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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, 1996
[_] 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 572-8800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK,$1.00 PAR NEW YORK STOCK EXCHANGE ZURICH STOCK EXCHANGE
VALUE CHICAGO STOCK EXCHANGE GENEVA STOCK EXCHANGE
LONDON STOCK EXCHANGE BASLE STOCK EXCHANGE
FRANKFURT STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2001 NEW YORK STOCK EXCHANGE
8 3/4% DEBENTURES DUE 2018 NEW YORK STOCK EXCHANGE
NEW YORK STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2012
CHEMICAL WASTE MANAGEMENT, INC.
LIQUID YIELD OPTION NOTES DUE 2010 NEW YORK STOCK EXCHANGE
CONVERTIBLE SUBORDINATED NOTES DUE NEW YORK STOCK EXCHANGE
2005
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. [_]
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
$17,286,000,000 AT FEBRUARY 3, 1997 (BASED ON THE CLOSING SALE PRICE ON THE
NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1997, AS REPORTED BY THE
WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 19, 1997, THE REGISTRANT HAD
ISSUED AND OUTSTANDING AN AGGREGATE OF 483,911,069 SHARES OF ITS COMMON STOCK
OF RECORD (EXCLUDING 10,886,361 SHARES HELD IN THE WMX TECHNOLOGIES, INC.
EMPLOYEE STOCK BENEFIT TRUST).
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1996 ANNUAL REPORT TO
STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 9, 1997 DESCRIBED IN PARTS II, III AND IV
HEREOF ARE INCORPORATED BY REFERENCE IN THIS REPORT.
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PART I
ITEM 1. BUSINESS.
GENERAL
WMX Technologies, Inc. is a leading international provider of waste
management 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 and in removing methane gas from
sanitary landfill facilities for use in electricity generation. In addition,
through Waste Management the Company provides Port-O-Let(R) portable
sanitation services to municipalities and commercial and special event
customers. Waste Management also manages the on-site industrial cleaning
services businesses owned by the Company's Rust International Inc. subsidiary.
The Company also provides hazardous waste management services. The Company's
chemical waste treatment, storage, disposal and related services in North
America 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 wholly owned Chem-Nuclear Systems, L.L.C.
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
outside North America 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 services (or has interests in
projects or companies providing such services) in ten countries in Europe,
seven countries in the Asia-Pacific region and Argentina, Brazil, and Israel.
Until February 1997, when the interest was sold, Waste Management
International also had an approximately 20% interest in Wessex Water Plc, an
English publicly traded company providing water treatment, water distribution,
wastewater treatment and sewage services ("Wessex").
Wheelabrator Technologies Inc., an approximately 65%-owned subsidiary of the
Company (referred to herein, together with its subsidiaries, as "WTI"), is a
leading developer of facilities and systems for, and provider of services to,
the trash-to-energy and waste fuel powered independent power markets. 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
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electrical or steam energy. WTI is also pursuing the development, ownership and
operation of power plants for industrial customers. In addition, WTI is
involved in the treatment and management of biosolids resulting from the
treatment of wastewater by converting them into useful fertilizers and the
recycling of organic wastes into compost material useable for horticultural and
agricultural purposes. WTI also designs, fabricates and installs
technologically advanced air pollution control systems and equipment. In 1996,
WTI sold its water process, manufacturing and custom engineering business and
is in the process of selling its water contract operations, outsourcing and
privatization business. See "Acquisitions and Dispositions" herein.
Rust International Inc., a subsidiary owned approximately 60% by the Company
and 40% by WTI (referred to herein, together with its subsidiaries, as "Rust"),
provides a variety of on-site industrial cleaning services, a business which is
managed by Waste Management, and provides hazardous, radioactive and mixed
waste program and facilities management services, primarily to the United
States Department of Energy and other federal government agencies. Such
services include waste treatment, storage, characterization and disposal and
privatization services. 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"). Rust also provides environmental and infrastructure
engineering and consulting services, a business which is to be sold or
otherwise disposed of. In 1996, Rust sold its process engineering,
construction, specialty contracting and related services business and its
scaffolding rental and erection business. See "Acquisitions and Dispositions"
herein.
The Company also owns an approximately 20% 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 ("ServiceMaster"). The Company has agreed to sell its
interest to ServiceMaster. See "Acquisitions and Dispositions" herein.
The Company's strategic plans call for the Company to focus on the provision
of waste management services and to sell or discontinue various businesses
which do not fit within that focus. The Company has therefore reported its
continuing operations as being within a single industry segment--waste
management services. The Company's continuing consolidated revenues were
approximately $8.5 billion in 1994, $9.1 billion in 1995 and $9.2 billion in
1996. For information relating to the expenses and assets of the Company's
operations, see the Company's Consolidated Financial Statements filed as an
exhibit to this report and incorporated by reference herein and for information
relating to the Company's operations in different geographic groups, see Note
13 thereto. For interim periods, the revenues and net income of certain of the
Company's operations 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 waste management services and related businesses,
including the Company, to modify, supplement or replace equipment and
facilities at costs which may be substantial. Because the continuing business
in which the Company is engaged is 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 8
to 15 of the Company's 1996 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 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.
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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 waste management 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 business has benefited from increased
governmental regulation, the business 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 business is
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.
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,
1996. Also, unless the context indicates to the contrary, statistical and
financial data appearing under the caption "North American Solid and Hazardous
Waste Management 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 on-site industrial cleaning services business managed
by Waste Management, WTI or Waste Management International. See "International
Waste Management and Related Services" and "Trash-to-Energy and Related
Services."
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NORTH AMERICAN SOLID AND HAZARDOUS WASTE MANAGEMENT SERVICES
The Company's North American 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 North American 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,
1996, the North American solid and hazardous waste revenue amounted to 67.3%,
68.6% and 69.5% respectively, of the Company's total revenues. For each of the
three years in the period ended December 31, 1996, the following table shows
the percentages of the Company's total North American solid and hazardous
waste services revenue (excluding on-site industrial cleaning services
revenue) arising from the Company's principal solid and hazardous waste
services:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Solid Waste and Recycling
Collection Services:
Residential............. 20.0% 19.6% 20.0%
Commercial.............. 26.7 26.4 26.2
Roll-off and Industrial. 21.8 21.5 21.5
Solid Waste Disposal,
Transfer and Related
Services................. 21.2 23.4 24.1
Hazardous Waste Services.. 10.3 9.1 8.2
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
</TABLE>
SOLID WASTE MANAGEMENT, RECYCLING AND RELATED SERVICES
At December 31, 1996, Waste Management conducted solid waste management,
recycling and related services operations in 47 states, the District of
Columbia, four Canadian provinces and Mexico. During 1994, 1995 and 1996,
operations in California, Florida and Pennsylvania together accounted for
approximately 30%, 28% and 26%, respectively, of North America solid waste
revenue. No customer accounted for as much as 1% of such revenue in 1994, 1995
or 1996.
