, $1 par value; 1,500,000,000 shares authorized;
496,386,758 shares issued in 1994 and 498,817,093 in 1995 496,387 498,817
Additional paid-in capital 357,150 422,801
Cumulative translation adjustment (150,832) (102,943)
Retained earnings 4,181,606 4,486,877
- ------------------------------------------------------------------------------------------------------------
$ 4,884,311 $ 5,305,552
Less--1988 Employee Stock Ownership Plan 19,729 13,062
Employee Stock Benefit Trust (12,386,629 shares in 1994
and 11,769,788 in 1995, at market) 323,601 350,151
- ------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $ 4,540,981 $ 4,942,339
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $17,423,173 $18,695,308
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
26
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the three years ended December 31, 1995
($000's omitted except per share amounts)
1988
Employee Employee
Additional Cumulative Stock Stock
Common Paid-in Translation Retained Treasury Ownership Benefit
Stock Capital Adjustment Earnings Stock Plan Trust
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 year $ -- $ -- $ -- $ 452,776 $ -- $ -- $ --
Cash dividends ($.58 per share) -- -- -- (280,858) -- -- --
Stock repurchase (8,443,400 shares) -- -- -- -- 278,363 -- --
Stock issued upon exercise of stock options 14 (8,749) -- -- (18,285) -- --
Treasury stock received in connection
with exercise of stock options -- -- -- -- 357 -- --
Tax benefit of non-qualified stock options
exercised -- 2,825 -- -- -- -- --
Contribution to 1988 ESOP (362,036 shares) -- -- -- -- -- (7,329) --
Treasury stock received as settlement for
claims -- -- -- -- 3,429 -- --
Stock issued upon conversion of LYONs -- (4,553) -- -- (7,882) -- --
Stock issued for acquisitions -- (4,655) -- -- (35,375) -- --
Transfer of equity interests
among controlled subsidiaries -- (24,694) -- -- -- -- --
Cumulative translation adjustment
of foreign currency statements -- -- (79,021) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 $496,217 $ 668,470 $(245,587) $3,693,108 $ 425,097 $27,659 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income for the year $ -- $ -- $ -- $ 784,381 $ -- $ -- $ --
Cash dividends ($.60 per share) -- -- -- (290,266) -- -- --
Dividends paid to Employee Stock Benefit Trust -- 5,617 -- (5,617) -- -- --
Stock issued upon exercise of stock options -- (5,948) -- -- (8,250) -- (5,928)
Treasury stock received in connection
with exercise of stock options -- -- -- -- 260 -- --
Tax benefit of non-qualified stock options
exercised -- 1,527 -- -- -- -- --
Contribution to 1988 ESOP (375,312 shares) -- -- -- -- -- (7,930) --
Treasury stock received as settlement for
claims -- -- -- -- 2,741 -- --
Stock issued upon conversion of LYONs 96 1,442 -- -- (56) -- --
Common stock issued for acquisitions 74 1,471 -- -- -- -- --
Temporary equity related to put options -- (252,328) -- -- -- -- --
Proceeds from sale of put options -- 29,965 -- -- -- -- --
Sale of shares to Employee Stock Benefit Trust
(12,601,609 shares) -- (106,327) -- -- (419,792) -- 313,465
Adjustment of Employee Stock Benefit Trust
to market value -- 16,064 -- -- -- -- 16,064
Transfer of equity interests
among controlled subsidiaries -- (2,803) -- -- -- -- --
Cumulative translation adjustment
of foreign currency statements -- -- 94,755 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 $496,387 $ 357,150 $(150,832) $4,181,606 $ -- $19,729 $323,601
- -----------------------------------------------------------------------------------------------------------------------------------
Net income for the year $ -- $ -- $ -- $ 603,899 $ -- $ -- $ --
Cash dividends ($.60 per share) -- -- -- (291,421) -- -- --
Dividends paid to Employee Stock Benefit Trust -- 7,207 -- (7,207) -- -- --
Stock issued upon exercise of stock options 44 (4,405) -- -- (1,763) -- (17,393)
Treasury stock received in connection
with exercise of stock options -- -- -- -- 663 -- --
Tax benefit of non-qualified stock options
exercised -- 2,049 -- -- -- -- --
Contribution to 1988 ESOP (322,508 shares) -- -- -- -- -- (6,667) --
Treasury stock received as settlement for
claims -- -- -- -- 1,100 -- --
Common stock issued upon conversion of LYONs 150 2,448 -- -- -- -- --
Common stock issued for acquisitions 2,236 13,908 -- -- -- -- --
Temporary equity related to put options -- (9,631) -- -- -- -- --
Proceeds from sale of put options -- 21,622 -- -- -- -- --
Settlement of put options -- (12,019) -- -- -- -- --
Adjustment of Employee Stock Benefit Trust
to market value -- 43,943 -- -- -- -- 43,943
Transfer of equity interests
among controlled subsidiaries -- 529 -- -- -- -- --
Cumulative translation adjustment
of foreign currency statements -- -- 47,889 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $498,817 $ 422,801 $(102,943) $4,486,877 $ -- $13,062 $350,151
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
For the three years ended December 31, 1995
Increase (Decrease) in cash ($000's omitted)
1993 1994 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income for the year $ 452,776 $ 784,381 $ 603,899
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 796,691 880,466 885,384
Provision for deferred income taxes 154,782 298,564 250,828
Minority interest in subsidiaries 57,986 149,703 138,162
Interest on Liquid Yield Option Notes (LYONs)
and WMX Subordinated Notes 37,162 33,551 23,021
Gain on sale of property and equipment, and
of investments by subsidiary (14,061) (14,876) (9,190)
Contribution to 1988 Employee Stock Ownership Plan 7,329 7,930 6,667
Gains from stock transactions of subsidiaries (15,109) -- --
Special charges, net of tax and minority interest 285,300 -- 202,492
Provision for loss on disposal of discontinued operations,
net of tax and minority interest -- -- 62,649
Changes in assets and liabilities,
excluding effects of acquired companies:
Receivables, net (112,489) (133,506) 45,232
Other current assets 41,038 (109,174) 48,214
Sundry other assets (29,445) (42,195) (72,282)
Accounts payable 33,328 155,254 39,669
Accrued expenses and unearned revenue (298,214) 43,121 (227,700)
Deferred items (24,015) (259,020) 61,557
Minority interest in subsidiaries (2,021) 14,038 (3,854)
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,371,038 $ 1,808,237 $ 2,054,748
- --------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Short-term investments $ 35,911 $ 2,755 $ (4,196)
Capital expenditures (1,719,178) (1,455,628) (1,386,932)
Proceeds from sale of property and equipment, and
of investments by subsidiary 134,169 276,822 141,774
Cost of acquisitions, net of cash acquired (581,745) (197,201) (224,304)
Other investments (185,256) (74,446) (44,193)
Acquisition of minority interests (129,524) (8,200) (68,370)
- --------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES $(2,445,623) $(1,455,898) $(1,586,221)
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1993 1994 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Cash dividends $ (280,858) $ (290,266) $ (291,421)
Proceeds from issuance of indebtedness 3,407,759 1,710,586 1,803,383
Repayments of indebtedness (1,682,950) (1,752,552) (1,860,451)
Proceeds from exercise of stock options, net 9,193 7,970 14,132
Contributions from minority interests 28,072 22,169 24,394
Stock repurchases by Company and subsidiaries (315,302) (49,665) (102,484)
Preferred stock redemption by subsidiary (5,000) -- --
Proceeds from sale of put options -- 29,965 21,622
Settlement of put options -- -- (12,019)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES $ 1,160,914 $ (321,793) $ (402,844)
- ----------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents $ 86,329 $ 30,546 $ 65,683
Cash and cash equivalents at beginning of year 6,473 92,802 123,348
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 92,802 $ 123,348 $ 189,031
==========================================================================================================
The Company considers cash and cash equivalents
to include currency on hand, demand deposits with banks
and short-term investments with maturities of less than
three months when purchased.
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 263,716 $ 307,257 $ 401,715
Income taxes, net of refunds received $ 331,803 $ 241,657 $ 283,165
Supplemental schedule of noncash investing and
financing activities:
LYONs converted into common stock of the Company $ 3,329 $ 1,594 $ 2,598
Liabilities assumed in acquisitions of businesses $ 673,129 $ 244,560 $ 245,918
Fair market value of Company and subsidiary stock
issued for acquired businesses $ 64,500 $ 4,773 $ 66,172
WMX Subordinated Notes issued for acquisition
of CWM minority interest $ -- $ -- $ 436,830
</TABLE>
29
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (000's omitted in all tables except
per share amounts)
- --------------------------------------------------------------------------------
NOTE 1 BUSINESS AND FINANCIAL STATEMENTS
WMX Technologies, Inc. and its subsidiaries ("WMX" or the "Company") provide
environmental, engineering and consulting, and industrial services to
governmental, residential, commercial, and industrial customers on a worldwide
basis in four core lines of business: waste services, clean energy, clean water,
and environmental and infrastructure engineering and consulting. Through 1995,
process engineering, construction, specialty contracting and similar services
were also provided through businesses the Company intends to exit (see Note 15).
These businesses have been classified as discontinued operations and are
segregated from continuing operations in the accompanying financial statements
and notes thereto.
The accompanying financial statements are prepared on a consolidated basis and
include the Company and its majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. See Note 13 for
details of certain financial information by subsidiary, line of business and
geographic area.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets, liabilities, income and expenses and
disclosures of contingencies. Future events could alter such estimates in the
near term.
- --------------------------------------------------------------------------------
NOTE 2 SUMMARY OF ACCOUNTING POLICIES
REVENUE RECOGNITION The Company recognizes revenue from long-term contracts on
the percentage-of-completion basis with losses recognized in full when
identified. Changes in project performance and conditions, estimated
profitability and final contract settlements may result in future revisions to
costs and income. Other revenues are recognized when the services are performed.
FOREIGN CURRENCY Certain foreign subsidiaries' assets and liabilities are
translated at the rates of exchange at the balance sheet date while income
statement accounts are translated at the average exchange rates in effect during
the period. The resulting translation adjustments are charged or credited
directly to stockholders' equity. Foreign exchange losses (net of related income
taxes and minority interest) of $529,000, $3,610,000 and $1,226,000 are included
in the Consolidated Statements of Income for 1993, 1994 and 1995, respectively.
SHORT-TERM INVESTMENTS The Company's short-term investments primarily consist
of securities having an investment grade of not less than A and a term to
maturity generally of less than one year, and because the investments have
always been held to maturity, are carried at cost. Such investments include tax-
exempt securities, certificates of deposit and Eurodollar time deposits.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The adoption of FAS 115 did not have a significant
effect on earnings for 1994, since the Company's accounting prior to adoption
was substantially in compliance with the new standard.
ENVIRONMENTAL LIABILITIES The Company provides for estimated closure and post-
closure monitoring costs over the operating life of disposal sites as airspace
is consumed. The Company has also established procedures to evaluate potential
remedial liabilities at closed sites which it owns or operated, or to which it
transported waste, including 106 sites listed on the Superfund National Priority
List ("NPL"). Where the Company concludes that it is probable that a liability
has been incurred, provision is made in the financial statements, based upon
management's judgment and prior experience, for the Company's best estimate of
the liability. Such estimates are subsequently revised as deemed necessary as
additional information becomes available. See Note 7 for additional information.
CONTRACTS IN PROCESS Information with respect to contracts in process at
December 31, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Costs and estimated earnings
on uncompleted contracts $ 2,618,921 $ 2,510,898
Less: Billings on uncompleted contracts (2,365,334) (2,253,867)
----------- -----------
Total contracts in process $ 253,587 $ 257,031
=========== ===========
</TABLE>
Contracts in process are included in the Consolidated Balance Sheets under the
following captions:
<TABLE>
<CAPTION>
<S> <C> <C>
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 347,064 $ 334,786
Billings in excess of costs
and estimated earnings
on uncompleted contracts
(included in unearned revenue) (93,477) (77,755)
----------- -----------
Total contracts in process $ 253,587 $ 257,031
=========== ===========
</TABLE>
All contracts in process are expected to be billed and collected within five
years.
Accounts receivable includes retainage which has been billed, but which is not
due pursuant to contract provisions until completion. Such retainage at December
31, 1995, is $23,095,000, including $6,724,000 that is expected to be collected
after one year. At December 31, 1994, retainage was $33,743,000.
PROPERTY AND EQUIPMENT Property and equipment (including major repairs and
improvements) are capitalized and stated at cost. Items of an ordinary
maintenance or repair nature are charged directly to operations. Disposal sites
are carried at cost and to the extent this exceeds end use realizable value,
such excess is amortized over the estimated life of the disposal site. Disposal
site improvement costs are capitalized and charged to operations over the
shorter of the estimated usable life of the site or the improvement.
Preparation costs for individual secure land disposal cells are recorded as
prepaid expenses and amortized as the airspace is filled. Significant costs
capitalized for such cells include excavation and grading costs, costs relating
to the design and construction of liner systems, and gas collection and leachate
collection systems. Unamortized cell construction cost at December 31, 1994 and
1995 was $154,100,000 and $187,689,000, respectively.
30
<PAGE>
- --------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION The cost, less estimated salvage value, of
property and equipment is depreciated over the estimated useful lives on the
straight-line method as follows: buildings - 10 to 40 years; vehicles and
equipment - 3 to 20 years; leasehold improvements - over the life of the
applicable lease.
INTANGIBLE ASSETS Intangible assets relating to acquired businesses consist
primarily of the cost of purchased businesses in excess of market value of net
assets acquired ("goodwill"). Such goodwill is being amortized on a straight-
line basis over a period of not more than forty years. The accumulated
amortization of intangible assets amounted to $458,167,000 and $572,587,000 as
of December 31, 1994 and 1995, respectively.
On an ongoing basis, the Company measures realizability of goodwill by the
ability of the acquired business to generate current and expected future
operating income in excess of annual amortization. If such realizability is in
doubt, an adjustment is made to reduce the carrying value of the goodwill. Such
adjustments have historically not been material to the Company's financial
statements.
CAPITALIZED INTEREST Interest has been capitalized on significant landfills,
trash-to-energy plants and other projects under construction in accordance with
FAS No. 34. Amounts capitalized and netted against Interest Expense in the
Consolidated Statements of Income were $100,591,000 in 1993, $104,512,000 in
1994 and $81,471,000 in 1995.
GAIN RECOGNITION ON SALE OF SUBSIDIARIES' STOCK It is the Company's policy to
record in income gains from the sale or other issuance of previously unissued
stock by its subsidiaries. No such gains were recorded in 1994 or 1995.
ACCOUNTING PRINCIPLES The Financial Accounting Standards Board ("FASB") has
issued FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which is effective for fiscal years
beginning after December 15, 1995. The Company does not believe the adoption of
FAS 121 will have a material impact on the financial statements.
In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation," which the Company also must adopt in 1996. FAS 123 provides an
optional new method of accounting for employee stock options and expands
required disclosure about stock options. If the new method of accounting is not
adopted, the Company will be required to disclose pro forma net income and
earnings per share as if it were. The Company is studying FAS 123 and is
gathering data necessary to calculate compensation in accordance with its
provisions, but has not decided whether to adopt the new method or quantified
its impact on the financial statements.
RESTATEMENT Certain amounts in previously issued financial statements have
been restated to conform to 1995 classifications.
- --------------------------------------------------------------------------------
NOTE 3 INCOME TAXES
The following tables set forth income from continuing operations before income
taxes, showing domestic and international sources, and the income tax provision,
showing the components by governmental taxing authority, for the years 1993
through 1995:
<TABLE>
<CAPTION>
Income From Continuing Operations Before Income Taxes 1993 1994 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $616,805 $1,187,938 $1,167,120
International 171,493 175,527 4,513
-------- ---------- ----------
$788,298 $1,363,465 $1,171,633
======== ========== ==========
Income Tax Provision (Benefit)
- ------------------------------------------------------------------------------------------
Current tax expense
U.S. Federal $133,581 $ 215,569 $ 224,924
State and local 29,893 49,549 48,957
Foreign 36,410 30,611 42,810
-------- ---------- ----------
Total current $199,884 $ 295,729 $ 316,691
-------- ---------- ----------
Deferred tax expense
U.S. Federal $ 87,792 $ 215,644 $ 181,873
State and local 29,464 33,689 36,101
Foreign 32,327 44,507 (16,538)
-------- ---------- ----------
Total deferred $149,583 $ 293,840 $ 201,436
-------- ---------- ----------
U.S. Federal benefit from amortization of deferred
investment credit $ (3,600) $ (2,595) $ (1,084)
-------- ---------- ----------
Total provision $345,867 $ 586,974 $ 517,043
======== ========== ==========
</TABLE>
The Federal statutory tax rate in 1993, 1994 and 1995 is reconciled to the
effective tax rate as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of Federal benefit 4.9 4.0 4.7
Amortization of deferred investment credit (0.4) (0.2) (0.1)
Amortization of intangible assets relating to acquired businesses 4.2 2.2 2.8
Federal tax credits (1.4) (1.0) (1.2)
Non-taxable gains on issuance of stock by subsidiaries (0.7) -- --
Minority interest 2.8 4.2 3.3
Adjustment of deferred income taxes due to Omnibus Budget
Reconciliation Act 1.8 -- --
Other, net (2.3) (1.1) (0.4)
----- ----- ----
Effective tax rate 43.9% 43.1% 44.1%
===== ===== ====
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
The Company uses the deferral method of accounting for investment credit,
whereby the credit is recorded in income over the composite life of the related
equipment.