COLLECTION
Waste Management provides solid waste collection services to approximately
1.1 million commercial and industrial customers. Collection services are also
provided to approximately 11.8 million 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 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.
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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 159 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 competition,
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 competition,
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.
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
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quality of such materials, prices for new materials and other factors. In some
instances, the Company enters into agreements with customers or the local
governments of municipalities in which it provides recycling services whereby
the customers or 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 1996, Waste Management provided curbside recycling services to
approximately 7.9 million households in the United States and Canada. Waste
Management has approximately 197,000 commercial and industrial recycling
services customers.
Waste Management operates 140 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 four glass processing facilities. During
1996, the Stone Container joint venture marketed approximately 4.9 million
tons of paper fiber and the American National Can joint venture processed
approximately 400,000 tons of other recyclable materials. Waste Management
also provides tire and demolition and construction debris recycling services.
Energy Recovery
At 37 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 sold directly to industrial users or 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.
The Company also engages in other resource recovery activities through WTI's
trash-to-energy and related operations and Waste Management International's
operations. See " Trash-to-Energy and Related Services" and "International
Waste Management and Related Services."
DISPOSAL
Waste Management operates 133 solid waste sanitary landfill facilities. Of
this number, 105 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 Management 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
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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.
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 1994, 1995 and 1996 approximately 55%, 57% and 60%,
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 competition 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 on-site industrial cleaning services and portable sanitation
services.
Waste Management manages the business of Rust Industrial Services Inc., a
subsidiary of Rust ("RIS"), providing on-site industrial services. RIS performs
a variety of types of industrial services --water blasting, tank cleaning,
explosives blasting, chemical cleaning, industrial vacuuming, catalyst handling
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 assists clients in the nuclear and utility industries
in solving electrical, mechanical, engineering and related technical services
problems.
Prior to selling the businesses in 1996 and early 1997, RIS also provided
scaffolding rental and erection services primarily to the chemical,
petrochemical and utilities industries and a variety of other on-site services.
Rust also provides hazardous, radioactive and mixed waste program and
facilities management services, primarily to the United States Department of
Energy and other federal government agencies. Such services include waste
treatment, storage, characterization and disposal and privatization services.
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.
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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 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.
All of the Company's seven United States secure land disposal facilities
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
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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 Management 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
the wastes on-site, and the uncertain regulatory environment regarding
hazardous waste management and remediation requirements. These factors have led
to reduced demand and increased pressure on pricing for chemical waste
management services, conditions 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 three 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.
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 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. International waste management and related
services comprised approximately 20.2%, 20.6% and 20.8% of the Company's
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total revenue in each of the three years ended December 31, 1996. 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
revenue 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
---------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Collection Services............................... 64% 64% 65%
Treatment and Disposal Services................... 36% 36% 35%
</TABLE>
While the Company has had international operations since the mid-1970's, the
bulk of the Company's international operations and revenues are derived from
the acquisition from 1990 to 1995 of numerous companies and interests in
Europe. However, with its acquisition goals largely completed, Waste Management
International has engaged in only a few additional small acquisitions since
1995 and has begun to dispose of certain operations which do not fit its long-
term strategy.
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.
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 (26%) and Germany (12%) in 1994,
Italy (23%), Germany (14%), The Netherlands (11%) and the United Kingdom (11%)
in 1995 and Italy (25%), the United Kingdom (12%), Germany (11%) and The
Netherlands (11%) in 1996.
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.
Following a strategic assessment of the European market, Waste Management
International intends to reduce its investment in France, Spain and Austria
during 1997 through joint ventures or the sale of various operations within
those countries. Waste Management International intends to focus its resources
on those markets in which it believes it can attain significant market share.
Waste Management International has also written off the investment in its
hazardous waste disposal facility in Germany because recent regulatory changes
have adversely affected its volumes.
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, 1996
to governmental and private customers in ten European countries, Argentina,
Australia and New Zealand. Business is obtained through public bids or tenders,
negotiated contracts, and, in the case of commercial and industrial
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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 1,420 municipal contracts, serving more than 6.3 million
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 1.85 million residential properties. Pricing for
municipal contracts is generally based on volume of waste, number and 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 300,000 commercial and
industrial customers. Contract terms and prices vary substantially among
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. 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,
1996, Waste Management International owned, operated or maintained 26 waste
treatment facilities, 85 recycling and recyclables processing facilities, eight
incinerators and 56 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 determinants
of the disposal method are the disposal costs at local landfills, as
incineration is generally more expensive, community preferences and regulatory
provisions.
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, Italy,
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<PAGE>
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 comply
with that country's stringent 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 49,000 megawatt hours to the local power
grid in 1996.
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. 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. During 1996, Waste
Management International and the County discussed the viability of the
project, as well as the County's ability to terminate the operations and lease
agreements for the project site, which Waste Management International opposes
unless there is adequate compensation.
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 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.
TRASH-TO-ENERGY AND RELATED SERVICES
WTI, through its subsidiaries, is a leading developer, operator and owner of
trash-to-energy and waste fuel powered independent power facilities in the
United States. These facilities, either owned or operated, give WTI
approximately 920 megawatts per hour of electric generating capacity. WTI's
trash-to-energy projects utilize proven boiler and grate technology and are
capable of processing up to 23,750 tons of trash per day. 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
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<PAGE>
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 customers, including utilities and private
industry. Cogeneration is a technology which allows the simultaneous
production 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.
These power systems use waste wood, waste tires, waste coal or natural gas as
fuel, and employ state-of-the-art technology, such as fluidized-bed
combustion, to ensure the efficient burning of fuel with reduced emission
levels. WTI acquired two industrial cogeneration plants (so-called "inside-
the-fence" facilities) during the year as part of its strategy to leverage its
energy plant operating capabilities and project financing expertise by owning
or operating power plants for industrial customers. The first facility,
located in Martell, California, was acquired in May 1996 and the second plant,
located in Anderson, California near one of the Company's other facilities,
was purchased in November 1996.
In addition, WTI develops, operates and owns projects that compost organic
wastes and treat and manage biosolids. WTI provides a range of biosolids
management services, including land application, drying, pelletizing, alkaline
stabilization and composting, to more than 400 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 three facilities currently in operation, with one other
facility undergoing start-up activity. WTI has approximately 635 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.
WTI subsidiaries also design and install advanced air pollution control
equipment and design, construct and maintain tall concrete chimneys and
storage silos. WTI's expertise in air pollution control technologies and
chimney design and construction is used in the design and construction of
WTI's trash-to-energy facilities, which WTI believes strengthens its
competitive position.
REGULATION
While, in general, the Company's waste management services business has
benefited from increased governmental regulation, the industry in which the
Company operates 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 industry 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 industry, 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
14
<PAGE>
facilities or restriction of operations, which could result in a loss of
earnings from a facility, a write-off of capitalized costs 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 waste management 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 is 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. An effect
of these and similar laws is to reduce the volume of wastes that would
otherwise be disposed in 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.
The demand for certain of the services provided by the Company, particularly
its hazardous waste management services, is dependent in part 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
continues to consider proposals under RCRA to redefine the term "hazardous
waste" for regulatory purposes. Under some such proposals, 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 proposals 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 proposals 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
15
<PAGE>
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 waste management services 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 waste management 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 MANAGEMENT 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 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
16
<PAGE>
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 a 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. Compliance with the new regulations 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.
All of Waste Management's and CWM's chemical waste treatment or disposal
facilities in the United States have been issued permits under RCRA. 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.
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. 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
17
<PAGE>
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.
TRASH-TO-ENERGY 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, within the next several years, the air pollution
control systems at certain trash-to-energy facilities owned or leased by WTI
most likely will be required to be modified to comply with more stringent air
pollution control standards adopted by the EPA in December 1995 for municipal
waste combusters. The compliance dates will vary by facility, but, subject to
the final decision in certain litigation which could result in up to an 18-
month delay in the deadlines, all affected facilities most likely will be
required to be in compliance with the standards by the end of the year 2000.
Currently available technologies will be adequate to meet the new standards.
Although the total expenditures required for such modifications are estimated
to be $190 million to $230 million, they are not expected to have a material
adverse effect on WTI's liquidity or results of operations because provisions
in the impacted facilities' long-term waste supply agreements generally allow
WTI to recover from customers the majority of incremental capital and
operating costs. 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.
Also, in May 1994, the U.S. Supreme Court ruled that state and local
governments may not constitutionally restrict the free movement of trash in
interstate commerce through the use of flow control laws. Such laws typically
involve a municipality specifying the disposal site for all solid waste
generated within its borders. Since the ruling, several decisions of state or
federal courts have invalidated regulatory flow control schemes in a number of
jurisdictions. Other judicial decisions have upheld non-regulatory means by
which municipalities may effectively control the flow of municipal solid
waste. There can be no assurance that such alternatives to regulatory flow
control will in every case be found lawful. WTI's Gloucester County, New
Jersey facility relies on a disposal franchise for substantially all of its
supply of municipal solid waste. In July 1996, a Federal District Court
permanently enjoined the State of New Jersey from enforcing its solid waste
regulatory flow control system, which was held to be unconstitutional, but
stayed the injunction for as long as its ruling is on appeal plus an
additional period of two years to enable the State to devise an alternative
nondiscriminatory approach. The State has indicated that it will continue to
enforce flow control during the two-year transition period and has filed an
appeal of the Federal District Court's ruling. The New Jersey legislature is
now considering a bill to authorize counties and authorities, including the
Gloucester County Improvement Authority, which administers WTI's franchise
there, to implement a constitutionally permissible system of "economic flow
control" designed to recover waste disposal costs incurred in reliance on the
state's franchise system. The Supreme Court's 1994 ruling and subsequent court
decisions have not to date had a material adverse effect on any of WTI's
trash-to-energy
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operations. Federal legislation has been proposed, but not yet enacted, to
effectively grandfather existing flow control mandates. In the event that such
legislation is not adopted, WTI believes that affected municipalities will
endeavor to implement alternative lawful means to continue controlling the
flow of waste. In view of the uncertain state of the law at this time,
however, WTI is unable to predict whether such efforts would be successful or
what impact, if any, this matter might have on WTI's trash-to-energy
facilities.
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 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. As the states and the
United States Congress have accelerated their consideration of the manner in
which economic efficiencies can be gained by deregulating the electric
generation industry, utilities and others have taken the position that power
sales agreements entered into pursuant to PURPA which provide for rates in
excess of current market rates should be voidable as "stranded assets." WTI's
25 power production facilities are qualifying facilities under PURPA and
depend on the sanctity of their power sales agreements for their economic
viability. Although a repeal or modification of PURPA is possible within the
next two years, WTI believes it unlikely that such action would retroactively
abrogate the long-term contracts and rate orders pursuant to which most of
WTI's existing projects sell electricity. Furthermore, the operations of WTI's
existing trash-to-energy and other small power production facilities business
are not expected to be materially and adversely affected if the various
benefits of PURPA are repealed or substantially reduced on a prospective
basis. Finally, the passage of the Energy Policy Act of 1992 created an
alternative ownership mechanism by which WTI's future independent power
projects would be able to participate in the electricity generation industry
without the burdens of traditional public utility regulation. However, WTI can
give no assurances that future utility restructurings, court decisions or
legislative or administrative action in this area will not have a material
adverse impact on WTI's financial position or results of operations.
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.
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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 or reserves will have been accrued over the life
of the facility to provide for 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.
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. For the federal government's 1996 fiscal year, a
maximum of approximately $1.4 billion of Superfund spending was authorized. The
federal government has also approved approximately the same amount of 1997
Superfund spending authorization.
The U. S. Congress is expected to consider reauthorization and revision of
the Superfund statute in 1997. In addition to possible changes in the statute's
funding mechanisms and provisions for
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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 new procedure for the adoption of waste management legislation
(other than for proposals of a primarily fiscal nature), which 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.