Deferred income taxes result from the recognition, in different periods, of
revenue and expense for tax and financial statement purposes. The primary
components that comprise the 1994 and 1995 deferred tax (assets) liabilities are
as follows:
<TABLE>
<CAPTION>
1994 1995
- --------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Reserves not deductible until paid $ (491,061) $ (526,202)
Deferred revenue (25,708) (24,472)
Net operating losses and
tax credit carryforwards (159,269) (266,898)
Other (69,812) (73,834)
---------- ----------
Subtotal $ (745,850) $ (891,406)
---------- ----------
Deferred tax liabilities
Depreciation and amortization $1,103,194 $1,368,258
Other 233,600 381,068
---------- ----------
Subtotal $1,336,794 $1,749,326
---------- ----------
Valuation allowance ($29,890,000 at
December 31, 1993) 78,622 98,605
---------- ----------
Net deferred tax liabilities $ 669,566 $ 956,525
========== ==========
</TABLE>
The Company's subsidiaries have approximately $37 million of alternative
minimum tax credit carryforwards that may be used indefinitely. Various
subsidiaries have U.S. Federal and foreign operating loss carryforwards of
approximately $530 million and state operating loss carryforwards of
approximately $513 million. Foreign operating losses of $253 million may be
carried forward indefinitely; the remaining loss carryforwards have expiration
dates through the year 2010. Valuation allowances have been established for
uncertainties in realizing the tax benefits of loss carryforwards and for the
basis difference in certain assets. While the Company expects to realize the
deferred tax assets in excess of the valuation allowances, changes in estimates
of future taxable income or in tax laws could alter this expectation. The
increase in the valuation allowance since 1993 is primarily attributable to
uncertainty in realizing the tax benefit of certain foreign operating loss
carryforwards.
The Company has concluded that development and expansion of its foreign
business requires that the undistributed earnings of its foreign subsidiaries be
reinvested indefinitely outside the United States. If the reinvested earnings
were to be remitted, the U.S. income taxes due under current tax law would not
be material.
- --------------------------------------------------------------------------------
NOTE 4 BUSINESS COMBINATIONS
During 1993, the Company and its principal subsidiaries acquired 189 businesses
for $581,745,000 in cash (net of cash acquired) and notes, $133,941,000 of debt
assumed, 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.
During 1994, 119 businesses were acquired for $197,201,000 in cash (net of
cash acquired) and notes, $17,305,000 of debt assumed, 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.
One hundred thirty-six businesses were acquired in 1995 for $224,304,000 in
cash (net of cash acquired) and notes, $77,689,000 of debt assumed, and
2,236,354 shares of the Company's common stock. Three of the aforementioned 1995
acquisitions, which otherwise met pooling of interests criteria, were not
significant in the aggregate and, consequently, prior period financial
statements were not restated. The remaining acquisitions were accounted for as
purchases.
The following summarizes the pro forma effect on continuing operations of
businesses acquired and accounted for as purchases (including those which
otherwise met pooling of interests criteria but were not significant in the
aggregate) in 1993, 1994 and 1995 as if they had been acquired as of January 1
of the preceding year (unaudited):
<TABLE>
<CAPTION>
1993 1994 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue as reported $8,636,116 $ 9,554,705 $10,247,617
Revenue of purchased businesses for period prior to
acquisition as stated above 555,218 477,040 161,868
---------- ----------- -----------
Pro forma revenue $9,191,334 $10,031,745 $10,409,485
========== =========== ===========
Net income as reported $ 442,431 $ 776,491 $ 654,590
Net income of purchased businesses for period prior
to acquisition as stated above 9,753 32,408 7,237
Adjustment for interest and goodwill amortization (18,532) (29,066) (7,649)
---------- ----------- -----------
Pro forma net income $ 433,652 $ 779,833 $ 654,178
========== =========== ===========
Earnings per share as reported $ .91 $ 1.60 $ 1.35
Effect of purchased businesses prior to acquisition
as stated above (.02) .01 --
---------- ----------- -----------
Pro forma earnings per share $ .89 $ 1.61 $ 1.35
========== =========== ===========
</TABLE>
In January 1995, the Company acquired all of the approximately 21.4% of the
outstanding shares of Chemical Waste Management, Inc. ("CWM") that it did not
already own. The transaction provided for the CWM public shareholders to receive
a convertible subordinated WMX note for every 81.1 CWM shares held. See Note 5
for additional information. In July 1995, the Company acquired all of the
approximately 3.1 million shares of Rust International Inc. ("Rust") held by the
public, for $16.35 per share in cash.
32
<PAGE>
- --------------------------------------------------------------------------------
NOTE 5 DEBT
The details relating to debt (including capitalized leases, which are not
material) as of December 31, 1994 and 1995, are as follows:
<TABLE>
<CAPTION>
1994 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper, weighted average interest 5.8% in 1994 and 5.7% in 1995 $ 946,702 $1,119,356
Tailored Rate ESOP Notes, weighted average interest 4.81% in 1994 and 4.74% in 1995 50,000 20,000
Debentures, interest 8-3/4%, due 2018 249,085 249,085
Notes, interest 4-5/8% to 8-1/4%, due 1996-2011 2,684,170 3,184,170
Step-Up Notes, interest 6.22% through April 29, 1997 and 8% thereafter, due 2004 150,000 150,000
Solid waste disposal revenue bonds, interest 6% to 7.75%, due 1996-2013 252,385 251,085
Installment loans and notes payable, interest 5.34% to 10.6%, due 1996-2020 1,298,436 1,233,871
Project Debt, interest 4% to 10.64%, due 1996-2010 764,859 735,646
Other long-term borrowings 34,320 32,210
Liquid Yield Option Notes, zero coupon-subordinated, interest 9%, due 2001 10,721 8,945
Liquid Yield Option Notes, zero coupon-subordinated, interest 6%, due 2012 ("Exchangeable LYONs") 361,438 53,996
Liquid Yield Option Notes, zero coupon-subordinated, interest 6%, due 2010 ("CWM LYONs") 132,981 36,840
WMX Subordinated Notes, interest 5.75%, due 2005 -- 439,571
---------- ----------
Total debt $6,935,097 $7,514,775
Less--current portion 890,686 1,094,165
---------- ----------
Long-term portion $6,044,411 $6,420,610
========== ==========
</TABLE>
The long-term debt as of December 31, 1995, is due as follows:
<TABLE>
<CAPTION>
<S> <C>
Second year $ 761,091
Third year 2,158,232
Fourth year 261,103
Fifth year 1,132,816
Sixth year and thereafter 2,107,368
----------
$6,420,610
==========
</TABLE>
Certain of the Company's borrowings are redeemable at the option of the
holders prior to maturity. Such amounts and certain other borrowings which would
otherwise be classified as current liabilities have been classified as long-term
debt because the Company intends to refinance such borrowings on a long-term
basis with $1,503,000,000 of committed long-term borrowing facilities which it
has available. The committed facilities provide for unsecured long-term loans at
interest rates of prime or LIBOR plus 30 basis points and commitment fees of 6
to 8 basis points per annum. There are no compensating balance requirements or
any informal arrangements in connection with loans which would be made under
these facilities.
In January 1995, the Company acquired the outstanding CWM shares it did not
already own. The transaction provided for the CWM public shareholders to receive
a convertible subordinated WMX note due 2005, with a principal amount at
maturity of $1,000, for every 81.1 CWM shares held, with cash paid in lieu of
issuance of fractional notes. The notes are subordinated to all existing and
future senior indebtedness of WMX. Each note bears cash interest from January
24, 1995 at the rate of two percent per annum of the $1,000 principal amount at
maturity, payable semi-annually. The difference between the principal amount at
maturity of $1,000 and the $717.80 stated issue price of each note represents
the stated discount which, together with the cash interest payable on the notes,
will accrue at a rate of 5.75 percent per annum (determined on a semi-annual
bond equivalent basis) for purposes of determining the prices at which WMX may
purchase or redeem notes, as described below. At the option of the holder, each
note will be purchased for cash by WMX on March 15, 1998, and March 15, 2000, at
prices of $789.95 and $843.03, respectively, which represent the stated issue
price plus accrued stated discount to those dates. Accrued unpaid interest to
those dates will also be paid. The notes will be redeemable by WMX on and after
March 15, 2000, for cash, at the stated issue price plus accrued stated discount
and accrued but unpaid interest through the date of redemption. In addition,
each note is convertible at any time prior to maturity, unless previously
purchased or redeemed by WMX, into 26.078 shares of WMX common stock, subject to
adjustment upon the occurrence of certain events. Upon any such conversion, WMX
will have the option of paying cash equal to the market value of the WMX shares
which would otherwise be issuable. As of December 31, 1995, there were 549,810
such notes outstanding with a maturity value amounting to $549,810,000.
As of December 31, 1994, CWM LYONs and the Exchangeable LYONs (together with
the CWM LYONs, the "LYONs") were convertible into or exchangeable for CWM
shares. On January 24, 1995, the LYONs became convertible into the number of
notes discussed in the preceding paragraph to which the holders would have been
entitled had they converted or exchanged the LYONs immediately prior to the
merger approval.
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. In November 1994, the Company issued
$200,000,000 of 8 1/4% Notes due November 15, 1999, at a price of 99.925%.
Neither of these issues is redeemable at the option of the Company prior to
maturity.
33
<PAGE>
- --------------------------------------------------------------------------------
In January 1995, the Company issued $250,000,000 of 8-1/8% Notes due February
1, 1998, at a price of 99.671%. In March 1995, the Company issued $200,000,000
of 7-1/8% Notes due March 22, 1997, at a price of 99.98%. In May 1995, the
Company issued $200,000,000 of 6.65% Notes due May 15, 2005, at par. The holder
of each 6.65% Note may elect to have such Note, or any portion thereof which is
a multiple of $1,000, repaid on May 15, 2000 at 100% of its principal amount,
together with accrued interest. The Company also issued in May 1995,
$100,000,000 of 7% Notes due May 15, 2005, at a price of 99.293%. In June 1995,
the Company issued $100,000,000 of 5.84% Notes due July 3, 1996, at par. In
October 1995, the Company issued $250,000,000 of 6-1/4% Notes due October 15,
2000, at a price of 99.85%. None of these issues is redeemable at the option of
the Company prior to maturity.
- --------------------------------------------------------------------------------
NOTE 6 DERIVATIVE FINANCIAL INSTRUMENTS
From time to time, the Company uses derivatives to manage interest rate,
currency and commodity risk. The portfolio of such instruments (which are held
for purposes other than trading) at December 31, 1995, is set forth in the
paragraphs which follow. Where deemed advantageous, management will use
derivatives in the future.
INTEREST RATE AGREEMENTS Certain of the Company's subsidiaries have 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. The agreements provide only for
the exchange of interest on the notional amounts at the stated rates, with no
multipliers or leverage.
While the subsidiaries are 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. The impact of swap agreements on consolidated interest expense and
on the effective interest rate on consolidated debt was immaterial. As of
December 31, 1995, interest rate agreements in notional amounts and with terms
as set forth in the following table were outstanding:
<TABLE>
<CAPTION>
Notional
Currency Amount Pay Receive Duration of Agreement
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sterling 20,000 Fixed Floating Feb. 1995 - Feb. 1999
Hong Kong dollar 250,000 Fixed Floating Feb. 1995 - Feb. 1997
</TABLE>
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. Typically
these have taken the form of purchased put options or offsetting put and call
options with different strike prices. The Company receives or pays, based on the
notional amount of the option, the difference between the average exchange rate
of the hedged currency against the base currency and the average (strike price)
contained in the option. Complex instruments involving multipliers or leverage
are not used. While the Company may be required to make a payment in connection
with these agreements, it will recognize an offsetting increase in the
translation of foreign earnings or 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 December 31, 1995, the Company was party to the following average rate
currency option (settles at expiration):
<TABLE>
<CAPTION>
Currency
-------------------------------
Notional Amount Hedged Against
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Collar, structured as offsetting put and call
with different strike prices, covering the
period January 1 to December 31, 1996 100,000 Swedish Krona Sterling
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
Significant foreign currency contracts outstanding during 1993, 1994 and 1995
were as follows:
<TABLE>
<CAPTION>
Currency
----------------------------------------
Average Amount Hedged Against
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1993 150,000 Sterling Dollar
9,300 Deutschemark Dollar
6,000 Finland Markka Sterling
1994 85,000 Deutschemark Sterling
132,000 French Franc Sterling
184,000 Swedish Krona Sterling
20,000,000 Italian Lire Sterling
10,000,000 Italian Lire Deutschemark
23,000 Deutschemark Dollar
141,000 Sterling Dollar
1995 46,600 Deutschemark Sterling
82,000 French Franc Sterling
13,500 Netherlands Guilder Sterling
180,000 Swedish Krona Sterling
1,500 Dollar Sterling
15,267,000 Italian Lire Sterling
11,820 Deutschemark Dollar
669 Sterling Swedish Krona
35,800 Sterling Dollar
</TABLE>
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 December
31, 1995:
<TABLE>
<CAPTION>
Type Commodity Quantity Expiration
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Swaps Crude oil 3,000 bbls. 1996
Collars Crude oil 300 bbls. 1996
Swaps Crude oil 3,000 bbls. 1997
Collars Crude oil 350 bbls. 1997
Swaps Crude oil 2,000 bbls. 1998
Collars Crude oil 200 bbls. 1998
Collars Crude oil 100 bbls. 1999
</TABLE>
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 highly rated financial institutions and the
Company does not anticipate non-performance. Maximum credit exposure is
represented by the fair value of contracts with a positive fair value; at
December 31, 1995, such amounts were not material.
- --------------------------------------------------------------------------------
NOTE 7 ENVIRONMENTAL COSTS AND 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.
The Company provides for estimated closure and post-closure monitoring costs
over the operating life of disposal sites as airspace is consumed. Such costs
for U.S. landfills are estimated based on the technical requirements of the
Subtitle C and D Regulations of the U.S. Environmental Protection Agency or the
applicable state requirements, whichever are stricter, and include such items as
final cap and cover on the site, methane gas and leachate management, and
groundwater monitoring. Substantially the same standards are applied to estimate
costs for foreign sites, even though current regulations in some foreign
jurisdictions are less strict.
35
<PAGE>
- --------------------------------------------------------------------------------
The Company has also established procedures to evaluate potential remedial
liablilities at closed sites which it owns or operated, or to which it
transported waste, including 106 sites on the NPL. In the majority of
situations, the Company's connection with NPL sites relates to allegations that
its subsidiaries (or their predecessors) transported waste to the facilities in
question, often prior to the acquisition of such subsidiaries by the Company.
The Company routinely reviews and evaluates sites requiring remediation,
including NPL sites, giving consideration to the nature (e.g., owner, operator,
transporter, or generator), and the extent (e.g., amount and nature of waste
hauled to the location, number of years of site operation by the Company, or
other relevant factors) of the Company's alleged connection with the site, the
accuracy and strength of evidence connecting the Company to the location, the
number, connection and financial ability of other named and unnamed potentially
responsible parties ("PRPs"), and the nature and estimated cost of the likely
remedy. Cost estimates are based on management's judgment and experience in
remediating such sites for the Company as well as for unrelated parties,
information available from regulatory agencies as to costs of remediation, and
the number, financial resources and relative degree of responsibility of other
PRPs who are jointly and severably liable for remediation of a specific site, as
well as the typical allocation of costs among PRPs. These estimates are
sometimes a range of possible outcomes. In such cases, the Company provides for
the amount within the range which constitutes its best estimate. If no amount
within the range appears to be a better estimate than any other amount, then the
Company provides for the minimum amount within the range in accordance with FAS
No. 5. The Company believes that it is "reasonably possible," as that term is
defined in FAS 5 ("more than remote but less than likely"), that its potential
liability could be at the high end of such ranges, which would be approximately
$150 million higher in the aggregate than the estimate that has been recorded in
the financial statements as of December 31, 1995.
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 necessitate the
recording of additional liabilities which could be material. The impact of such
future events cannot be estimated at the current time.
Where the Company believes that both the amount of a particular environmental
liability and the timing of the payments are reliably determinable, the cost in
current dollars is inflated at 3% until expected time of payment and then
discounted to present value at 7%. Had the Company not discounted any portion of
its liability, the amount recorded would have been increased by approximately
$171 million at December 31, 1995.
The Company's active landfill sites have estimated remaining lives ranging
from one to over 100 years based upon current site plans and annual volumes of
waste. During this remaining site life, the Company will provide for an
additional $1.12 billion of closure and post-closure costs, including accretion
for the discount recognized to date.