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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 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 portable sanitation
service business, and the on-site industrial cleaning services business of Rust
managed by Waste Management, from numerous large and small competitors. In
addition, Rust's program and facilities management business encounters intense
competition, primarily in pricing, quality and reliability of services, from
various sources in all aspects of its business.
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.
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.
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"), 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
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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 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-cancelable by WTI or Waste Management
International without the other's consent prior to 2000. If the arrangement is
canceled, 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 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. 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 in 1995 and its scaffolding rental
and erection business in 1996, the Company and Rust agreed with the respective
purchasers not to engage in providing those services in North America prior to
2002 (in the case of the remediation business) and 2001 (in the case of the
scaffolding business). In connection with WTI's sale of its water process,
manufacturing and custom engineering
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business, WMX and WTI agreed with the purchaser not to engage in such business
in the United States or any other country in which WTI conducted such business
at the time of sale until 2001.
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 59,700
persons in their worldwide continuing operations. Of this number, the Company
employs approximately 38,400 persons in its North American solid and hazardous
waste management services operations (excluding employees of the Rust on-site
industrial cleaning services business operated by Waste Management). Of this
total, approximately 29,100 persons (including 2,400 contract workers) are
employed in solid and hazardous waste collection, transfer, resource recovery
and disposal activities, and approximately 9,300 in managerial, executive,
sales, clerical, data processing and other solid waste and related activities.
As of December 31, 1996, Waste Management International employed
approximately 16,500 persons. Of this number, approximately 12,700 persons were
employed in its collection services operations, 2,400 in its treatment and
disposal services operations and 1,400 in administrative functions.
WTI has approximately 2,100 full-time employees in its continuing operations.
Rust employed approximately 2,700 persons at December 31, 1996 in the on-site
industrial cleaning services business managed by Waste Management and Rust's
program and facilities management services business.
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
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businesses following acquisition by the Company. During 1996, the Company
continued to acquire additional operations in the waste management 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 significantly decreased, and the Company has
disposed of significant amounts of non-waste management services businesses and
assets, as well as underperforming or poorly positioned waste management
services businesses. As it focuses on its core waste management services
business, the Company intends to continue engaging in such dispositions. See
below. The Company's growth prospects may be affected by the decision to engage
in such dispositions and 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 acquisition of businesses 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
attempting to obtain 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.
In June 1996, Rust sold its process engineering and construction business to
Raytheon Engineering Inc.
In September 1996, Rust sold its scaffolding rental and erection services
business to Brand Scaffold Services, Inc. for approximately $190 million.
In December 1996, WTI sold its water process, manufacturing and custom
engineering business to United States Filter Corporation ("U.S. Filter") for
approximately $370 million.
Also in December 1996, Waste Management International announced plans to sell
its approximately 20% interest in Wessex. The sale was completed in February
1997.
In addition, as part of its program to dispose of approximately $1.5 billion
of non-core or underperforming assets over the next 18 to 24 months, the
Company has announced the following:
. an agreement reached in February 1997 to sell its approximately 20%
interest in ServiceMaster to ServiceMaster for approximately $626
million in the second quarter of 1997, subject to ServiceMaster's
reaching suitable agreements with its lenders;
. the planned sale by WTI of its remaining water services business to U.S.
Filter for approximately $77 million;
. the planned sale by Rust of its remaining domestic and international
engineering and consulting business;
. the planned sale of approximately $400 million of non-integrated waste
management services businesses in North America;
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. reduced investment by Waste Management International in all or parts of
businesses in France, Spain and Austria by creating joint ventures or
selling operations within these countries; and
. the planned sale of non-core and non-contributing real estate holdings.
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, 1996 represented approximately 20%, 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 1997. The Company's subsidiaries lease numerous office and operating
facilities throughout the world. For the year ended December 31, 1996,
aggregate annual rental payments on real estate leased by the Company and its
subsidiaries approximated $103.8 million.
The principal fixed assets of Waste Management consist of vehicles and
equipment (which include, among other items, approximately 21,400 collection
and transfer vehicles, 1.6 million containers and 25,100 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, 1996, 105 solid waste disposal facilities, aggregating
approximately 66,400 total acres, including approximately 15,950 permitted
acres, were owned by Waste Management in the United States and Canada and 28
facilities, aggregating approximately 13,725 total acres, including
approximately 5,750 permitted acres, were leased from parties not affiliated
with Waste Management under leases expiring from 1997 to 2085. At December 31,
1996, 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
United States chemical waste facilities with secure land disposal sites
aggregated approximately 7,875 acres, including approximately 1,475 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, 1996 represented approximately 8.8% and 19.7%, respectively, of
Waste Management International's assets. The principal fixed assets utilized in
Waste Management International's collection services operations at December 31,
1996, consisted of vehicles and equipment (which included, among other items,
approximately 7,000 collection, transportation, and other route vehicles and
approximately 260 pieces of landfill and other heavy equipment), and
approximately 307,000 containers, including approximately 3,850 stationary
compactors. In addition, Waste Management International owns approximately 730
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,
1996, consisted of 56 landfills, 26 waste treatment facilities, 85 recycling
and recyclables processing facilities, eight 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, eight
cogeneration and small power production facilities, two coal handling
facilities, three 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 1998 to 2020,
subject to renewal options in certain cases.
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ITEM 3. LEGAL PROCEEDINGS.
The continuing business in which the Company is engaged is 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.
In December 1996, a CWM subsidiary paid a civil penalty of $100,000 to settle
an administrative proceeding brought by the New York State Department of
Environmental Conservation involving alleged violation by the subsidiary of
leachate management regulations from 1994 to 1996 at the subsidiary's Model
City, New York facility. In settling this matter, the subsidiary did not admit
any violation of law.
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 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, 1996, the Company or its subsidiaries had been notified
that they are potentially responsible parties in connection with 103 locations
listed on the Superfund National Priority List ("NPL"). Of the 103 NPL sites at
which claims have been made against the Company, 18 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 18 owned
facilities, the Company is working in conjunction with the government to
characterize or to remediate identified site problems. In addition, at these 18
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 85 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
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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 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. In November 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 Connecticut Supreme Court
has upheld that ruling. The Company believes that removal of such waste is an
inappropriate remedy and is seeking an alternative resolution of the issue. The
Company is unable to predict the outcome of the issue or any removal action
that may ultimately be required as a result of the permitting process. However,
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
28
<PAGE>
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 140 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
nearly complete as to the 12 sites in the first phase of the case and discovery
is expected to continue for several years as to the remaining sites. A trial
date has been set for October 14, 1997 as to the first phase sites. No trial
date has been set as to the remaining sites. 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 potential 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 1996.
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 65, has been a director of the Company and has served
as Chairman of the Board of the Company since 1968. Since February 1997, he has
served as acting Chief Executive Officer. He had previously served as Chief
Executive Officer from 1968 to June 1996. 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.
Herbert A. Getz, age 41, 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 from July 1995 to January
1997, 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 a director of NSC and OHM.
Thomas C. Hau, age 61, 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.
Joseph M. Holsten, age 44, has been Executive Vice President and Chief
Operating Officer of the Company since February 1997. He was Chief Executive
Officer of Waste Management International from July 1995 to March 1997. From
October 1993 to July 1995, he was Executive Vice President
29
<PAGE>
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 49, has been Executive Vice President of the Company
since February 1997. He was a Senior Vice President of the Company from May
1992 to February 1997, Treasurer of the Company from 1986 to July 1996 and
Chief Financial Officer of the Company from 1989 to February 1997. 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 54, 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.
John D. Sanford, age 43, has been Senior Vice President and Chief Financial
Officer of the Company since February 1997. He also has been Treasurer since
July 1996. He was Vice President--Project Finance of the Company from March
1996 to February 1997. He was also the Vice President, Chief Financial Officer
and Treasurer of WTI from 1993 to February 1997 and Executive Vice President of
WTI from 1995 to February 1997. From February to May 1993, Mr. Sanford was
Staff Vice President--Finance of WTI. He also served as Vice President and
Chief Financial Officer of WTI's Wheelabrator Energy Systems Inc. subsidiary
from 1987 to 1993.
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.
<TABLE>
<CAPTION>
1995 QUARTERLY
SUMMARY
--------------- 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
<CAPTION>
1996 QUARTERLY
SUMMARY
--------------- CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
------- ------- ------------------
<S> <C> <C> <C>
First........................................ $32 1/8 $27 3/4 $.15
Second....................................... 36 1/8 31 5/8 .16
Third........................................ 33 1/4 28 5/8 .16
Fourth....................................... 36 5/8 32 1/8 .16
</TABLE>
30
<PAGE>
At March 19, 1997, the Company had approximately 50,000 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. No Company
shares were repurchased under this program in 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 1996,
the Company purchased 14,390,000 shares pursuant to this program at a cost of
approximately $473,560,000. In February 1997, the Company's Board of Directors
approved a new repurchase program to replace the program approved in December
1995. Under the new program, the Company is authorized to purchase during 1997
and 1998 up to 50 million shares of its common stock in the open market, in
privately negotiated transactions or through issuer tender offers.
During 1994, 1995 and 1996, the Company sold put options on 42.3 million
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. For information concerning the exercise or
expiration of these put options and related information, see "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Financial Condition--Capital Structure" incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information for each of the
five years in the period ended December 31, 1996 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.
31
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------
1992(1) 1993(2)(3) 1994(3) 1995(3)(4) 1996(3)(5)
----------- ----------- ----------- ----------- -----------
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue from continuing
operations............. $ 8,661,027 $ 7,827,280 $ 8,482,718 $ 9,053,018 $ 9,186,970
Income from continuing
operations............. $ 850,036 $ 418,086 $ 742,306 $ 618,243 $ 477,791
Earnings per common and
common equivalent
share--continuing
operations............. $ 1.72 $ .86 $ 1.53 $ 1.27 $ .97
Total assets............ $14,114,180 $16,080,265 $17,083,042 $18,364,274 $18,366,592
Long-term debt, less
portion payable within
one year............... $ 4,312,511 $ 6,143,685 $ 6,024,478 $ 6,390,041 $ 6,971,607
Dividends per share..... $ .50 $ .58 $ .60 $ .60 $ .63
</TABLE>
- --------
(1) 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.
(2) 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.
(3) In 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. During 1996, the sale of the industrial
process engineering and construction businesses, based in Birmingham,
Alabama, was completed. In 1996, WTI sold its water process systems and
equipment manufacturing businesses, and Rust sold its industrial
scaffolding business. WTI entered into an agreement to sell its water and
wastewater facility operations and privatization business and Rust began
implementing plans to exit its remaining domestic and international
engineering and consulting business. CWM is also exiting its fuels blending
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 on January 1,
1993, for the discontinued operations. See Note 15 to the Company's
Consolidated Financial Statements.
(4) 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.
(5) The results for 1996 include special charges of $107,900,000 (before
minority interest) related to Waste Management International's sale of its
investment in Wessex and a charge of $169,500,000 (before minority
interest) to revalue its investments in France, Austria and Spain in
contemplation of exiting all or part of these markets or forming joint
ventures and to write off an
32
<PAGE>
investment in a hazardous waste disposal facility. Also in 1996, the Company
and CWM recorded special charges of $255,000,000 (before tax) for
reengineering their finance and administrative functions and increasing
reserves for certain litigation. See Note 14 to the Company's Consolidated
Financial Statements.
(6) Certain amounts have been restated to conform to 1996 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, 1996, 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 8 to 15 of the Company's
1996 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, 1995 and 1996,
Consolidated Statements of Income, Stockholders' Equity and Cash Flows for each
of the years in the three-year period ended December 31, 1996 and Notes to
Consolidated Financial Statements set forth on pages 17 to 36 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 2 of the Company's proxy
statement for the annual meeting scheduled for May 9, 1997 (the "Proxy
Statement") for a description of the directors and a director nominee 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 11 through 17 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
33
<PAGE>
Statement, for certain information respecting ownership of common stock of the
Company, WTI and Waste Management International, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the paragraph under the caption "Compensation Committee
Interlocks and Insider Participation" on page 17 of the Proxy Statement and the
information set forth under the caption "Certain Transactions" beginning on
page 27 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, 1996;
(ii) Consolidated Balance Sheets--December 31, 1995 and 1996;
(iii) Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1996;
(iv) Consolidated Statements of Cash Flows for the three years ended
December 31, 1996;
(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) Amended and Restated Employment Agreement, dated as of June 17,
1996, by and between the registrant and Phillip B. Rooney (Exhibit 10.1
to registrant's report on Form 10-Q for the quarter ended September 30,
1996)
34
<PAGE>
(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 24, 1995 (Exhibit 10.7 to
registrant's 1995 annual report on Form 10-K)
(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 (Exhibit 10.11 to registrant's 1995 annual report on Form 10-
K)
(xii) Amendment No. 1 to WMX Technologies Inc. Non-Qualified Profit
Sharing and Savings Plus Plan (filed with this report)
(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 (Exhibit 10.21 to registrant's 1995 annual
report on Form 10-K)
(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. Amended and Restated 1992 Stock Option
Plan for Non-Employee Directors (filed with their report)
(xxiv) Wheelabrator Technologies Inc. 1992 Stock Option Plan (Exhibit
10.45 to the 1991 annual report on Form 10-K of Wheelabrator
Technologies Inc.)