As of December 31, the Company's liabilities for closure, post-closure
monitoring and environmental remediation costs were as follows:
<TABLE>
<CAPTION>
1994 1995
- -----------------------------------------------------------
<S> <C> <C>
Current portion, included in
Accrued Expenses $ 108,750 $ 138,603
Non-current portion 704,015 622,952
---------- ----------
Total recorded $ 812,765 $ 761,555
Amount to be provided over
remaining life of active
sites, including discount
of $169 million in 1994 and
$171 million in 1995 1,149,617 1,118,739
---------- ----------
Expected aggregate undiscounted
environmental liabilities $1,962,382 $1,880,294
========== ==========
</TABLE>
Anticipated payments of environmental liabilities at December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 138,603
1997 97,621
1998 49,416
1999 40,586
2000 32,115
Thereafter 1,521,953
----------
$1,880,294
==========
</TABLE>
The change in the expected aggregate undiscounted amount results primarily
from changes in available airspace.
The Company and certain of its subsidiaries are named as defendants in
personal injury and property damage lawsuits, including purported class actions,
on the basis of a Company subsidiary's having owned, operated or transported
waste to a disposal facility which is alleged to have contaminated the
environment. While the Company believes it has meritorious defenses to these
lawsuits, their ultimate resolution is often substantially uncertain due to a
number of factors, and it is possible such matters could have a material adverse
impact on the Company's earnings for one or more quarters or years.
The Company has filed suit against numerous insurance carriers seeking
reimbursement for past and future remedial, defense and tort claim costs at a
number of sites. The carriers involved have denied coverage and are defending
these claims. No amounts have been recognized in the financial statements for
any future insurance recoveries.
36
<PAGE>
- --------------------------------------------------------------------------------
NOTE 8 STOCK OPTIONS
The Company has two stock option plans currently in effect under which future
grants may be issued: the 1992 Stock Option Plan (the "1992 Plan") and the 1992
Stock Option Plan for Non-Employee Directors (the "Directors' Plan").
Options granted under the 1992 Plan are generally exercisable in equal
cumulative installments over a three- to five-year period beginning one year
after the date of grant. Options granted under the Directors' Plan become
exercisable in five equal annual installments beginning six months after the
date of grant.
Under the 1992 Plan, non-qualified stock options may be granted at a price
equal to 100% of the market value on the date of grant, for a term of not less
than five years nor more than ten years. Twelve million five hundred thousand
shares of the Company's common stock were initially reserved for issuance under
this plan.
Pursuant to the Directors' Plan, 150,000 shares of the Company's common stock
were initially reserved. Options for 15,000 shares are to be granted, at the
time of election to the Board, to each person who is not an officer or full-time
employee of the Company or any of its subsidiaries.
As part of the acquisitions of the CWM and Rust shares not previously owned by
the Company, as discussed in Note 4, outstanding CWM stock options were
converted into options to acquire approximately 2,873,000 Company shares at
prices of $21.97 to $63.33 per share and outstanding Rust stock options were
converted into options to acquire approximately 1,976,000 Company shares at
prices of $21.39 to $40.10 per share.
The status of the plans, including predecessor plans and replacement plans
(together "Prior Plans") under which options remain outstanding, during the
three years ended December 31, 1995, was as follows:
<TABLE>
<CAPTION>
Shares Option Price
- -----------------------------------------------------------------------
<S> <C> <C>
JANUARY 1, 1993--
Outstanding 9,783 $ 3.46 -- $41.80
Available for future grant 14,822 --
------
1993--
Granted 2,957 $30.90 -- $38.45
Exercised 551 $ 3.46 -- $35.44
Cancelled--
Prior Plans 179 $18.84 -- $41.80
Current plans 328 $30.69 -- $41.80
------
December 31, 1993--
Outstanding 11,682 $ 4.33 -- $41.80
Available for future grant 12,193 --
------
1994--
Granted 3,729 $24.33 -- $29.03
Exercised 462 $ 4.33 -- $25.72
Cancelled--
Prior Plans 312 $14.72 -- $41.80
Current plans 826 $ 8.57 -- $41.80
Additional shares available for future grant 6,000 --
------
December 31, 1994--
Outstanding 13,811 $ 7.20 -- $41.80
Available for future grant 15,290 --
------
1995--
Granted 3,117 $23.21 -- $28.90
Exercised 721 $ 7.20 -- $30.69
Cancelled--
Prior Plans 1,111 $21.39 -- $63.33
Current plans 316 $26.48 -- $41.80
Converted CWM and Rust stock options 4,849 $21.39 -- $63.33
Shares no longer available for future grant 2,914 --
------
December 31, 1995--
Outstanding 19,629 $ 8.57 -- $63.33
Available for future grant 4,726 --
======
</TABLE>
Options were exercisable with respect to 9,859,656 shares at December 31,
1995.
37
<PAGE>
- --------------------------------------------------------------------------------
NOTE 9 CAPITAL STOCK
The Board of Directors has the authority to create and issue up to 50,000,000
shares of $1 par preferred stock at such time or times, in such series, with
such designations, preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions thereof as it may
determine. No shares of the preferred stock have been issued.
Pursuant to a plan adopted by the Company in January 1987, each share of the
Company's common stock carries the right (referred to herein as a "Right") to
purchase one four-hundredth (subject to adjustment) of a share of Series A
Preferred Stock, $1.00 par value ("Preferred Stock"), at a price of $68.75
(subject to adjustment). The Rights are tradeable only with the Company's common
stock until they become exercisable. The Rights become exercisable ten days
after the earlier of a public announcement that a person has acquired 20% or
more of the Company's outstanding voting stock or a person's commencement or
announcement of a tender or exchange offer that would result in his owning 30%
or more of the Company's outstanding voting stock. The Rights are subject to
redemption by the Company at a price of $.0125 per Right, subject to certain
limitations, and will expire on February 6, 1997. The Preferred Stock carries
certain preferential dividend and liquidation rights and certain voting and
other rights.
If the Company or its assets are acquired in certain merger or other
transactions after a person acquires Company voting stock or commences or
announces an offer as provided above, each holder of a Right may purchase at the
exercise price of the Right, shares of common stock of the acquiring company
having a market value of two times the exercise price of the Right. If the
Company is the survivor in certain merger transactions or in the event of
certain other "self-dealing" transactions, each holder of a Right may purchase
at the exercise price of the Right, shares of Preferred Stock having a market
value of twice the exercise price of the Right. Rights held by an acquiring
person become void upon the occurrence of such events.
On December 8, 1995, the Board of Directors of the Company authorized the
repurchase by the Company of up to 25 million shares of its comon stock from
time to time in the open market or in privately negotiated transactions over a
24-month period. On the same date, the Board of Directors of WTI authorized WTI
to repurchase up to 20 million shares of its common stock over a 24-month
period. Both authorizations replaced existing common stock repurchase programs.
- --------------------------------------------------------------------------------
NOTE 10 EARNINGS PER SHARE
Earnings per share are computed on the basis of the weighted average number of
common and common equivalent shares outstanding during each year. Common stock
equivalents relate primarily to the impact of options outstanding under the
Company's stock option plans.
The following table reconciles the number of common shares shown as
outstanding in the Consolidated Balance Sheets with the number of common shares
used in computing earnings per share:
<TABLE>
<CAPTION>
1994 1995
- --------------------------------------------------------
<S> <C> <C>
Common shares issued, net of
Employee Stock Benefit Trust shares
per Consolidated Balance Sheets 484,000 487,047
Effect of shares issuable under
stock options after applying
the "treasury stock" method 396 627
Effect of using weighted average
common shares outstanding
during the year (252) (1,702)
------- -------
Common shares used in computing
earnings per share 484,144 485,972
======= =======
</TABLE>
- --------------------------------------------------------
NOTE 11 COMMITMENTS AND CONTINGENCIES
The Company leases several of its operating and office facilities for various
terms. Rents charged to costs and expenses in the Consolidated Statements of
Income amounted to $178,039,000 in 1993, $197,969,000 in 1994 and $186,248,000
in 1995. These amounts include rents under long-term leases, short-term
cancellable leases and rents charged as a percentage of revenue, but are
exclusive of financing leases capitalized for accounting purposes.
The long-term rental obligations as of December 31, 1995, are due as follows:
<TABLE>
<CAPTION>
<S> <C>
First year $ 170,311
Second year 152,711
Third year 140,162
Fourth year 132,892
Fifth year 126,872
Sixth through tenth years 545,675
Eleventh year and thereafter 329,046
----------
$1,597,669
==========
</TABLE>
During 1994 and 1995, the Company sold put options on 31.6 million 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. Proceeds from the sale of put options were credited to additional paid-
in capital. The amount the Company would be obligated to pay to repurchase
shares of its common stock if all outstanding put options were exercised has
been reclassified to a temporary equity account. In the event the options are
exercised, the Company may elect to pay the holder in cash the difference
between the strike price and the market price of the Company's shares, in lieu
of repurchasing the stock.
Options on 17.9 million shares expired unexercised in 1994 and 1995, as the
price of the Company's stock was in excess of the strike price at maturity.
Options on 4.7 million shares were exercised in February 1995, and the Company
elected to settle them for cash at a total cost of $12,019,000. The remaining
9.0 million options expire at various dates in 1996, at strike prices ranging
from $27.34 to $31.45 per share.
The Company's insurance program includes coverage for pollution liability
resulting from "sudden and accidental" releases of contaminants and pollutants.
Management believes that the coverage terms, available limits of liability, and
costs currently offered by
38
<PAGE>
- --------------------------------------------------------------------------------
the insurance market do not represent sufficient value to warrant the purchase
of "non-sudden and accidental" pollution liability insurance coverage. As such,
the Company has chosen not to purchase risk transfer "non-sudden and accidental"
pollution liability insurance coverage. To satisfy existing government
requirements, the Company has secured non-risk transfer pollution liability
insurance coverage in amounts believed to be in compliance with Federal and
State law requirements for "non-sudden and accidental" pollution. The Company
must reimburse the insurer for losses incurred and covered by this insurance
policy. In the event the Company continues not to purchase risk transfer "non-
sudden and accidental" pollution liability insurance coverage, the Company's net
income could be adversely affected in the future if "non-sudden and accidental"
pollution losses should occur.
The Company has issued or is a party to approximately 3,120 bank letters of
credit, performance bonds and other guarantees. Such financial instruments
(averaging approximately $639,000 each), including those provided for affiliates
and not otherwise recorded, are given in the ordinary course of business.
Because virtually no claims have been made against these financial instruments
in the past, management does not expect these instruments will have a material
adverse effect on the consolidated financial position or results of operations
of the Company.
Since 1994, WTI has been involved in litigation involving permits for the
construction and operation of the Lisbon, Connecticut, trash-to-energy plant.
These matters were resolved during 1995 and the plant began commercial
operations in January 1996.
During the first quarter of 1995, Waste Management International plc ("WM
International") received an assessment of approximately 417 million Krona
(approximately $62 million) from the Swedish Tax Authority, relating to a
transaction completed in 1990. WM International believes that all appropriate
tax returns and disclosures were properly filed at the time of the transaction
and intends to vigorously contest the assessment.
A subsidiary of Waste Management, Inc. ("WMI") has been involved in litigation
challenging a municipal zoning ordinance which restricted the height of its New
Milford, Connecticut landfill to a level below that allowed by the permit
previously issued by the Connecticut Department of Environmental Protection
("DEP"). Although a lower court declared the zoning ordinance's height
limitation unconstitutional, the Connecticut Supreme Court reversed that ruling
and remanded the case for further proceedings in the Superior Court. In November
1995, the Superior Court ordered the WMI subsidiary to apply to the DEP for
permission to remove all waste above the height allowed by the zoning ordinance.
The Company believes that removal of such waste is an inappropriate remedy and
has appealed the Superior Court order to the state Supreme Court. The Company is
unable to predict the outcome of the appeal or the nature and extent of the
removal action that may ultimately be required following further appeals or as a
result of the permitting process. However, if the Superior Court order as to
removal of the waste is not modified, the subsidiary could incur substantial
costs, which could vary significantly depending upon the nature of any plan
which is eventually approved by applicable regulatory authorities for removing
the waste, the actual volume of waste to be moved and other currently
unforeseeable factors, and which could have a material adverse effect on the
Company's financial condition and results of operations in one or more future
periods.
In the ordinary course of conducting its business, the Company becomes
involved in lawsuits, administrative proceedings and governmental
investigations, including antitrust and environmental matters. Some of these
proceedings may result in fines, penalties or judgments being assessed against
the Company which, from time to time, may have an impact on earnings for a
particular quarter or year. The Company does not believe that these proceedings,
individually or in the aggregate, are material to its business or financial
condition.
- --------------------------------------------------------------------------------
NOTE 12 BENEFIT PLANS
The Company has a defined benefit pension plan for all eligible non-union
domestic employees of WMX, CWM and WMI. The benefits are based on the employee's
years of service and compensation during the highest five consecutive years out
of the last ten years of employment. The Company's funding policy is to
contribute annually the minimum required amount determined by its actuaries.
Net periodic pension expense for 1993, 1994 and 1995, based on discount rates
of 8.50% for all three years, included the following components:
<TABLE>
<CAPTION>
1993 1994 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,785 $ 11,075 $ 11,752
Interest cost on projected benefit obligation 9,507 11,532 13,228
Expected return on plan assets (11,055) (12,335) (13,237)
Net amortization and deferral (1,451) (1,310) 33
-------- -------- --------
Net periodic pension expense $ 7,786 $ 8,962 $ 11,776
======== ======== ========
</TABLE>
Assumptions, used to determine the plan's funded status as of December 31, are
as follows:
<TABLE>
<CAPTION>
1994 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 8.5% 7.75%
Rate of increase in compensation levels 4.0% 4.0%
Expected long-term rate of return on assets 9.0% 9.0%
</TABLE>
The following table sets forth the plan's funded status and the amount
recognized in the Company's Consolidated Balance Sheets at December 31, 1994 and
1995 for its pension plan:
<TABLE>
<CAPTION>
1994 1995
- ----------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligations,
including vested benefits
of $120,881 and $152,031 at
December 31, 1994 and 1995,
respectively $(136,713) $(167,287)
========= =========
Projected benefit obligation $(156,609) $(191,059)
Plan assets at fair value,
primarily common stocks,
bonds and real estate 136,740 167,068
--------- ---------
Plan assets less than
projected benefit obligation $ (19,869) $ (23,991)
Unrecognized net loss 39,304 29,801
Unrecognized overfunding at
date of adoption (January 1, 1985)
of FAS No. 87, net of amortization,
being recognized over 15 years (8,727) (6,422)
--------- ---------
Pension cost included in
prepaid (accrued) expenses $ 10,708 $ (612)
========= =========
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
The Company also has a non-qualified defined benefit plan for officers of WMX,
CWM and WMI who have served in such capacities for at least 10 years at the time
of retirement. The benefits are based on the officer's years of service and
compensation during the highest three consecutive years out of the last ten
years of employment. The benefits are reduced by such officer's benefits under
the pension plan. This plan is not funded. Expense for 1993, 1994 and 1995 for
this plan was $2,551,000, $3,418,000 and $4,202,000, respectively.
WM International participates in both defined benefit and defined contribution
retirement plans for its employees in various countries. The projected benefit
obligation and the plan assets of the WM International defined benefit plans are
not material. Other subsidiaries participate in various multi-employer pension
plans covering certain employees not covered under the Company's pension plan,
pursuant to agreements with collective bargaining units who are members of such
plans. These plans are generally defined benefit plans; however, in many cases,
specific benefit levels are not negotiated with or known by the employer-
contributors. Contributions of $15,242,000, $16,194,000 and $18,369,000 for
subsidiaries' defined contribution plans were made and charged to income in
1993, 1994 and 1995, respectively.
The following table analyzes the obligation for postretirement benefits other
than pensions (primarily health care costs), which is included in other deferred
items on the Consolidated Balance Sheets, as of December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
- -------------------------------------------------------
<S> <C> <C>
Accumulated Postretirement
Benefit Obligations:
Retirees $57,216 $52,255
Other fully eligible participants 10,960 9,682
Other active participants 9,478 10,695
------- -------
$77,654 $72,632
Unrecognized:
Prior service cost 627 566
Gain 9,501 7,911
------- -------
$87,782 $81,109
======= =======
</TABLE>
For measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1996; the rate was assumed to
decrease by 0.5% per year to 6.0% in 2001 and remain at that level thereafter.
Increasing the assumed health care cost trend by one percentage point in each
year would increase the accumulated postretirement benefit obligation as of
December 31, 1995 by approximately $4,341,000, and the aggregate of the service
and interest cost components of net postretirement health care cost for 1995 by
approximately $403,000. The weighted-average discount rate used in determining
the accumulated postretirement benefit obligation was 8.5% in 1994 and 7.75% in
1995.
The expense for postretirement health care benefits was $7,300,000 in 1993,
$4,668,000 in 1994 and $5,359,000 in 1995. The service and interest components
of the expense were $3,000,000 and $4,300,000, respectively, in 1993, $1,049,000
and $3,619,000, respectively, in 1994, and $1,094,000 and $4,265,000,
respectively, in 1995.