35
<PAGE>
(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)
(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)
(xxxi) Employment Agreement dated as of August 15, 1996 between the
registrant and James E. Koeing (Exhibit 10.2 to registrant's report on
Form 10-Q for the quarter ended September 30, 1996)
(xxxii) Employment Agreement dated as of August 15, 1996 between the
registrant and Herbert A. Getz (Exhibit 10.3 to registrant's report on
Form 10-Q for the quarter ended September 30, 1996)
(xxxiii) Restricted Stock Agreement dated as of August 15, 1996
between the registrant and James E. Koenig (Exhibit 10.4 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
(xxxiv) Restricted Stock Agreement dated as of August 15, 1996
between the registrant and Herbert A. Getz (Exhibit 10.5 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
(xxxv) Letter Agreement dated as of February 17, 1997 between the
registrant and Phillip B. Rooney (filed with this report)
(xxxvi) WMX Technologies, Inc. 1997 Equity Incentive Plan (Exhibit A
to registrant's Proxy Statement for its 1997 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 1996, the Company filed reports on Form 8-K as
follows:
(i) a report dated December 13, 1996 reporting under item 5 the issuance
of a news release indicating that CWM would appeal the decision of the
United States District Court for the Western District of Tennessee in
Memphis, Tennessee, which held CWM liable for approximately $76.5 million
in contract damages and $15 million in punitive damages in a dispute with
the former owners of CWM's Emelle, Alabama hazardous waste landfill and the
possibility that the Company might record a charge in the fourth quarter of
1996 that would have a material adverse effect on the registrant's results
of operations; and
36
<PAGE>
(ii) a report dated December 18, 1996 reporting under item 5 the issuance
of a news release announcing that (a) Waste Management International had
reached an agreement with Wessex Water Plc ("Wessex") to sell its 19.5%
equity investment in Wessex, (b) the agreement would generate a charge in
the fourth quarter of 1996 of approximately $88 million after tax, or $.18
per share, and have a $.04 per share negative impact on the Company's 1997
earnings, (c) upon completion of the Wessex transaction the Company will
have generated nearly $1 billion in cash from the disposition of non-core
and underperforming assets, the target it established in May 1996, and (d)
the registrant expects to monetize additional assets, including other non-
core equity investments, real estate and underperforming core businesses.
37
<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>
1994--Reserve for
doubtful accounts (B)
(C).................... $57,279 $33,720 $(38,621) $5,072 $1,760 $59,210
======= ======= ======== ====== ====== =======
1995--Reserve for
doubtful accounts (C).. $59,210 $38,914 $(39,224) $1,814 $1,213 $61,927
======= ======= ======== ====== ====== =======
1996--Reserve for
doubtful accounts...... $61,927 $39,148 $(57,681) $4,374 $ (245) $47,523
======= ======= ======== ====== ====== =======
</TABLE>
- --------
(A) Reserves of companies accounted for as purchases.
(B) Includes reserves for doubtful long-term notes receivable.
(C) Restated to exclude discontinued operations.
38
<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 1996 filed as an exhibit to and incorporated
by reference in this Form 10-K, and have issued our report thereon dated
February 3, 1997. Our audit was made for the purpose of forming an opinion on
those statements taken as a whole. The schedule included on page 38 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 3, 1997
39
<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 26TH DAY OF MARCH 1997.
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.
SIGNATURE TITLE DATE
/s/ Dean L. Buntrock Director, Chairman
- ------------------------------------- of the Board and
DEAN L. BUNTROCK Chief Executive
Officer
/s/ Jerry E. Dempsey Director
- -------------------------------------
JERRY E. DEMPSEY
/s/ Donald F. Flynn Director
- -------------------------------------
DONALD F. FLYNN
/s/ Peer Pedersen Director
- -------------------------------------
PEER PEDERSEN
/s/ James R. Peterson Director
- -------------------------------------
JAMES R. PETERSON
/s/ Alexander B. Trowbridge Director
- -------------------------------------
ALEXANDER B. TROWBRIDGE
/s/ H. Jesse Arnelle Director
- -------------------------------------
H. JESSE ARNELLE
/s/ Pastora San Juan Cafferty Director
- -------------------------------------
PASTORA SAN JUAN CAFFERTY March 26, 1997
/s/ James B. Edwards Director
- -------------------------------------
JAMES B. EDWARDS
/s/ Paul M. Montrone Director
- -------------------------------------
PAUL M. MONTRONE
/s/ Steven G. Rothmeier Director
- -------------------------------------
STEVEN G. ROTHMEIER
/s/ Peter H. Huizenga Director
- -------------------------------------
PETER H. HUIZENGA
/s/ Howard H. Baker, Jr. Director
- -------------------------------------
HOWARD H. BAKER, JR.
/s/ Thomas C. Hau Vice President,
- ------------------------------------- Controller and
THOMAS C. HAU Principal
Accounting Officer
/s/ John D. Sanford Senior Vice
- ------------------------------------- President, Chief
JOHN D. SANFORD Financial Officer,
Treasurer and
Principal Financial
Officer
40
<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 30, 1997
4.1(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)
4.1(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)
4.2 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
</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>
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 Amended and Restated Employment Agreement, dated as of June 17, 1996, by
and between the registrant and Phillip B. Rooney (incorporated by
reference to Exhibit 10.1 to registrant's report on Form 10-Q for the
quarter ended September 30, 1996)
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 (incorporated by reference
to Exhibit 10.7 to registrant's 1995 annual report on Form 10-K)
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 (incorporated by reference to Exhibit 10.11 to registrant's 1995
Annual Report on Form 10-K)
10.12 Amendment No. 1 to the WMX Technologies, Inc. Non-Qualified Profit
Sharing and Savings Plus Plan
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)
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)
</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>
10.17 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 (incorporated by reference to Exhibit 10.21 to
registrant's 1995 annual report on Form 10-K)
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. Amended and Restated 1992 Stock Option Plan for
Non-Employee Directors
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)
10.34 Employment Agreement dated as of August 15, 1996 between the registrant
and James E. Koenig (incorporated by reference to Exhibit 10.2 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
10.35 Employment Agreement dated as of August 15, 1996 between the registrant
and Herbert A. Getz (incorporated by reference to Exhibit 10.3 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
10.36 Restricted Stock Agreement dated as of August 15, 1996 between the
registrant and James E. Koenig (incorporated by reference to Exhibit
10.4 to registrant's report on Form 10-Q for the quarter ended September
30, 1996)
10.37 Restricted Stock Agreement dated as of August 15, 1996 between the
registrant and Herbert A. Getz (incorporated by reference to Exhibit
10.5 to registrant's report on Form 10-Q for the quarter ended September
30, 1996)
10.38 Letter Agreement dated as of February 17, 1997 between the registrant
and Phillip B. Rooney
10.39 WMX Technologies, Inc. 1997 Equity Incentive Plan (incorporated by
reference to Exhibit A to the registrant's Proxy Statement for its 1997
Annual Meeting of Stockholders)
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, Footnotes 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 3.2
WMX TECHNOLOGIES, INC.
______________________________
BY-LAWS
______________________________
AMENDED AND RESTATED AS OF: January 30, 1997
<PAGE>
ARTICLE I
OFFICES
SECTION 1. DELAWARE OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of directors shall be held in the Village of Oak Brook, State of
Illinois, at such place as may be fixed from time to time by the board of
directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the board of directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may
be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held
on the second Friday in May if not a legal holiday, and if a legal holiday, then
on the next business day following, at 10:00 a.m., or at such other date and
time as shall be designated from time to time by the board of directors and
stated in the notice of the meeting, at which the stockholders shall elect
directors as provided in the restated certificate of incorporation, and transact
such other business as may properly be brought before the annual meeting (a) in
accordance with applicable statutes, (b) by or at the direction of the board of
directors or (c) by any stockholder (i) who is a stockholder of record on the
date of the giving of the notice provided for in this Section 2 and on the
record date for the determination of stockholders entitled to vote at such
annual meeting and (ii) who complies with the
<PAGE>
procedures set forth in this Section 2. For business properly to be brought
before an annual meeting of stockholders by a stockholder pursuant to this
Section 2, the stockholder must have given timely notice thereof in proper
written form to the secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than ninety (90) days nor more than one
hundred twenty (120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
-------- -------
that the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public announcement of the date of the annual meeting
was made, whichever first occurs. In no event shall the public announcement of
an adjournment or postponement of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above. To be in proper
written form, a stockholder's notice to the secretary shall set forth in writing
as to each matter the stockholder proposes to bring before the annual meeting:
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting; (ii)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business; (iii) the class and number of shares of
capital stock of the Corporation which are owned by the stockholder as of the
record date for the annual meeting; (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of the stockholder in such business; and
(v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting. The
chairman of the annual meeting shall have the sole authority to determine
whether business was properly brought before the annual meeting in accordance
with the provisions of this Section 2 and, if the chairman should determine that
such business was not so properly brought, he or she shall so declare to the
annual meeting, and any such business not properly brought before the annual
meeting shall not be transacted. For purposes of this Section 2, "public
announcement" shall mean disclosure in a press release issued to one or more
national financial or general news services, including without limitation the
Dow Jones News Service or Associated Press, or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
2
<PAGE>
SECTION 3. ANNUAL MEETING NOTICE. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than 60
days before the date of the meeting.
SECTION 4. STOCKHOLDER MEETING LIST. The secretary of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present for any purpose
germane to the meeting.
SECTION 5. INSPECTORS. The board of directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors of election and may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If any inspector or alternate so appointed shall be unwilling
or unable to serve, the chairman of the meeting shall appoint the necessary
inspector or inspectors. The inspectors so appointed, before entering upon the
discharge of their duties, shall be sworn faithfully to execute the duties of
inspectors with strict impartiality and according to the best of their ability,
and the oath so taken shall be subscribed by them. Such inspectors shall: (a)
determine the number of shares of capital stock of the Corporation outstanding
and the voting power of each; (b) determine the shares represented at the
meeting, the existence of a quorum, and the validity of proxies and ballots; (c)
count and tabulate all votes and ballots; (d) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors; (e) certify their determination of the number
of shares represented at the meeting and their count of all votes and ballots;
and (f) do such acts as are proper to conduct the election or vote with fairness
to all stockholders. The date and time of the opening and closing of the polls
for each matter upon which stockholders will vote at a meeting shall be
announced at the meeting, and no ballots, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of
3
<PAGE>
the polls. No director or candidate for the office of director shall act as an
inspector of election of directors. Inspectors need not be stockholders.
SECTION 6. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
restated certificate of incorporation, may be called by the chairman of the
board, the president or the secretary or by resolution of the board of
directors, subject to the provisions of Article Sixth of the restated
certificate of incorporation, and shall be called by the chairman of the board,
president or secretary at the request in writing of a majority of the board of
directors, subject to the provisions of Article Sixth of the restated
certificate of incorporation.
SECTION 7. SPECIAL MEETING NOTICE. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than 60
days before the date of the meeting to each stockholder entitled to vote at such
meeting.
SECTION 8. SPECIAL MEETING PURPOSE. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
SECTION 9. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
restated certificate of incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
4
<PAGE>
SECTION 10. VOTING. (a) When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question (other than the
election of directors) brought before such meeting, unless the question is one
upon which by express provision of the General Corporation Law of the State of
Delaware or of the restated certificate of incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
(b) Each share of common stock shall entitle the holder thereof to one
vote, in person or by proxy, at any and all meetings of the stockholders of the
Corporation, on all propositions before the meeting. No proxy shall be voted or
acted upon after three years from its date unless the proxy provides for a
longer period.