The Company has an Employee Stock Ownership Plan ("1988 ESOP") for all
eligible non-union United States and Canadian employees of WMX, CWM and WMI. The
benefits are based on the employee's years of service and compensation. The
Company contributes each year an amount, if any, determined by the Board of
Directors of the Company.
Information concerning the 1988 ESOP is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
Expense recorded (contribution) $7,329 $7,930 $6,667
====== ====== ======
Interest expense on 1988 ESOP debt $1,510 $1,965 $1,147
====== ====== ======
Dividends on unallocated
1988 ESOP shares used
by the 1988 ESOP $ 964 $ 780 $ 555
====== ====== ======
</TABLE>
The Company has a Profit Sharing and Savings Plan ("PSSP") available to
certain employees of WMX, CWM and WMI. The terms of the PSSP allow for annual
contributions by the Company as determined by the Board of Directors as well as
a match of employee contributions up to $500 per employee ($750 effective
January 1, 1996). Charges to operations for the PSSP were $11,589,000 in 1993,
$27,334,000 in 1994 and $24,882,000 in 1995. Rust, WTI and WM International also
sponsor non-contributory and contributory defined contribution plans covering
both salaried and hourly employees. Employer contributions are generally based
upon fixed amounts of eligible compensation and amounted to $18,614,000,
$23,431,000 and $23,017,000 during 1993, 1994 and 1995, respectively.
Effective January 1, 1994, the Company and its principal subsidiaries adopted
FAS No. 112, "Employers' Accounting for Postemployment Benefits." This new
statement established accounting standards for employers who provide benefits to
former or inactive employees after employment but before retirement. The
adoption of FAS 112 did not have a significant effect on earnings, because the
Company's accounting prior to adoption was substantially in compliance with the
new standard.
During 1994, the Company established an Employee Stock Benefit Trust and sold
12.6 million 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.
40
<PAGE>
- --------------------------------------------------------------------------------
NOTE 13 COMPANY'S OPERATIONS IN DIFFERENT INDUSTRIES AND GEOGRAPHICAL AREAS
The analysis of operations by industry segment which follows reflects the
Company's traditional management structure of five principal subsidiaries, each
of which has operated in a relatively discrete portion of the environmental
services industry or geographic area. WMI has provided integrated solid waste
services and CWM has provided hazardous waste collection, transportation,
treatment and disposal services in North America. WM International has provided
these services, as well as trash-to-energy services, outside North America. WTI
has been 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 has served the environmental and infrastructure
engineering and consulting, and on-site industrial and related services markets
in the United States and a number of foreign countries.
Whereas solid waste, hazardous waste and trash-to-energy operations have been
performed by three distinct organizations in North America, these services have
been provided internationally by a single management organization. Because of
the different business environment for international operations, the Company has
managed these as a discrete segment. Following is an analysis of the Company's
continuing operations by these historical segments.
<TABLE>
<CAPTION>
Trash-To-Energy, International
Engineering, Water Treatment, Waste Corporate
Solid Hazardous Industrial and Air Quality and Management and
Waste Waste Related Services Related Services Services Eliminations(1) Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993
Revenue $4,702,166 $ 661,860 $1,035,004 $1,142,219 $1,411,211 $(316,344) $ 8,636,116
Operating expenses
including goodwill
amortization 3,193,183 506,264 808,694 792,719 1,009,145 (309,914) 6,000,091
Special charge -- 550,000 -- -- -- -- 550,000
Selling and
administrative expenses 547,413 128,058 131,575 107,276 198,969 (9,267) 1,104,024
---------- ---------- ---------- ---------- ---------- --------- -----------
Income from operations $ 961,570 $ (522,462) $ 94,735 $ 242,224 $ 203,097 $ 2,837 $ 982,001
========== ========== ========== ========== ========== ========= ===========
Identifiable assets $6,912,271 $1,498,631 $1,360,703 $3,081,709 $3,315,621 $(169,169) $15,999,766
========== ========== ========== ========== ========== ========= ===========
Depreciation and
amortization expense $ 461,963 $ 63,971 $ 43,971 $ 75,323 $ 121,050 $ 22,084 $ 788,362
========== ========== ========== ========== ========== ========= ===========
Capital expenditures(2) $1,139,004 $ 157,786 $ 124,754 $ 303,905 $ 403,326 $ 26,009 $ 2,154,784
========== ========== ========== ========== ========== ========= ===========
1994
Revenue $5,117,871 $ 649,581 $1,140,294 $1,324,567 $1,710,862 $(388,470) $ 9,554,705
Operating expenses
including goodwill
amortization 3,502,445 454,765 915,129 915,237 1,244,597 (380,393) 6,651,780
Selling and
administrative expenses 549,608 105,736 153,230 119,380 230,014 1,532 1,159,500
---------- ---------- ---------- ---------- ---------- --------- -----------
Income from operations $1,065,818 $ 89,080 $ 71,935 $ 289,950 $ 236,251 $ (9,609) $ 1,743,425
========== ========== ========== ========== ========== ========= ===========
Identifiable assets $7,388,766 $1,375,341 $1,472,263 $3,276,611 $4,037,922 $(311,381) $17,239,522
========== ========== ========== ========== ========== ========= ===========
Depreciation and
amortization expense $ 479,333 $ 59,381 $ 57,542 $ 95,254 $ 154,575 $ 24,514 $ 870,599
========== ========== ========== ========== ========== ========= ===========
Capital expenditures(2) $ 950,383 $ 57,983 $ 57,242 $ 115,082 $ 304,999 $ 20,397 $ 1,506,086
========== ========== ========== ========== ========== ========= ===========
1995
Revenue $5,642,857 $ 613,883 $1,027,430 $1,451,675 $1,865,081 $(353,309) $10,247,617
Operating expenses
including goodwill
amortization 3,806,798 463,984 816,528 1,015,269 1,410,282 (350,309) 7,162,552
Special charges -- 140,600 -- -- 194,593 -- 335,193
Selling and
administrative expenses 578,290 94,551 135,012 130,976 235,807 -- 1,174,636
---------- ---------- ---------- ---------- ---------- --------- -----------
Income from operations $1,257,769 $ (85,252) $ 75,890 $ 305,430 $ 24,399 $ (3,000) $ 1,575,236
========== ========== ========== ========== ========== ========= ===========
Identifiable assets $8,506,954 $1,159,467 $1,387,565 $3,220,193 $4,235,589 $ 54,988 $18,564,756
========== ========== ========== ========== ========== ========= ===========
Depreciation and
amortization expense $ 457,820 $ 48,860 $ 49,796 $ 107,814 $ 181,341 $ 32,041 $ 877,672
========== ========== ========== ========== ========== ========= ===========
Capital expenditures(2) $1,101,312 $ 65,080 $ 34,606 $ 45,101 $ 263,352 $ 31,624 $ 1,541,075
========== ========== ========== ========== ========== ========= ===========
</TABLE>
(1) Includes corporate office and elimination of intercompany transactions.
(2) Includes property and equipment of purchased businesses.
41
<PAGE>
- --------------------------------------------------------------------------------
As a result of a strategic review begun in 1994, management and operations of
the Company have been realigned on the basis of four principal global lines of
business -- waste services, clean energy, clean water, and environmental and
infrastructure engineering and consulting. The following table analyzes
continuing operations on a line-of-business basis.
<TABLE>
<CAPTION>
Environmental and
Infrastructure
Waste Clean Clean Engineering and Corporate and
Services Energy Water Consulting Eliminations(2) Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993
Revenue $ 7,457,371 $ 804,016 $392,194 $298,879 $(316,344) $ 8,636,116
Operating expenses including
goodwill amortization 5,259,571 532,619 294,525 223,290 (309,914) 6,000,091
Special charge 550,000 -- -- -- -- 550,000
Selling and administrative expenses 956,588 46,899 63,937 45,867 (9,267) 1,104,024
----------- ---------- -------- -------- --------- -----------
Income from operations $ 691,212 $ 224,498 $ 33,732 $ 29,722 $ 2,837 $ 982,001
=========== ========== ======== ======== ========= ===========
Identifiable assets $12,356,320 $2,196,145 $485,349 $297,258 $ 664,694 $15,999,766
=========== ========== ======== ======== ========= ===========
Depreciation and
amortization expense $ 693,819 $ 62,777 $ 21,446 $ 10,320 $ -- $ 788,362
=========== ========== ======== ======== ========= ===========
Capital expenditures(1) $ 1,802,781 $ 209,091 $112,965 $ 26,718 $ 3,229 $ 2,154,784
=========== ========== ======== ======== ========= ===========
1994
Revenue $ 8,140,785 $ 888,037 $489,295 $425,058 $(388,470) $ 9,554,705
Operating expenses including
goodwill amortization 5,738,990 589,610 369,592 333,981 (380,393) 6,651,780
Selling and administrative expenses 971,075 44,032 78,615 64,246 1,532 1,159,500
----------- ---------- -------- -------- --------- -----------
Income from operations $ 1,430,720 $ 254,395 $ 41,088 $ 26,831 $ (9,609) $ 1,743,425
=========== ========== ======== ======== ========= ===========
Identifiable assets $13,470,901 $2,152,458 $587,480 $402,053 $ 626,630 $17,239,522
=========== ========== ======== ======== ========= ===========
Depreciation and
amortization expense $ 751,251 $ 62,460 $ 40,813 $ 16,075 $ -- $ 870,599
=========== ========== ======== ======== ========= ===========
Capital expenditures(1) $ 1,374,893 $ 76,392 $ 35,725 $ 14,576 $ 4,500 $ 1,506,086
=========== ========== ======== ======== ========= ===========
1995
Revenue $ 8,634,836 $ 893,513 $618,472 $454,105 $(353,309) $10,247,617
Operating expenses including
goodwill amortization 6,099,597 574,865 477,842 360,557 (350,309) 7,162,552
Special charges 325,336 9,857 -- -- -- 335,193
Selling and administrative expenses 972,018 44,751 89,922 67,945 -- 1,174,636
----------- ---------- -------- -------- --------- -----------
Income from operations $ 1,237,885 $ 264,040 $ 50,708 $ 25,603 $ (3,000) $ 1,575,236
=========== ========== ======== ======== ========= ===========
Identifiable assets $14,535,905 $2,025,491 $612,824 $392,486 $ 998,050 $18,564,756
=========== ========== ======== ======== ========= ===========
Depreciation and
amortization expense $ 742,148 $ 73,098 $ 44,744 $ 17,682 $ -- $ 877,672
=========== ========== ======== ======== ========= ===========
Capital expenditures(1) $ 1,485,958 $ 12,404 $ 33,415 $ 9,288 $ 10 $ 1,541,075
=========== ========== ======== ======== ========= ===========
</TABLE>
(1) Includes property and equipment of purchased businesses.
(2) Includes corporate office and elimination of intersegment transactions.
42
<PAGE>
- --------------------------------------------------------------------------------
Foreign operations in 1995 were conducted in 10 countries in Europe, eight
countries in the Asia Pacific region, and Canada, Brazil, Mexico, Israel, and
Argentina. The information relating to the Company's foreign operations is set
forth in the following tables:
<TABLE>
<CAPTION>
United Other
States Europe Foreign Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Revenue $ 6,994,757 $1,241,811 $399,548 $ 8,636,116
=========== ========== ======== ===========
Income from operations $ 754,502 $ 184,412 $ 43,087 $ 982,001
=========== ========== ======== ===========
Identifiable assets $12,444,968 $2,955,078 $599,720 $15,999,766
=========== ========== ======== ===========
1994
Revenue $ 7,427,611 $1,504,154 $622,940 $ 9,554,705
=========== ========== ======== ===========
Income from operations $ 1,476,067 $ 198,251 $ 69,107 $ 1,743,425
=========== ========== ======== ===========
Identifiable assets $12,628,264 $3,725,393 $885,865 $17,239,522
=========== ========== ======== ===========
1995
Revenue $ 7,837,050 $1,800,768 $609,799 $10,247,617
=========== ========== ======== ===========
Income from operations $ 1,515,729 $ 17,951 $ 41,556 $ 1,575,236
=========== ========== ======== ===========
Identifiable assets $13,769,141 $3,920,962 $874,653 $18,564,756
=========== ========== ======== ===========
</TABLE>
No single customer accounted for as much as 3% of consolidated revenue in
1993, 1994 and 1995.
WM International operates facilities in Hong Kong which are owned by the Hong
Kong government. On July 1, 1997, control of the Hong Kong government transfers
to mainland China. WM International is unable to predict what impact, if any,
this change will have on its operations in Hong Kong. At December 31, 1995, WM
International had identifiable assets of $242.5 million related to its Hong Kong
operations, which generated 1995 pretax income of approximately $16.5 million.
- --------------------------------------------------------------------------------
NOTE 14 SPECIAL GAINS AND CHARGES
During the third quarter of 1993, the Company recorded a special charge of
$550.0 million (before tax and minority interest) as a result of CWM recording a
special asset revaluation and restructuring charge. The charge consisted of
$381.0 million to write down assets, primarily incinerators, and $169.0 million
for cash expenditures. Substantially all of the cash expenditures were made as
of December 31, 1994. As a result of this program, overhead, including
depreciation and amortization, was reduced in 1994 by approximately $60 million
on an annualized basis.
Results for 1993 include a non-taxable gain of $15.1 million (before minority
interest) relating to the second quarter issuance of shares by Rust in
connection with the acquisition of the minority interest in a subsidiary.
In 1994, Rust recorded a charge of $9.2 million (before tax and minority
interest) for the writeoff of assets and the recognition of one-time costs
incurred during the fourth quarter in connection with the discontinuance of its
marine construction and dredging operations, and the closing of offices in a
consolidation of its other operations. This charge is included in Operating
Expenses ($6.6 million) and Selling and Administrative Expenses ($2.6 million)
in the Consolidated Statement of Income.
In the first quarter of 1995, in response to the continuing deterioration of
the chemical waste services market, CWM took additional steps to realign its
organization, and in connection therewith, recorded a special charge of $140.6
million before tax ($91.4 million after tax or $.19 per WMX share). The charge
related primarily to a write-off of the investment in facilities and
technologies that CWM abandoned because they do not meet customer service or
performance objectives, but also includes $22.0 million of future cash payments
for rents under non-cancellable leases, guaranteed bank obligations of a joint
venture, and employee severance. The majority of the cash expenditures were paid
in 1995, although certain of the non-cancellable leases extend through the year
2002.
In the fourth quarter of 1995, WM International recorded an exceptional charge
of $194.6 million ($152.4 million after tax) primarily related to the actions it
is taking to sell or otherwise dispose of non-core businesses and investments,
as well as core businesses and investments in low potential markets, abandon
certain hazardous waste treatment and processing technologies, and streamline
its country management organization. The charge reduced the Company's income by
approximately $153.3 million before tax ($111.0 million after tax). The charge
included $34.3 million of cash payments for employee severance and rents under
non-cancellable leases. Approximately $11.2 million of the cash costs were paid
prior to December 31, 1995. The majority of the balance will be paid in early
1996, although certain rent payments on leased facilities will continue into the
future. WM International expects that upon completion of these actions, overhead
will be reduced by approximately $20 million annually, which management plans to
invest in new marketing initiatives and operational productivity enhancements.
43
<PAGE>
- --------------------------------------------------------------------------------
NOTE 15 DISCONTINUED OPERATIONS
In December 1995, the Rust Board of Directors approved a plan to sell or
otherwise discontinue Rust's process engineering, construction, specialty
contracting and similar lines of business and have Rust focus on its
environmental and infrastructure engineering and consulting businesses. The
discontinued businesses have been segregated and the accompanying consolidated
balance sheets, statements of income and related footnote information have been
restated.
Rust has engaged investment bankers to assist it in valuing and identifying
potential buyers for the major business units to be sold, and expects to
complete the sales in 1996. Provision has been made for estimated loss on
disposal of the discontinued operations, net of related tax benefits and
minority interest, and is included in the 1995 consolidated statement of income.
The provision for loss includes management's best estimate of the amounts to be
realized on the sale of businesses and assets. The amounts Rust will ultimately
realize could differ materially in the near term from these estimates.
Revenues of the discontinued businesses were $499,461,000 in 1993,
$542,613,000 in 1994, and $731,731,000 in 1995. Following is a summary of the
assets and liabilities as of December 31, 1994 and 1995, which are reflected on
the consolidated balance sheets as net assets of discontinued operations:
<TABLE>
<CAPTION>
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 136,466 $ 163,662
Property and equipment
and other noncurrent assets 162,926 94,251
Current liabilities (111,718) (122,529)
Noncurrent liabilities (4,023) (4,832)
--------- ---------
Net assets of
discontinued operations $ 183,651 $ 130,552
========= =========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 16 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of FAS No. 107, "Disclosures about Fair
Value of Financial Instruments." The estimated fair value amounts have been
determined by the Company, using available market information and commonly
accepted valuation methodologies. However, considerable judgment is necessarily
required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company or holders of the instruments could realize in a
current market exchange. The use of different assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The fair value estimates presented herein are based on information available to
management as of December 31, 1994, and December 31, 1995. Such amounts have not
been revalued since those dates, and current estimates of fair value may differ
significantly from the amounts presented herein.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1995
- --------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonderivatives--
Assets--
Cash and cash equivalents $ 123,348 $ 123,348 $ 189,031 $ 189,031
Receivables 1,887,923 1,887,923 1,889,721 1,889,721
Short-term investments 19,704 19,704 36,243 36,243
Liabilities--
Commercial paper 946,702 944,837 1,119,356 1,120,209
Project debt 764,859 828,320 735,646 880,619
Liquid Yield Option Notes and
WMX Subordinated Notes 505,140 500,410 539,352 576,024
Other borrowings 4,718,396 4,586,522 5,120,421 5,319,414
Derivatives relating to debt -- 1,653 -- (74)
Other derivatives carried as--
Assets (in Other Assets) 307 307 -- --
Liabilities (in Accrued Expenses) (1,105) (16,245) (65) (16,647)
Letters of credit, performance bonds
and guarantees -- -- -- --
</TABLE>
44
<PAGE>
- --------------------------------------------------------------------------------
CASH, RECEIVABLES AND SHORT-TERM INVESTMENTS The carrying amounts of these
items are a reasonable estimate of their fair value.
LIABILITIES For debt issues that are publicly traded, fair values are based on
quoted market prices or dealer quotes. Due to the short-term nature of the ESOP
notes, their carrying value approximates fair value. Interest rates that are
currently available to the Company for issuance of debt with similar terms and
remaining maturities are used to estimate fair value for debt issues that are
not quoted on an exchange.
DERIVATIVES The fair value of derivatives generally reflects the estimated
amounts that the Company would receive or pay to terminate the contracts at
December 31, thereby taking into account unrealized gains and losses. Dealer
quotes are available for most of the Company's derivatives. Deferred gains and
losses are shown as assets and liabilities, as offsetting such amounts against
the related nonderivative instrument is permitted only pursuant to a right of
setoff or master netting agreement.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS In the normal course of business, the
Company is a party to financial instruments with off-balance-sheet risk, such as
bank letters of credit, performance bonds and other guarantees, which are not
reflected in the accompanying balance sheets. Such financial instruments are to
be valued based on the amount of exposure under the instrument and the
likelihood of performance being required. In the Company's experience, virtually
no claims have been made against these financial instruments. Management does
not expect any material losses to result from these off-balance-sheet
instruments and, therefore, is of the opinion that the fair value of these
instruments is zero.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is an analysis of certain items in the Consolidated Statements of Income by quarter for 1994 and 1995.
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Revenue $2,170,661 $2,420,106 $2,459,336 $2,504,602 $ 9,554,705
Gross profit 649,818 747,041 749,669 756,397 2,902,925
Income from continuing operations 161,777 202,155 207,093 205,466 776,491
Net income 162,612 203,117 212,885 205,767 784,381
Income from continuing operations
per common and common equivalent share .33 .42 .43 .42 1.60
Net income per common
and common equivalent share .34 .42 .44 .42 1.62
1995
Revenue $2,445,185 $2,635,665 $2,619,227 $2,547,540 $10,247,617
Gross profit 591,125 788,929 794,941 574,877 2,749,872
Income from continuing operations 101,292 212,462 230,801 110,035 654,590
Net income 101,245 219,127 233,848 49,679 603,899
Income from continuing operations
per common and common equivalent share .21 .44 .47 .23 1.35
Net income per common
and common equivalent share .21 .45 .48 .10 1.24
</TABLE>
See Note 14 to Consolidated Financial Statements for a discussion of the
special charges affecting the 1994 fourth quarter and full year results and the
1995 first quarter, fourth quarter and full year results.
See Note 15 to Consolidated Financial Statements for a discussion of the
decision to discontinue certain operations, announced during the fourth quarter
of 1995.
45
<PAGE>
Exhibit 21
SUBSIDIARIES OF WMX TECHNOLOGIES, INC.
The following is a list of all direct and indirect subsidiaries of the
registrant as of March 1, 1996. The state or other jurisdiction of
incorporation or organization is indicated in parentheses following each
subsidiary's name. The names of the divisions or other business units of each
subsidiary are indented and listed below the relevant subsidiary's name.
A & B Builders, Inc. (Texas)
AB Frakttjanst (Sweden)
AB Gosta M. Skoglund (Sweden)
Advanced Environmental Technical Services, L.L.C. (Delaware)
Aero-Metric, Inc. (Wisconsin)
Allegheny Industrial Electrical Company, Inc. (Delaware)
Am.Eco S.r.l. (Italy)
American Refuse Systems, Inc. (North Carolina)
Applied Environmental Consulting, Inc. (California)
Applied Environmental, Inc. (California)
Arabian Cleaning Enterprise, Ltd. (Saudi Arabia)
Arkansas Valley Waste Limited Partnership (Illinois)
Ark BV (Netherlands)
ARS - Waste Management, Ltd. (Illinois)
Aseo S.A. (Argentina)
Aspica s.r.l. (Italy)
Aurec (Germany)
Automated Disposal Systems, Inc. (Delaware)
Automotive Industrial Recyclers Holding Company (Florida)
Automative Industrial Recovery Systems, Inc. (Florida)
Auxiwaste SA (France)
Avica S.r.l. (Italy)
Bajamaja OY (Finland)
Belpar Chemical Services, Inc. (West Virginia)
Benfur Engineering Company (Delaware)
Bensalem Power Company (Pennsylvania)
BICS of Tennessee, Inc. (Tennessee)
Bio-Energy Partners (Illinois)
Bio Gro Acquisition Sub, Inc. (Delaware)
Bio Gro Florida, Inc. (Florida)
Brand Air, Inc. (Delaware)
Brand Construction Services, Inc. (Delaware)
Brand Demolition Services, Inc. (Delaware)
Brand Insulations, Inc. (Illinois)
<PAGE>
Brand Marine Services, Inc. (Delaware)
Brand Remediation Services, Inc. (Delaware)
Brand Services, Inc. (Delaware)
BRINI of North America, Inc. (Connecticut)
Bristol Contract Services Limited (United Kingdom)
Brundidge Waste Disposal Center, Inc. (Alabama)
Burton, Adams, Kemp & King, Inc. (North Carolina)
Bury House Limited (United Kingdom)
California Acquisition Sub, Inc. (Delaware)
Canada Crinc, Ltd. (New Brunswick)
C. A. van Vliet Containertransport (Netherlands)
C. A. van Vliet Techneik B.V. (Netherlands)
Cedar Hammock Refuse Disposal Corporation (Florida)
Waste Management of Manatee County
Waste Management of Sarasota County
Cemtech L.P. (Delaware)
Cemtech Management, Inc. (Delaware)
Central Service Corporation (Florida)
Ceriani Cave (Italy)
Chamberlain Resources, Inc. (Arizona)
Charlotte Landscaping and Sanitation Services, Inc. (Florida)
Chemical Waste Management, Inc. (Delaware)
Controlled Waste
CWM Remedial Services
CWM Transportation
Technical Services
Trade Waste Incineration
Waste Reduction Services
Waste Separation Technologies
Chemical Waste Management Clemson Technical Center, Inc. (South Carolina)
Chemical Waste Management de Mexico, S.A. de C.V. (Mexico)
Chemical Waste Management of Indiana, L.L.C. (Delaware)
Chemical Waste Management of Kansas, Inc. (Kansas)
Chemical Waste Management of New Jersey, Inc. (New Jersey)
Chemical Waste Management of Pennsylvania, Inc. (Delaware)
Chemical Waste Management of the Northwest, Inc. (Washington)
Chem-Nuclear Systems, Inc. (Delaware)
CID MRRF, Inc. (Delaware)
CNSI Sub, Inc. (Delaware)
Community Refuse, Limited (Pennsylvania)
Compania Schreiber de Servicios (Spain)
Container Recycling Alliance, L.P. (Delaware)
Controlled Waste Materials, Inc. (Illinois)
Cord Industrienster Spykerisse BV (Netherlands)
2
<PAGE>
Cote D'Azur Assainissement (France)
Cote D'Azur Entretien (France)
County Wide Sanitation Partners, L.P. (Illinois)
CWM Cement, Inc. (Delaware)
CWM Chemical Services, Inc. (Delaware)
Chicago Incinerator Facility
Model City Facility
Memphis Service Facility
CWM Holdings, Inc. (Delaware)
CWM Resource Management, Inc. (Georgia)
CWM Resource Recovery, Inc. (Ohio)
Dan-Clean DK A/S (Denmark)
Dankompost APS (Denmark)
Dansk Miljotoilet A/S (Denmark)
Davies Bros (Waste) Ltd & Greenwood (DB) Containers Ltd. (England)
Debris Processors, Inc. (Virginia)
Indian Trail Disposal Facility
Decker Disposal, Inc. (Florida)
Waste Management of Sarasota County
Deconditionnement, Maintenance Et Securite SA ("DMS")
Demart Sarl (France)
Deponie Bentheim Entsorgung Verwaltungsgeskellschaft mbH (Germany)
Derichebourg Est (France)
Derichebourg Hygiene (France)
Derichebourg Ile De France (France)
Derichebourg Midi Pyrenees (France)
Derichebourg Nord (France)
Derichebourg Quest (France)
Derichebourg Sap Sarl (France)
Derichebourg Sas SA (France)
Derichebourg Services Sarl (France)
Derichebourg Seta SA (France)
Derichebourg Sud Quest Sarl (France)
Derichebourg Var Sarl (France)
Diversified Scientific Services, Inc. (Tennessee)
Dynastar, Inc. (Ohio)
Ecocentro s.p.a. (Italy)
Eco-Consult s.r.l. (Italy)
Ecol Italiana S.p.A. (Italy)
Ecol S.A. (Argentina)
Ecoservizi S.p.A. (Italy)
Ekenas Sopservice OB (Finland)
Eksjo Renhallning AB (Sweden)
EMICA S.r.l. (Italy)
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Enviro-Gro Technologies, Inc. (New York)
Enviro-Gro Technologies II, Inc. (New York)
Enviroland, Incorporated (Michigan)
Environmental Development Associates of North Carolina, Inc. (North Carolina)
Environmental Development Associates of New Jersey, Inc. (New Jersey)
Environmental Waste Concepts, Ltd. (Illinois)
Enviropace Limited (Hong Kong)
Envirotech Operating Services, Inc. (Delaware)
Envirotech Operating Services (Petaluma), Inc. (Delaware)
Eureco s.r.l. (Italy)
EUV Entsorgungs-u. Verwertungs-GmbH (Germany)
Fempack Limited (United Kingdom)
Fineco Italiana S.r.l. (Italy)
FJBCC Sarl (France)
France Metal Recyclage (France)
Franchi E Caserio S.r.l. (Italy)
Fratelli Visconti S.r.l. (Italy)
Gateway Waste Partners, L.P. (Illinois)
Gebr. Van Vliet B.V. (Netherlands)
General Nuclear Systems, Inc. (Delaware)
General Sanitation Corporation (Florida)
Geological Reclamation Operations and Waste Systems, Inc. (Pennsylvania)
Burlington County Resource Recovery Facilities Complex
G.R.O.W.S. Landfill
Meadowlands Baler Facility
Meadowland Recycling and Disposal Facility
Geopol S.A.R.L. (France)
Georgia Waste Systems, Inc. (Georgia)
B. J. Recycling and Disposal Facility
Chapman Waste Disposal
Georgia Waste Systems North
Rolling Hills Recycling and Disposal Facility
Waste Management of Augusta - Aiken
Waste Management of Atlanta
Waste Management of Cobb County
Waste Management of Macon
Gesam Gestione Servizi Ambientali S.p.A. (Italy)
GES Gesellschaft zur Entsorgung von Sekundaerrohstoffen mbH (Germany)
Gestion Des Rebuts D.M.P. Inc. (Quebec)
WMI Mauricie Bois - Franc
WMI Parc Hirondelles
Gestioni Ambientali (Italy)
Grand Disposal Partners, L.P. (Illinois)
Green Valley Landfill Limited (Hong Kong)
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Gruning GmbH Wertstoffaufbereitung und Containerdienst (Germany)
G.T.I. - Generale Trasporti Immondizie s.r.l. (Italy)
Gulf Disposal, Inc. (Florida)
Gulf Coast Recycling and Disposal Facility
Hall-ing Refuse Partners, L.P. (Illinois)
Harris Disposal Service, Inc. (Florida)
Harris Sanitation, Inc. (Florida)
Hedco Landfill Limited (United Kingdom)
Holiday Moss (Landfill) Limited (United Kingdom)
Hollander Industriediensten Amsterdam BV (Netherlands)
Ib Jorgensen Handelaktiesglskab (Denmark)
Ibka Industriservice A/S (Denmark)
Ichochema B.V. (Netherlands)
Icopower B.V. (Netherlands)
Icotech (Netherlands)
Icova B.V. (Netherlands)
Icova/Maltha Glascollecting B.V. (Netherlands)
ICRC Company (Delaware)
IGM International S.p.A. (Italy)
IGM S.p.A. (Italy)
Infectious Waste Management Limited Partnership (Illinois)
Ingenieria Urbana S.A. (Spain)
International Coal Refinery Company (Delaware)
IPS Quinte Inc. (Ontario)
IRA S.r.l. (Italy)
I.R.E. Pennsylvania, Inc. (Pennsylvania)
Italrifiuti S.p.A. (Italy)
Jaartsveld Groen En Milieu B.V. (Netherlands)
Jarsno Equipment Inc. (Ontario)
Jarsno International, Inc. (New York)
Jate-eero Oy (Finland)
Jatekyyti Oy (Finland)
Jinyuan Power Limited Partnership (Delaware)
Johnson Filtration Systems Inc. (Delaware)
Johnson Filtration Systems Limited (Ireland)
Just-Altpapier-Verwertung GmbH (Germany)
Just GmbH Rohstoffe fur die Papierindustrie (Germany)
Jydsk Miljoservice A/S (Denmark)
Kahle Landfill, Inc. (Missouri)
K & J Karppasen Kuljetus OY (Finland)
Karlstad Renhallnings AB (Sweden)
K. D. Scott Limited (United Kingdom)
Keene Road Landfill, Inc. (Florida)
Kennedy & Donkin Africa (Botswana) Partnership (Botswana)
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Kennedy & Donkin Africa (Malawi) Partnership (Malawi)
Kennedy & Donkin Building Services Limited (United Kingdom)
Kennedy & Donkin Generation & Industrial Limited (United Kingdom)
Kennedy & Donkin Information Systems Ltd. (United Kingdom)
Kennedy & Donkin International Ltd. (Hong Kong)
Kennedy & Donkin Ltd. (United Kingdom)
Kennedy & Donkin Malaysia Ltd. (Delaware)
Kennedy & Donkin (Middle East) Limited (Cyprus)
Kennedy & Donkin Overseas Ltd. (United Kingdom)
Kennedy & Donkin Power Ltd. (United Kingdom)
Kennedy & Donkin Quality Engineering Limited (United Kingdom)
Kennedy & Donkin Quality Inc. (Delaware)
Kennedy & Donkin Systems Control Ltd. (United Kingdom)
Kennedy & Donkin Transportation Ltd. (United Kingdom)
Keravan Hyotykaytto Oy (Finland)
Kiinteisto Oy Vaasan Kairatie 9 (Finland)
Klok Containers BV (Netherlands)
KNAB GmbH (Germany)
KNAB Zwischenlager Verwaltungs- ung Betriebsgesellschaft mbH (Germany)
Lake Disposal Partners, Ltd. (Illinois)
Landskrona-Svalovs Renhallnigs AB (Sweden)
Ljungby Renhallning & Transport AB (Sweden)
Ljusne Renhallnings AB (Sweden)
Loristan Services Limited (United Kingdom)
LSS & Associates, Inc. (Arizona)
Malardalens Tankservice AB (Sweden)
Manchester Tankers Limited (United Kingdom)
Mantank Cleaning Services Limited (United Kingdom)
M & O Waste Management Limited Partnership (Illinois)
Massachusetts Refusetech, Inc. (Delaware)
Materials Recovery, Inc. (Massachusetts)
Matrix Construction, Incorporated (Texas)
Matrix Engineering, Inc. (Texas)
Mellanaktoren AB (Sweden)
Mesne Lea Estates Limited (United Kingdom)
Meurthe Et Moselle Service Sarl (France)
Miami Valley Pressure Cleaning, Inc. (Ohio)
Middlemass Holdings Pty Limited (Australia)
Middlemass Industrial Services Pty Limited (Australia)
Mid-Ontario Equipment Ltd. (Ontario)
Midwest Transport, Inc. (Wisconsin)
Milieu Express B.V. (Netherlands)
Miljotjanst: Malardalan AB (Sweden)
Miljotjanst: Nykoping AB (Sweden)
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Miljotjanst: Sodermanland AB (Sweden)
Miljotjanst: Vastmanland AB (Sweden)
Miller Waste Partners, L.P. (Illinois)
Missouri Disposal Partners, L.P. (Illinois)
Modern Trash Removal of York, Inc. (Pennsylvania)
Modern Landfill
Mountain Indemnity Insurance Company (Vermont)
MPF Engineered Filtered Products Inc. (Ontario)
MRI Holding Company (Delaware)
M.S.T.S., Inc. (Delaware)
Mull Entsorgung West GmbH & Co. KG (Germany)
National Guaranty Insurance Company (Vermont)
National Industrial Constructors Inc. (Delaware)
National Seal Company (Illinois)
Nelanco, Ltd. (Missouri)
Neptune Microfloc, Incorporated (Oregon)
New England CR Inc. (Massachusetts)
New York Acquisition Sub, Inc. (Delaware)
NH/VT Energy Recovery Corporation (New Hampshire)
Nice Nettooyage Sarl (France)
Nichols Sanitation, Inc. (Florida)
Lake Placid Sanitation
North Broward County Resource Recovery Project, Inc. (Florida)
North Broward Holdings Inc. (Delaware)
Norwaste Limited (United Kingdom)
Nova Spurghi (Italy)
NSC Sales Corp. (Virgin Islands)
Ocean Combustion Service, B.V. (Netherlands)
Ocean Combustion Service GmbH (West Germany)
Ocean Combustion Service, N.V. (Belgium)
Ocmulgee Disposal, Inc. (Georgia)
Oil & Solvent Process Company (California)
Oljy-Karelia KY (Finland)
Olshan Demolishing Company, Inc. (Texas)
Ostjydsk Industrirenovation A/S (Denmark)
O.V.E.R. s.r.l. (Italy)
Pacific Waste Management Holdings Pty. Limited. (Australia)
Pacific Waste Manaagement Pte. Ltd. (Singapore)
Pacific Waste Management Pty Limited (Australia)
Pacific Waste Management Limited (Hong Kong)
Pacific Waste Management Ltd. (New Zealand)
Paega (Italy)
Papierabfallentsorgung Gellschaft mbH (Austria)
Park Services, Inc. (Delaware)
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Pecol S.r.l. (Italy)
Penn-Warner Club, Inc. (Delaware)
Peterson-KNAB GmbH (Germany)
Phoenix Systems, Inc. (Maryland)
Piacentii Srl (Italy)
Piacenza AMB (Italy)
Pilmuir Waste Disposal Limited (United Kingdom)
Pingliang Power Limited Partnership (Delaware)
P.I.T.E.F. S.r.l. (Italy)
Plant Control Services, Inc. (Texas)
Progesam Ecosistenmi S.r.l. (Italy)
PT Waste Management Indonesia (Indonesia)
Pullman-Hoffman, Inc. (Ohio)
Pullman Plumbing, Pipefitting & Mechanical, Inc. (West Virginia)
Pullman Power Products Corporation (Delaware)
Pullman Power Products International Corporation (Delaware)
Pullman Power Products of Canada Limited (Canada)
Pullman Torkelson Utility Fuels Company (Delaware)
PWM Affiliates Superannuation Fund Pty Limited (Australia)
Questquill Limited (United Kingdom)
R A Johnson (Haulage) Ltd. (England)
Rancho Estates Properties, Inc. (Delaware)
RCCD Inc. (Delaware)
RCC Fiber Company, Inc. (Delaware)
Recovery I, Inc. (Louisiana)
Recycle First North Andover Inc. (Delaware)
Refuse Services, Inc. (Florida)
Clay County Recycling and Disposal Facility
Jacksonville Waste Control
Lake City Waste Control
Sunbeam Recycling and Disposal Facility
Trinity Recycling and Disposal Facility
Waste Management of Clay County
Waste Management of Jacksonville
Waste Management of Putnam County
Renovadan Miljoservice A/S (Denmark)
Resco Holdings Inc. (Delaware)
Residuos Industriales Multiquim, S.A. de C.V. (Mexico)
Reuter Recycling of Florida, Inc. (Florida)
Reym B.V. (Netherlands)
Reym GmbH (Netherlands)
RGH Recycling GmbH (Germany)
Richmond Waste Partners, Ltd. (Illinois)
RIH Inc. (Delaware)
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Riimaki OY (Finland)
Riley Energy Systems of Lisbon Corporation (Delaware)
Riley Energy Systems of Lisbon Connecticut Corp. (Connecticut)
Rose Disposal Services, Inc. (Indiana)
RRT Design & Construction Corp. (Delaware)
RRT Empire of Mid-Connecticut, Inc. (Connecticut)
RRT Empire of Monroe County, Inc. (New York)
RRT Empire Returns Corporation (New York)
RRT Equipment Corp. (New York)
RRT Land Corp. (New York)
RRT of Lake County, Illinois, Inc. (Delaware)
RRT of New Jersey, Inc. (New Jersey)
RRT of Pennsylvania, Inc. (Pennsylvania)
RRT of Philadelphia, Inc. (Delaware)
RRT of Springfield, Massachusetts, Inc. (Massachusetts)
RRT of Syracuse, New York, Inc. (New York)
RRT Plastics Corp. (Delaware)
RRT Plastics of N.J., Inc. (New Jersey)
RRT-Recycle America, Inc. (Delaware)
Rudolf Beck & Sohne Aktiengesellschaft (Austria)
Rupke & Associates Ltd. (Ontario)
Rust Architecture Inc. (Wisconsin)
Rust Architecture & Geology of North Carolina, P.C. (North Carolina)
Rust Associates Ltd. (Canada)
Rust Capital Corporation (Delaware)
Rust China Ltd. (Delaware)
Rust Engineering & Construction Inc. (Delaware)
Rust Engineering do Brasil Construcoes Ltda. (Brasil)
Rust Environment & Infrastructure Inc. (Wisconsin)
Rust Environment & Infrastructure of Canada Inc. (Alberta)
Rust Environment & Infrastructure of Michigan Inc. (Michigan)
Rust Environment & Infrastructure of New York Inc. (New York)
Rust Environment & Infrastructure of North Carolina Inc. (North Carolina)
Rust Environment & Infrastructure of Ohio Inc. (Ohio)
Rust Environment & Infrastructure, P.E., ARCH. L.S., P.C. (New York)
Rust Federal Environmental Services Inc. (Delaware)
Rust Federal Services Inc. (Delaware)
Rust Federal Services of Colorado Inc. (Delaware)
Rust Federal Services of Hanford Inc. (Delaware)
Rust Federal Services of Idaho Inc. (Delaware)
Rust Field Services, Inc. (Delaware)
Rust Geotech Inc. (Delaware)
Rust Germany GmbH (Germany)
Rust Industrial Cleaning Inc. (Delaware)
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Rust Industrial Cleaning Services Inc. (Delaware)
Rust Industrial Services Inc. (Delaware)
Rust International Holdings Inc. (Delaware)
Rust International Inc. (Delaware)
Rust International of North Carolina, P.C. (North Carolina)
Rust JRP Ltd (Hong Kong)
Rust JRP Pte Ltd (Singapore)
Rust Limited (United Kingdom)
Rust Middle East Ltd. (Delaware)
Rust MRM Limited (United Kingdom)
Rust North America Holdings Inc. (Delaware)
Rust Overseas B.V. (Netherlands)
Rust Overseas Inc. (Delaware)
Rust Plant Services Inc. (South Carolina)
Rust PPK Pty Ltd. (New South Wales, Australia)
Rust Precision Blasting Inc. (Delaware)
Rust Precision Cleaning Services (Delaware)
Rust Remedial Services Holding Company Inc. (Delaware)
Rust Remedial Services Inc. (Delaware)
Rust Scaffold Builders Inc. (Delaware)
Rust Scaffold Rental & Erection Inc. (Delaware)
Rust Scaffold Services Inc. (Delaware)
Rust Scaffold Services of Canada Ltd. (Ontario)
Rust Servicios Ambientales e Infraestructura, S.A. de C.V. (Mexico)
Rust Specialty Chemicals Inc. (Delaware)
Rust Sweden Holdings A B (Sweden)
Rust Utility Services Inc. (Delaware)
Rust VA Projekt AB (Sweden)
Rust Waste Treatment Services Inc. (Delaware)
Sacagica s.r.l. (Italy)
Saframa S.A. (Argentina)
Sakab Batteri B (Sweden)
Sakab MFA-Forvaltning AB (Sweden)
Salem Waste Disposal Center, Inc. (Alabama)
Salutec, S.A. (Argentina)
Saneanientos Sellberg S.A. (Spain)
S.A.P. s.p.a. (Italy)
S.A.R.I. S.p.A. (Italy)
S.A.S.P.I S.p.A. (Italy)
S.E.P. s.r.l. (Italy)
SCA Services, Inc. (Delaware)
Mohawk Valley Sanitary Landfill
S.C.E.A. Du Bosnier (France)
SC Holdings, Inc. (Pennsylvania)
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L & D Landfill
Sanitary Landfill
SCS Construction Limited (United Kingdom)
Sengelose Kompost A/S (Denmark)
SERPOL (France)
Service de Rehabilitation des Dechets (S.R.D.) (France)
Servicios Especiales de Recoleccion de Basura, S.A. de C.V. (Mexico)
Servicios Integrales de Protection Ambiental, S.A. de C.V. (Mexico)
Servizi Piemonte S.r.l. (Italy)
SES Bridgeport Inc. (Delaware)
SES Brooklyn Inc. (Delaware)
SES Brooklyn Navy Yard Inc. (Delaware)
SES Connecticut Inc. (Delaware)
SES North Andover Inc. (Delaware)
SES Seattle Inc. (Delaware)
Shell Seekers Limited (United Kingdom)
Shereg Schleswig Holsteinische Entsorgung u. Recycling GmbH (Germany)
Skaraborgs Engergi - Och Mijo AB (Sweden)
Sidel (France)
Signal Capital Sherman Station Inc. (Delaware)
Signal Clean Water Corporation (Delaware)
Signal Own-And-Operate Inc. (Delaware)
Signal Overseas Capital Corporation N.V. (Netherlands)
Signal RESCO, Inc. (Delaware)
S.I.R.T.I.S. s.r.l. (Italy)
Sir-Mas (Italy)
Sistemas Para Control de Desechos Solidos, S.A. de C.V. (Mexico)
SMC Smaltimenti Controllati S.p.a. (Italy)
SNC Rust Canada Limited (Canada)
S.N.U. Di Esposito Carlo & C. (Italy)
Soaring Vista Properties, Inc. (Maryland)
Societ A. Grenet SARL (France)
Societe Civile Immobiliere Les Amandiers (France)
Societe D'Amenagement Et D'Exploitation De Terrains Agricoles (France)
Societe D'Economie Mixte De Cabourg Et De Sa Region (SEMCAR)(France)
Societe D'Etudes et de realisation D'Amenagements De Terrains (France)
Societe Europeenne de Ferrailles et de Machefers (France)
Societe Parisienne D'Amenagement De Terrains (SPAT) (France)
Sogea S.r.l. (Italy)
Solaria Fornaci Laterizi s.r.l. (Italy)
Solna Transport AB (Sweden)
Solna Transport & Renhallning AB (Sweden)
South Broward County Resource Recovery Project, Inc. (Florida)
South Broward Holdings Inc. (Delaware)
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S.P.E.M. S.p.A. (Italy)
Sunny Farms, Ltd. (Pennsylvania)
Svensk Avfallskonvertering AB (Sweden)
S. V. Farming Corp. (New Jersey)
Swindell-Dressler Energy Supply Company (Delaware)
Swindell-Dressler Leasing Company (Delaware)
Swindell Rust Associates Inc. (Delaware)
Swindell Rust Iran Inc. (Delaware)
Sydostkemi AB (Sweden)
Sylvans Kemiteknik AB (Sweden)
Sylvan & Qvibelius AB (Sweden)
TC, Inc. (Indiana)
Techim S.r.l. (Italy)
Terra Quest - Mohave, Inc. (Arizona)
The Rust Engineering Company Limited (Canada)
The Rust Engineering Company of Michigan (Michigan)
The Rust Engineering Company of New York Inc. (New York)
The Standard Bridge Corporation (New York)
The Swindell-Dressler Corporation of Canada Limited (Canada)
The Wheelabrator Corporation (Delaware)
The Woodlands of Van Buren, Inc. (Delaware)
Tijuana Equilibrio Ecologico, S.A. de C.V. (Mexico)
Tomoka Refuse, Inc. (Florida)
Town and Country Refuse, Inc. (Florida)
Port-O-Let
Trail Ridge Landfill, Inc. (Delaware)
Transportbedrijf Van Bliet B.V. (Nederlands)
Transwaste (N.W.) Limited (United Kingdom)
Tra.S.E. s.p.a. (Italy)
TRECO Construction Services Inc. (Delaware)
TWI Transportation, Inc. (Delaware)
UK Waste Management Holdings Limited (United Kingdom)
UK Waste Management Limited (United Kingdom)
United Waste Partners, L.P. (Illinois)
Valdenza S.r.l. (Italy)
Vanerborgs Stadbudsbyra AB (Sweden)
Vanersborgs Renhallning AB (Sweden)
Van Vliet Recycling B.V. (Netherlands)
Van Vliet Speciaal Afval B.V. (Netherlands)
VE-Part S.r.l. (Italy)
Verwaltungsgesellschaft Neuhaus Entsorgung GmbH (Germany)
Vliko B.V. (Netherlands)
Warner Company (Delaware)
Warner East
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Warner West
Washington Waste Hauling & Recycling, Inc. (Delaware)
Port-O-Let
Recycle America
Valley Topsoil
Waste Management - Northwest
Waste Management of Ellensburg
Waste Management of Greater Wenatchee
Waste Management of Kennewick
Waste Management of Seattle
Waste Management of Spokane
Waste Management of Yakima
Waste Management - SnoKing
Waste Management - Rainier
West Group - Northwest Region Office
WMI Services
Washington Waste Systems, Inc. (Washington)
Wass Entreprenad AB (Sweden)
Waste Away Group, Inc. (Alabama)
Environmental Waste Systems
LaGrange Transfer Station
Montgomery Transfer Station
Phenix City Transfer
Springhill Landfill
Waste Management of Alabama - Central
Waste Management of Alabama - East
Waste Management of Alabama - North
Waste Management of Alabama - South
Waste Clearance (Holdings) Limited (United Kingdom)
Waste Clearance Limited (United Kingdom)
Waste Disposal, Inc. (New Jersey)
Howell Landfill
Waste Handling Company (W.H.C.) B.V. (Holland)
Waste Management Asia B.V. (Netherlands)
Waste Management Czechoslovakia s.r.o. (Czechoslovakia)
Waste Management Collection and Recycling, Inc. (California)
American Waste Systems
C & H Disposal
Empire Waste Management
Great Western Reclamation
Griffith Disposal
Horizon Rubbish Service
Recycle America
SAWDCO Collection
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Sunset Environmental
Valley Waste Management
Waste Management of Inland Valley
Waste Management of Sacramento
Waste Management of San Gabriel/Pomona Valley
Waste Management of Santa Cruz County
Waste Management of Stockton
Waste Management of the Central Valley
Waste Management of Woodland
Waste Management de Mexico, S.A. de C.V. (Mexico)
Waste Management Disposal Services of Arizona, Inc. (Delaware)
Waste Management Disposal Services of Colorado, Inc. (Colorado)
Central Weld Sanitary Landfill
North Weld Sanitary Landfill
Waste Management Disposal Services of Maine, Inc. (Maine)
Waste Management Disposal Services of Maine - Crossroads
Waste Management Disposal Services of Maryland, Inc. (Maryland)
Sandy Hill
Waste Management Disposal Services of Massachusetts, Inc. (Massachusetts)
Waste Management Disposal Services of Montana, Inc. (Montana)
Waste Management Disposal Services of New York, Inc. (Delaware)
Waste Management Disposal Services of Oregon, Inc. (Delaware)
Columbia Ridge Landfill and Recycling Center
Oregon Waste Systems
Waste Management Disposal Services of Pennsylvania, Inc. (Pennsylvania)
Pottstown Landfill and Recycling Center
Waste Management Disposal Services of Tennessee, Inc. (Delaware)
Waste Management Disposal Services of Virginia, Inc. (Delaware)
Middle Peninsula Landfill and Recycling Facility
Waste Management Disposal Services of Washington, Inc. (Delaware)
Greater Wenatchee Regional Landfill and Recycling Center
Waste Management of Washington
Waste Management Do Brasil, Ltda Empreendimentos Ambientals (Brazil)
Waste Management Espana S.A. (Spain)
Waste Management Finland OY (Finland)
Waste Management France (Holdings) (France)
Waste Management France S.A. (France)
Waste Management France S.A.R.L. (France)
Waste Management Gewerbemullentsorgung GmbH (Austria)
Waste Management GmbH & DO MVA Hamm OHG (Germany)
Waste Management Greece Anonymous Commercial Company (Greece)
Waste Management Hausmullentsorgung GmbH (Austria)
Waste Management Holding Gesellschaft mbH (Austria)
Waste Management, Inc. (Illinois)
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Waste Management Inc. of Florida (Florida)
Atlantic Waste Management
Broward Disposal
Central Disposal
Environmental Waste Systems
Florida Environmental Waste
Florida Disposal
Florida Resource Management
Gulf Coast Recycling and Disposal Facility
Hillsborough Heights Recycling and Disposal Facility
Medley Landfill & Recycling Center
Rubbish Gobbler
Southeast Recycling and Disposal Facility
Southern Sanitation Service
South Florida Service Center
United Sanitation Recycling and Disposal Facility
Waste Management of Bay County
Waste Management of Collier County
Waste Management of Dade County
Waste Management of Monroe County
Waste Management of Pasco County
Waste Management of Tampa
Waste Management, Inc. of Tennessee (Tennessee)
Chestnut Ridge Landfill and Recycling Center
Waste Management of Tennessee - Clarksville
Waste Management of Tennessee - Jackson
Waste Management of Tennessee - Knoxville
Waste Management of Tennessee- Memphis
Waste Management of Tennessee - Nashville
Waste Management International, Inc. (Delaware)
Waste Management International, Ltd. (Bermuda)
Waste Management International plc (United Kingdom)
Waste Management International Services Limited (United Kingdom)
Waste Management International Services Pension Scheme (Trustees) Limited
(United Kingdom)
Waste Management International Y CIA (Chile)
Waste Management Italia S.r.l. (Italy)
Waste Management (Land) Limited (United Kingdom)
Waste Management Limited (United Kingdom)
Waste Management Nederland B.V. (Netherlands)
Waste Management N.Z. Ltd. (New Zealand)
Waste Management of Alabama, Inc. (Alabama)
Dixie Waste
Valley View Sanitary Landfill
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Waste Management of Alabama - Lynn
Waste Management of Alabama - Mobile
Waste Management of Alabama - The Shoals
Waste Management of Birmingham - Recycle America
Waste Management of Mississippi - Gulf Coast
Waste Management of North Mississippi - Tupelo
Waste Management of West Alabama
WMI Services of Birmingham
Waste Management of Alameda County, Inc. (California)
Altamont Landfill and Resource Recovery Facility
Central Division
Davis Street Station for Material Recovery and Transfer
East Bay Disposal Co.
Livermore Dublin Disposal
Northern Division
Recycle America of Northern California
Southern Division
Sunnyvale Recycling and Disposal Facility
Tri-Cities Recycling and Disposal Facility
Waste Management of Arizona, Inc. (California)
Butterfield Station Recycling and Disposal Facility
Industrial Recycling Services
Industrial Services Division
Modulaire of Arizona
Sky Harbor Regional Transfer & Recycling Center
27th Avenue Recycling and Disposal Facility
Waste Management of Northern Arizona
Waste Management of Phoenix - North
Waste Management of Phoenix - Recycle America
Waste Management of Phoenix - South
Waste Management of Tucson
Waste Management of Tucson - Recycle America
Waste Management of Verde Valley
WMI Services - Phoenix
Waste Management of Arkansas, Inc. (Delaware)
Brushy Island Recycling and Disposal Facility
Jefferson County Landfill and Recycling Center
Shannon Road Recycling and Disposal Facility
Union County Recycling and Disposal Facility
Waste Management of Arkansas North
Waste Management of Arkansas South
Waste Management of California, Inc. (California)
Kirby Canyon Recycling and Disposal Facility
Lancaster Recycling and Disposal Facility
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Modulaire of California
Simi Valley Recycling and Disposal Facility
Universal Refuse Removal of El Cajon
Waste Management of Fresno County
Waste Management of Lancaster
Waste Management of Los Angeles
Waste Management of Los Angeles - South
Waste Management of North County
Waste Management of San Diego
Waste Management of San Fernando Valley
Waste Management of Santa Clara County
Waste Management of the Desert
Waste Management of Cambridge, Inc. (Delaware)
Adho Disposal
Hunting Ridge Landfill
Waste Management of Carolinas, Inc. (North Carolina)
Piedmont Landfill and Recycling Center
Waste Management of Asheville
Waste Management of Carolinas
Waste Management of Central Carolina
Waste Management of Eastern Carolina
Waste Management of the Piedmont
Waste Management of Raleigh/Durham
Waste Management of Wilmington
Waste Management of the Triad
Waste Management of Central Florida, Inc. (Florida)
Alachua Waste Management
Waste Management of Central Jersey, Inc. (New Jersey)
Parklands Recycling and Disposal Facility
Waste Management of Colorado, Inc. (Colorado)
Canon City Disposal and Recycling
Colorado Springs Recycling and Disposal Facility
Colorado Springs Transfer Station
County Line Recycling and Disposal Facility
Denver/Arapahoe Disposal Site
Englewood Transfer Station
Modulaire of Colorado
Port-O-Let
Waste Management of Aurora
Waste Management of Colorado - Aurora Facility
Waste Management of Colorado - Landfill Division
Waste Management of Colorado - North Facility
Waste Management of Colorado - Recycle Facility
Waste Management of Colorado - South Facility
17
<PAGE>
Waste Management of Colorado Springs
Waste Management of Colorado Springs - Recycle America Processing Facility
Waste Management of Denver
Waste Management of Denver - Recycle America Processing Facility
Waste Management of Northern Colorado
Waste Management of Pueblo
Waste Management of the Rockies
Waste Management of Columbus, Inc. (Ohio)
Waste Management of Connecticut, Inc. (Connecticut)
New Milford Recycling and Disposal Facility
Waste Management of Connecticut - Cheshire
Waste Management of Connecticut - Norwalk
Waste Management of Connecticut - Wallingford
Waste Management of Delaware, Inc. (Delaware)
Waste Management of Delaware - Wilmington
Waste Management of Delmarva
Waste Management of Eastern Shore, Inc. (Delaware)
Waste Management of Five Oaks Recycling and Disposal Facility, Inc. (Delaware)
Waste Management of Florida Holding Company, Inc. (Delaware)
Waste Management of Florida, Inc. (Delaware)
Waste Management of Georgia, Inc. (Georgia)
Live Oak Landfill
Waste Management of Chattanooga
Waste Management of Northeast Alabama
Waste Management of Savannah
Waste Management of the Tennessee Valley
Waste Management of Grass Valley, Inc. (Delaware)
Waste Management of Greater Washington, Inc. (Delaware)
Universal Recycling
Waste Management of Hampton Roads, Inc. (Virginia)
Waste Management of Hawaii, Inc. (Hawaii)
Waimanalo Gulch Recycling and Disposal Facility
West Hawaii Landfill
Waste Management of Idaho, Inc. (Idaho)
Waste Management of Illinois, Inc. (Delaware)
Banner/Western Disposal Service
Chain of Rocks Recycling and Disposal Facility
CID
Durbin Paper Stock Company
Five Oaks Recycling and Disposal Facility
Greene Valley Recycling and Disposal Facility
Kankakee Recycling and Disposal Facility
Laraway Recycling and Disposal Facility
McLean County Disposal and Recycling Services
18
<PAGE>
Milam Recycling and Disposal Facility
Prairie Hill Recycling and Disposal Facility
Settler's Hill Recycling and Disposal Facility
Tazewell Recycling and Disposal Facility
TCD Services
United Waste Systems
Waste Management - Northwest
Waste Management - West
Waste Management of Metro East
Waste Management of Peoria
Waste Management of the South Suburbs
Wheatland Prairie Recycling and Disposal Facility
Woodland Recycling and Disposal Facility
Waste Management of Indiana Holdings One, Inc. (Delaware)
Waste Management of Indiana Holdings Two, Inc. (Delaware)
Waste Management of Indiana, L.L.C. (Delaware)
Deercroft Recycling and Disposal Facility
Glenwood Ridge Recycling and Disposal Facility
Oak Ridge Recycling and Disposal Facility
Prairie View Recycling and Disposal Facility
Superior Waste Systems
Twin Bridges Recycling and Disposal Facility
Waste Management of Central Indiana
Waste Management of Evansville
Waste Management of Fort Wayne
Waste Management of Indianapolis
Waste Management of Indianapolis - Hamilton County Transfer
Waste Management of Lafayette
Waste Management of Muncie
Waste Management of Northwest Indiana
Waste Management of Warsaw
Wheeler Recycling and Disposal Facility
Waste Management of Iowa, Inc. (Iowa)
Solid Waste Systems
Waste Management of Kansas, Inc. (Kansas)
Forest View Recycling and Disposal Facility
Rolling Meadows Recycling & Disposal Facility
Solid Waste Systems
Topeka Waste Systems
Waste Management of Wichita
Waste Management - Refuse Control
Waste Management of Kentucky Holdings, Inc. (Delaware)
Waste Management of Kentucky, L.L.C. (Delaware)
Blue Ridge Recycling and Disposal Facility
19
<PAGE>
Kramer Lane Recycling and Disposal Facility
Lexington Recycling and Disposal Facility
Outer Loop Recycling and Disposal Facility
Waste Management of Kentucky - Gray Disposal
Waste Management of Kentucky - Lexington
Waste Management of Kentucky - Louisville
Waste Management of Kentucky - Madison Disposal
Waste Management of Kentucky - Stevens Dispos-All Service
Waste Management of LaGrange, Inc. (Delaware)
Waste Management of Leon County, Inc. (Florida)
Springhill Regional Sanitary Landfill
Waste Management of Louisiana, Inc. (Louisiana)
Acadiana Recycling and Disposal Facility
Acadia Parish Sanitary Landfill
Alexandria Recycling and Disposal Facility
American Waste and Pollution Control-Algiers Residential
American Waste and Pollution Control-Eastern New Orleans Residential
American Waste and Pollution Control-Kelvin Recycling and Disposal Facility
American Waste and Pollution Control-St. Bernard Parish Residential
American Waste and Pollution Control-Slidell Residential
American Waste and Pollution Control-West Jefferson Residential
Jefferson Davis Recycling and Disposal Facility
Kelvin Recycling and Disposal Facility
Magnolia Recycling and Disposal Facility
Pelican Recycling and Disposal Facility
Pelican State Environmental Services
Waste Management of Acadiana
Waste Management of Baton Rouge
Waste Management of the Bayous
Waste Management of Central Louisiana
Waste Management of Lake Charles
Waste Management of New Orleans
Waste Management of Northeast Louisiana
Waste Management of Northwest Louisiana
Waste Management of the Pines
Waste Management of St. Landry
Waste Management of St. Tammany
Waste Management of South Louisiana
Waste Management Services of Louisiana
Woodside Recycling and Disposal Facility
Waste Management of Maine, Inc. (Maine)
Waste Management of Maine - Portland
Waste Management of Maryland, Inc. (Maryland)
Mobile Offices of Maryland
20
<PAGE>
Waste Management of Cambridge
Waste Management of Greater Washington
Waste Management of Maryland - Baltimore
Waste Management of Southern Maryland
WMI Medical Services
WMI Services of Maryland
Waste Management of Massachusetts, Inc. (Massachusetts)
Waste Management of Boston - North
Waste Management of Central Massachusetts
Waste Management of Massachusetts - Gloucester
Waste Management of Massachusetts - South Shore
Waste Systems
Waste Management of Michigan, Inc. (Michigan)
Autumn Hills Recycling and Disposal Facility
Cedar Ridge Recycling and Disposal Facility
Eagle Valley Recycling and Disposal Facility
Efficient Sanitation
Northern Oaks Recycling and Disposal Facility
Recycle America - Metro Detroit
Tri-City Recycling and Disposal Facility
Valley Rubbish
Venice Park Recycling and Disposal Facility
Waste Management of Michigan - Alma Transfer and Recycling Facility
Waste Management of Michigan - Area Disposal
Waste Management of Michigan - Burr Oak
Waste Management of Michigan - Central
Waste Management of Michigan - Detroit North
Waste Management of Michigan - Detroit Transfer and Recycling Facility
Waste Management of Michigan - Detroit West
Waste Management of Michigan - Dowagiac Transfer and Recycling Facility
Waste Management of Michigan - Holland
Waste Management of Michigan - Holland Transfer and Recycling Facility
Waste Management of Michigan - Mideast
Waste Management of Michigan - Mideast/Port Huron
Waste Management of Michigan - Midwest
Waste Management of Michigan - Northern
Waste Management of Michigan - Recycle America/Grand Rapids
Waste Management of Michigan - Southwest
Waste Management of Michigan - Western
Westside Recycling and Disposal Facility
WMI Services - Eastern Michigan/Northwest Ohio
Woodland Meadows Recycling and Disposal Facility
Waste Management of Minnesota, Inc. (Minnesota)
Anoka Recycling and Disposal Facility
21
<PAGE>
Dietman Sanitation & Recycling
Recycle America of Minnesota
Sun Prairie Recycling and Disposal Facility
Waste Management - Blaine
Waste Management - LeSueur
Waste Management - Rochester
Waste Management - Savage
Waste Management - St. Cloud
Waste Management of Hastings
WMI Services of Minnesota
Waste Management of Mississippi, Inc. (Mississippi)
Pecan Grove Landfill
Pine Ridge Landfill
Plantation Oaks Landfill
Prairie Bluff Landfill
Waste Management of Central Mississippi - Jackson
Waste Management of Central Mississippi - Kosciusko
Waste Management of Central Mississippi - Meridian
Waste Management of Central Mississippi - Vicksburg
Waste Management of North Mississippi - Clarksdale
Waste Management of North Mississippi - Columbus
Waste Management of North Mississippi - Corinth
Waste Management of North Mississippi - Greenville
Waste Management of North Mississippi - Grenada
Waste Management of North Mississippi - Tupelo
Waste Management of South Mississippi - Gulfport
Waste Management of South Mississippi - McComb
Waste Management of South Mississippi - Natchez
Waste Management of South Mississippi - Pine Belt
Waste Management of Missouri, Inc. (Delaware)
Black Oak Recycling and Disposal Facility
Environmental Industries
Kahle Recycling and Disposal Facility
Meramec Hauling
Pezold Hauling
Rumble Recycling and Disposal Facility
Waste Management of Kansas City
Waste Management of Springfield
Waste Management of St. Louis
Waste Management of the Ozarks
Waste Management of Montana, Inc. (Delaware)
High Plains Sanitary Landfill and Recycling Center
Waste Management of Great Falls
Waste Management of Nebraska, Inc. (Delaware)
22
<PAGE>
Douglas County Recycling and Disposal Facility
Waste Management of New Hampshire, Inc. (Connecticut)
Turnkey Recycling and Environmental Enterprises
Waste Management of New Hampshire - Laconia
Waste Management of New Hampshire - Londonderry
Waste Management of New Hampshire - Rochester
Waste Management of New Hampshire - Peterborough
Waste Management of New Jersey, Inc. (New Jersey)
Avenue A Transfer & Recycling Center
Recycle America
Waste Management of New Mexico, Inc. (New Mexico)
Hobbs Recycling and Disposal Facility
Modulaire of New Mexico
Otero County Recycling and Disposal Facility
Recycle America Processing Facility
Rio Rancho Recycling and Disposal Facility
San Juan County Recycling and Disposal Facility
Sunshine Recycling and Disposal Facility
Waste Management of Albuquerque - Recycle America Processing Facility
Waste Management of Four Corners
Waste Management of Southeast New Mexico
Waste Management of the Southwest
Waste Management of New York City, Inc. (Delaware)
Waste Management of New York, Inc. (New York)
High Acres Landfill and Recycling Facility
Waste Management of Eastern New York
Waste Management of New York - Buffalo
Waste Management of New York - Rochester
Waste Management of New York - Syracuse
Waste Management of New York - Utica
Waste Management of Southwestern New York
Waymor Recycling and Disposal Facility
WMI Services of New York
Waste Management of New York City, L.P. (Delaware)
Waste Management of North Dakota, Inc. (Delaware)
Northern Waste Systems
Waste Management of North Jersey, Inc. (Delaware)
Waste Management of NYC, Inc. (Delaware)
Waste Management of Ohio, Inc. (Delaware)
Countywide Recycling and Disposal Facility
ELDA Recycling and Disposal Facility
Evergreen Recycling and Disposal Facility
Herrick Valley Recycling and Disposal Facility
Lake County Recycling and Disposal Facility
23
<PAGE>
Pinnacle Road Recycling and Disposal Facility
Seneca East Recycling and Disposal Facility
Stony Hollow Recycling and Disposal Facility
Suburban Recycling and Disposal Facility
Waste Management of Ohio - Akron
Waste Management of Ohio - Blaylock
Waste Management of Ohio - Cleveland Transfer and Recycling Facility
Waste Management of Ohio - Cleveland West
Waste Management of Ohio - Columbus
Waste Management of Ohio - Columbus Transfer and Recycling Facility
Waste Management of Ohio - Findlay
Waste Management of Ohio - IWD
Waste Management of Ohio - Koogler
Waste Management of Ohio - Lima
Waste Management of Ohio - Lima Transfer and Recycling Facility
Waste Management of Ohio - M & M Sanitation
Waste Management of Ohio - Newark
Waste Management of Ohio - Northwest
Waste Management of Ohio - Recycle America/Toledo
Waste Management of Ohio - S.E.M.
Waste Management of Ohio - Shelby County Transfer
Waste Management of Ohio - Suburban Sanitation Service
Waste Management of Ohio - Youngstown
WMI Services - Ohio
Waste Management of Oklahoma, Inc. (Oklahoma)
East Oak Recycling and Disposal Facility
Muskogee Recycling and Disposal Facility
Quarry Recycling and Disposal Facility
Waste Management of Oklahoma City
Waste Management of Tulsa
Waste Management of Orange County, Inc. (California)
Waste Management of Oregon, Inc. (Oregon)
Waste Management of Vancouver U.S.A.
Waste Management of Orlando, Inc. (Florida)
Waste Management of Pennsylvania, Inc. (Pennsylvania)
Lake View Landfill (Northern)
Mid-Atlantic Recycling and Distribution Center
Milton Grove Demolition and Tire Recycling
Philadelphia Transfer and Recycling Station
Pottsville Transfer Station
Recycle America
River Road Landfill
Steel Valley Transfer Station
The Forge Recycling and Resource Recovery Center
24
<PAGE>
Tully Town Resource Recovery Facility
Waste Automation
Waste Management - Allentown
Waste Management - Dixon Recycling
Waste Management of Camp Hill
Waste Management of Delaware Valley - North
Waste Management of Delaware Valley - South
Waste Management of Erie
Waste Management of Greater Lancaster
Waste Management of Greencastle
Waste Management of Greenville
Waste Management of Indian Valley
Waste Management of Laurel Valley
Waste Management of Northeast Pennsylvania
Waste Management of Pennsylvania - Hauling
Waste Management of Pittsburgh
Waste Management of Pottstown
WMI Medical Services of New Jersey
WMI Medical Services of New York
WMI Medical Services of Pennsylvania
WMI Medical Services of West Virginia
Waste Management of Pinellas County, Inc. (Florida)
Suncoast Recycle America Center
Waste Management of Rhode Island, Inc. (Delaware)
Waste Management of Rhode Island - Newport
Waste Management of South Carolina, Inc. (South Carolina)
Charleston Landfill
Hickory Hill Sanitary Landfill
Palmetto Landfill
Sandy Pines Landfill
Waste Management of Coastal Disposal Service
Waste Management of the Low Country
Waste Management of South Dakota, Inc. (South Dakota)
Waste Management of Sioux Falls
Waste Management of the Black Hills
Waste Management of South Jersey, Inc. (New Jersey)
Middle Martee Landfill
Waste Management of Camden
Waste Management of Texas, Inc. (Texas)
All Waste Paper Recycling
Austin Community Disposal co.
Bluebonnet Recycling and Disposal Facility
Centex Waste Management
Coastal Plains Recycling and Disposal Facility
25
<PAGE>
Comal County Recycling and Disposal Facility
Covell Gardens Landfill
DFW Recycling and Disposal Facility
Eastside Recycling and Disposal Facility
Fabit Waste Management
Garbage Gobbler
Hillside Recycling and Disposal Facility
Lacy Lakeview Recycling and Disposal Facility
Longhorn Disposal
Northwest Transfer Station
Oak Hill Recycling and Disposal Facility
Pecan Prairie Recycling and Disposal Facility
Permian Basin Waste Management
Recycle America - Dallas Bulk Grade Division
Recycle America - Dallas High Grade Division
S & B Trucking & Sanitation
Texas Waste Management
Waste Management of Fort Worth Recycling and Disposal Facility
Waste Management - Golden Triangle
Waste Management of Dallas - East
Waste Management of Dallas Recycle America Processing Facility
Waste Management of Dallas - West
Waste Management of East Texas
Waste Management of Houston
Waste Management of Northeast Texas
Waste Management of Southeast Texas - Angleton
Waste Management of Southeast Texas - Dickinson
Waste Management of South Texas
Westside Recycling and Disposal Facility
Williamson County Recycling and Disposal Facility
WMI Services of Dallas
WMI Services of North Texas
WMI Services of Texas
Waste Management of Tri-Cities, Inc. (Delaware)
Waste Management of Troutdale, Inc. (Delaware)
Waste Management of Utah, Inc. (Utah)
Modulaire of Utah
Reliable Waste Systems
Waste Management of Salt Lake
Waste Management of Virginia, Inc. (Virginia)
Manassas Transfer Station
Waste Management of Hampton Roads
Waste Management of Northern Virginia
Waste Management of Northern Virginia - Crown Disposal
26
<PAGE>
Waste Management of the Outer Banks
Waste Management of Richmond/Fiber Fuels
Waste Management of Richmond Port-O-let
Waste Management of Richmond Recycle America
Waste Management of Virginia - Blue Ridge
WMI Services of Hampton Roads
WMI Services of Virginia
Waste Management of West Virginia, Inc. (Delaware)
Waste Management of Shenandoah Valley
Waste Management of Wheaton, Inc. (Delaware)
Waste Management of Wilmington, Inc. (Delaware)
Waste Management of Wisconsin, Inc. (Wisconsin)
Best Disposal
Metro/Stone Ridge Recycling and Disposal Facility
Orchard Ridge Recycling and Disposal Facility
Parkview Recycling and Disposal Facility
Pheasant Run Recycling and Disposal Facility
Ridgeview Recycling and Disposal Facility
Timberline Trail Recycling and Disposal Facility
Turtle Creek Recycling and Disposal Facility
UWS Transportation
Valley Trail Recycling and Disposal Facility
Waste Management - Northeast Wisconsin
Waste Management of Fox Valley
Waste Management of La Crosse
Waste Management of Madison
Waste Management of Milwaukee
Waste Management of Muskego
Waste Management of Rockford
Waste Management of Wisconsin - East
Waste Management Southwest
Waste Management - Tri County
WMI Services of Wisconsin
Waste Management of Wyoming, Inc. (Delaware)
Waste Management Paper Stock Company, Inc. (Delaware)
Southern Sanitation Southeast - Recycle America
Waste Management of Florida - Recycle America
Waste Management of Sarasota - Recycle America
Waste Management of Tampa - Recycle America
Waste Management Pepierentsorgung Gesellschaft mbH (Austria)
Waste Management Partners, Inc. (Delaware)
Waste Management Partners of Bozeman, Ltd. (Illinois)
Waste Management Partners of Midland/Odessa (Illinois)
Waste Management Partners of Paris, Ltd. (Illinois)
27
<PAGE>
Waste Management Partners of Southeast North Dakota, L.P. (Illinois)
Waste Management Plastic Products, Inc. (Delaware)
Waste Management Projektierungsgesellschaft mbH (Austria)
Waste Management Queensland Pty. Limited (Queensland)
Waste Management Recycling and Disposal Services of California, Inc.
(California)
Bradley Landfill and Recycling Center
Waste Management of Northern California
Waste Management of Southern California
Waste Management Recycling and Disposal Services of Illinois, Inc. (Illinois)
Waste Management Remediation Services B.V. (Netherlands)
Waste Management Remediation Services B.V. (Netherlands)
Waste Management Republic of China (China)
Waste Management (Rock Common) Limited (United Kingdom)
Waste Management (Roxby) Limited (United Kingdom)
Waste Management Services, C.A. (Venezuela)
Waste Management Services S A (Switzerland)
Waste Management South America B.V. (Netherlands)
Waste Management Thailand B.V. (Netherlands)
Waste Relief Partners, L.P. (Illinois)
Waste Resources Ltd (New Zealand)
Waste Resources of Tampa Bay, Inc. (Florida)
Waste Resources of Tennessee, Inc. (Tennessee)
Waste Services Company Partnership (Colorado)
Waterblast Ltd. (United Kingdom)
Wessex Waste Management Limited (United Kingdom)
WESI Baltimore Inc. (Delaware)
WESI Capital Inc. (Delaware)
WESI Peabody Inc. (Delaware)
WESI Peekskill Inc. (Delaware)
WESI Westchester Inc. (Delaware)
WESI Saugus Inc. (Delaware)
WESI Westchester Inc. (Delaware)
WES Medical Services of Florida Inc. (Delaware)
WES Medical Services of North Carolina Inc. (Delaware)
WES Medical Services of Ohio Inc. (Delaware)
WES Medical Services of Texas Inc. (Delaware)
WES Medical Services of Wisconsin Inc. (Delaware)
Westates Carbon-Arizona, Inc. (Arizona)
Western Compliance Services, Inc. (Oregon)
Wheelabrator Air Pollution Control Inc. (Delaware)
Wheelabrator Albion Inc. (Delaware)
Wheelabrator Albion Power Inc. (Delaware)
Wheelabrator Baltimore Inc. (Delaware)
Wheelabrator-Berger (Maschinenfabriken) GmbH (West Germany)
28
<PAGE>
Wheelabrator-Berger Stiftung GmbH (West Germany)
Wheelabrator Bridgeport Inc. (Delaware)
Wheelabrator Broward Inc. (Delaware)
Wheelabrator Canada Inc. (Ontario)
Wheelabrator Cedar Creek Inc. (Delaware)
Wheelabrator Clean Air Holdings Inc. (Delaware)
Wheelabrator Clean Air Systems Inc. (Illinois)
Wheelabrator Cleanfuel Corporation (Delaware)
Wheelabrator Clean Water Holdings Inc. (Delaware)
Wheelabrator Clean Water Systems Inc. (Maryland)
Wheelabrator Coal Refinery Inc. (Delaware)
Wheelabrator Coal Services Company (Delaware)
Wheelabrator Cobb Inc. (Delaware)
Wheelabrator Concord Inc. (Delaware)
Wheelabrator Concord Operating Inc. (Delaware)
Wheelabrator Connecticut Inc. (Delaware)
Wheelabrator Culm Services Inc. (Delaware)
Wheelabrator do Brasil Limitada (Brazil)
Wheelabrator Energy Company Inc. (Delaware)
Wheelabrator Energy Leasing Company (Delaware)
Wheelabrator Energy Systems Inc. (Delaware)
Wheelabrator Engineered Systems Inc. (Delaware)
Wheelabrator Environmental Systems Inc. (Delaware)
Wheelabrator Environmental Systems of New York, Inc. (Delaware)
Wheelabrator EOS Canada Inc. (Ontario)
Wheelabrator EOS Inc. (Delaware)
Wheelabrator EOS Puerto Rico Inc. (Delaware)
Wheelabrator Epping Inc. (Delaware)
Wheelabrator Falls Inc. (Delaware)
Wheelabrator Frackville Energy Company Inc. (Delaware)
Wheelabrator Frackville Properties Inc. (Delaware)
Wheelabrator Fuel Services Inc. (Delaware)
Wheelabrator Fuels Service Corporation (Delaware)
Wheelabrator Genesee Inc. (Delaware)
Wheelabrator Gloucester Inc. (Delaware)
Wheelabrator Hagerstown Inc. (Delaware)
Wheelabrator HPD Inc. (Illinois)
Wheelabrator Hudson Energy Company Inc. (Delaware)
Wheelabrator Incineration, Inc. (Delaware)
Wheelabrator Land Resources Inc. (Delaware)
Wheelabrator McKay Bay Inc. (Florida)
Wheelabrator Mecklenburg Inc. (Delaware)
Wheelabrator Millbury Inc. (Delaware)
Wheelabrator New Hampshire Inc. (Delaware)
29
<PAGE>
Wheelabrator New Jersey Inc. (Delaware)
Wheelabrator NHC Inc. (Delaware)
Wheelabrator Northampton Energy Company Inc. (Delaware)
Wheelabrator Northampton Inc. (Delaware)
Wheelabrator Northampton Linerboard Company Inc. (Delaware)
Wheelabrator North Broward Inc. (Delaware)
Wheelabrator North Shore Inc. (Delaware)
Wheelabrator Norwalk Energy Company Inc. (Delaware)
Wheelabrator Peekskill Inc. (Delaware)
Wheelabrator Penacook Inc. (Delaware)
Wheelabrator Pinellas Inc. (Delaware)
Wheelabrator Plant Services Inc. (Delaware)
Wheelabrator Polk Inc. (Delaware)
Wheelabrator Pottstown Inc. (Delaware)
Wheelabrator Putnam Inc. (Delaware)
Wheelabrator Ridge Energy Inc. (Delaware)
Wheelabrator-Rust Maintenance Services, Inc. (Delaware)
Wheelabrator San Diego Inc. (Delaware)
Wheelabrator Saugus Inc. (Delaware)
Wheelabrator Shasta Energy Company Inc. (Delaware)
Wheelabrator Sherman Station One Inc. (Delaware)
Wheelabrator Sherman Station Two Inc. (Delaware
Wheelabrator Shrewsbury Inc. (Delaware)
Wheelabrator South Broward Inc. (Delaware)
Wheelabrator Spokane Inc. (Delaware)
Wheelabrator Technologies Germany Holding GmbH (Germany)
Wheelabrator Technologies Inc. (Delaware)
Wheelabrator Technologies International Limited (United Kingdom)
Wheelabrator Technologies (UK) Limited (United Kingdom)
Wheelabrator Tidewater Inc. (Delaware)
Wheelabrator Trucking Corporation (Delaware)
Wheelabrator Utility Services Inc. (Delaware)
Williams Disposal Service, Inc. (Florida)
Winnipeg Waste Disposal Limited Partnership (Manitoba)
WMD Boeckmann Ohlig (Germany)
WMD Fuchs GmbH (Germany)
WMD Knoess & Anthes GmbH (Germany)
WMD Milojoservice A/S (Denmark)
WMD Schreiber GmbH (Germany)
WMD Waste Management Deutschland Holding GmbH (Germany)
WMMMM Ekopalvelu OY (Finland)
WMI Medical Services of Arizona, Inc. (Delaware)
WMI Medical Services of California, Inc. (Delaware)
WMI Medical Services of Florida, Inc. (Delaware)
30
<PAGE>
WMI Medical Services of Indiana, Inc. (Indiana)
WMI Medical Services of the Midwest, Inc. (Delaware)
WMI Medical Services of Wisconsin
WMI Medical Waste Services of Illinois
WMI Medical Services of New England, Inc. (Delaware)
WMI Medical Services of Ohio, Inc. (Ohio)
WMI Medical Services - Dayton
WMI Medical Services - Toledo
WMI Medical Services - Youngstown
WMI Medical Services of the South, Inc. (Delaware)
WMI Medical Services of Texas, Inc. (Delaware)
WMI Medical Waste Services of North Carolina, Inc. (North Carolina)
WMI Mexico Holdings, Inc. (Delaware)
WMI Ohio Acquisition Sub, Inc. (Delaware)
WMI Properties, Inc. (Pennsylvania)
Warner Company Slag Operation
WMI Quebec Inc. (Quebec)
WMI Sellbergs AB (Sweden)
WMI Services of Nevada, Inc. (Nevada)
WMI Urban Services, Inc. (Delaware)
WMI Waste Management of Canada Inc. (Canada)
TCL Waste Systems
Waste Management Big Bear Services
Waste Management Essex/Kent
Waste Management Fraser Valley
Waste Management Halton/Hamilton
Waste Management Materials Processing - Recycle Canada
Waste Management Materials Processing - Toronto Transfer
Waste Management McLellan Disposal
Waste Management of Oxford/Perth
Waste Management of Calgary
Waste Management of Edmonton
Waste Management of Greater Toronto
Waste Management of Greater Vancouver
Waste Management of Southwestern Ontario
Waste Management of the Okanagan
Waste Management York/Simcoe
West Edmonton Recycling and Disposal Facility
WMI du Quebec
WMI - Hull/Ottawa
WMI Recyclage - Quebec
WMI Services - Ontario
WMI Services - Quebec
WM Jatchuolto OY (Finland)
31
<PAGE>
WM Kiinteistojen Jatepoisto OY (Finland)
WMNA Container Recycling, Inc. (Delaware)
WMNA Rail-Cycle Sub, Inc. (Delaware)
WM Paper Recycling, Inc. (Delaware)
WM Partnership Holdings, Inc. (Delaware)
WM Portugal (Gestao De Residuos) LDA (Portugal)
WM Reipas OY (Finland)
WM Umwelttechnik Gmbh (Germany)
WMX Environmental Monitoring Laboratories, Inc. (Delaware)
WMX of Alabama, Inc. (Delaware)
WTI International Holdings Inc. (Delaware)
WTI Jinyuan Limited Inc. (Delaware)
WTI Jinyuan Power Inc. (Delaware)
WTI Pingliang Limited Inc. (Delaware)
WTI Pingliang Power Inc. (Delaware)
WTI Rust Holdings Inc. (Delaware)
Wuper Recycling Container-Dienst GmbH (Germany)
Y & S Maintenance, Inc. (Pennsylvania)
Ymparistoykkoset OY (Finland)
32
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8 (registration
nos. 33-7201, 33-17447, 33-26733, 33-35936, 33-63702, 33-64266, 33-62285, 33-
64427, 33-64431 and 333-01325), previously filed Registration Statement on Form
S-3 (registration no. 33-60109) and previously filed Registration Statement on
Form S-4 (registration no. 33-56891).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the December 31, 1995 consolidated balance sheet and the consolidated statement
of income for the twelve-month period ended December 31, 1995 and is qualified
in its entirety by reference to such financial statements and the footnotes
thereto.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 189,031
<SECURITIES> 36,243
<RECEIVABLES> 1,947,774
<ALLOWANCES> 66,840
<INVENTORY> 0
<CURRENT-ASSETS> 3,021,049
<PP&E> 13,734,642
<DEPRECIATION> 3,968,943
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<COMMON> 498,817
0
0
<OTHER-SE> 4,443,522
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<INCOME-TAX> 517,043
<INCOME-CONTINUING> 654,590
<DISCONTINUED> (50,691)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 603,899
<EPS-PRIMARY> 1.24
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</TABLE>