SECTION 11. MEETING PROCEDURE. The chairman of any meeting of
stockholders shall have full and complete authority over matters of procedure
and there shall be no appeal from the ruling of the chairman. If disorder or
any other event should arise which prevents continuation of the legitimate
business of the meeting, the chairman may announce the adjournment of the
meeting; and upon his or her doing so, the meeting is immediately adjourned.
The chairman may ask or require anyone who is not a bona fide stockholder or
holder of a valid proxy, or who is disrupting or inhibiting the orderly conduct
of the meeting, to leave the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. NUMBER. The number of directors which shall constitute the
whole board shall be thirteen but shall be reduced automatically to twelve
immediately prior to the election of directors at the annual meeting of
stockholders in 1997. Only directorships with terms expiring in any year (as
provided in Article Fifth of the restated certificate of incorporation) shall be
filled at the annual meeting of stockholders in that year. Directors shall be at
least 21 years of age and need not be stockholders.
5
<PAGE>
SECTION 2. ELECTION, TERM AND VACANCIES. At each meeting of stockholders
for the election of directors at which a quorum is present, the persons
receiving a plurality of the votes cast shall be elected directors. Each
director shall serve until the annual meeting of stockholders for the year in
which his term expires and until his successor is duly elected and qualified,
subject, however, to his prior death, retirement, resignation or removal for
cause. Should a vacancy occur or be created, whether arising through death,
retirement, resignation or removal of a director for cause, or through an
increase in the number of directors of any class, such vacancy shall be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. A director so elected to fill a vacancy shall
serve for the then present term of office of the class of directors to which he
was elected. Subject to the provisions of Article IX of these by-laws, if there
are no directors in office, then an election may be held in the manner provided
by statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
SECTION 3. NOMINATIONS. Nominations for any election of a director may be
made by the board of directors, a committee appointed by the board or by any
stockholder entitled to vote generally in the election of directors (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 3 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the
procedures set forth in this Section 3. All nominations by stockholders must be
made pursuant to timely notice in proper written form to the secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than ninety (90) days nor more than one hundred twenty (120) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
-------- -------
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public
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announcement of the date of the annual meeting was made, whichever first occurs.
In no event shall the public announcement of an adjournment or postponement of
an annual meeting commence a new time period for the giving of a stockholder's
notice as described above. To be in proper written form, such stockholder's
notice shall set forth in writing (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is or would be required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder and such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected; and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder, (ii)
the class and number of shares of the Corporation which are beneficially owned
by such stockholder, (iii) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in its
notice and (v) any other information relating to such stockholder that is or
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Notwithstanding anything in this Section 3 to the
contrary, in the event that the number of directors to be elected to the board
of directors of the Corporation is increased and there is no public announcement
by the Corporation naming all of the nominees for director or specifying the
size of the increased board of directors at least seventy (70) days prior to the
first anniversary of the preceding year's annual meeting, a stockholder's notice
required by this Section 3 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
Corporation. At the request of the board of directors, any person nominated by
the board, or a committee appointed by the board, for election as a director
shall furnish to the secretary of the Corporation the information required to be
set forth in a stockholder's notice of nomination which pertains to the nominee.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the procedures
prescribed by this
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Section 3, and the defective nomination shall thereupon be disregarded. For
purposes of this Section 3, "public announcement" shall mean disclosure in a
press release issued to one or more national financial or general news services,
including without limitation the Dow Jones News Service or Associated Press, or
in a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
SECTION 4. POWERS. The business of the Corporation shall be managed by
its board of directors which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute or by the restated
certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
SECTION 5. PLACE OF MEETINGS. The board of directors of the Corporation
and committees thereof may hold meetings, both regular and special, either
within or without the State of Delaware.
SECTION 6. REGULAR MEETINGS. Regular meetings of the board of directors
or any committee thereof may be held without notice at such time and at such
place as shall from time to time be determined by the board or such committee.
SECTION 7. SPECIAL MEETINGS. Special meetings of the board or committees
thereof may be called by the chairman of the board or, in the case of a
committee meeting, by the committee chairman on one day's notice to each
director, either personally or by mail, telegram, telex, or facsimile
transmission; special meetings of the board shall be called by the chairman of
the board or secretary in like manner and on one day's notice on the written
request of two directors.
SECTION 8. QUORUM. At all meetings of the board a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the restated certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting
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from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
SECTION 9. WRITTEN CONSENT. Unless otherwise restricted by the restated
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
SECTION 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the
restated certificate of incorporation, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
SECTION 11. COMMITTEES. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee, provided, however, that in the event of the absence or
disqualification of any member and alternate member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member or alternate
member. Any such committee, to the extent provided in the resolution
designating such committee and not limited by the General Corporation Law of the
State of Delaware, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. A resolution passed by a majority of the whole board which
designates a committee or
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committees as provided above may be amended or repealed only by a majority of
the whole board. Unless its authorizing resolution otherwise specifies, two
members of a committee shall be required to constitute a quorum, except that
only one member shall be required in the case of any committee having only one
member.
SECTION 12. COMMITTEE MINUTES. Each committee shall keep regular minutes
of its meetings and report the same to the board of directors when required.
SECTION 13. COMPENSATION. The directors may be paid their expenses if
any, of attendance at each meeting of the board of directors and may be paid a
fixed sum for attendance at each meeting of the board of directors, a stated
salary as director, or any combination thereof. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like expenses and compensation for attending committee meetings.
SECTION 14. RESIGNATION. A resignation of a director shall be effective
upon receipt by the chairman of the board of a signed written notice of such
resignation, or, should such notice contain a specified date of resignation, at
such specified date. No acceptance by the board of directors is required for
such resignation to be effective.
ARTICLE IV
NOTICES
SECTION 1. FORM AND TIMING. Whenever any notice is required to be given
to any director or stockholder pursuant to the provisions of the General
Corporation Law of the State of Delaware, the restated certificate of
incorporation, these by-laws or the resolutions or other governing provisions of
a committee of the board of directors, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given on the second business day next following the day when the same shall be
deposited in the United
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States mail. Notice to a director may also be given by telegram addressed to
such director at such address, and such notice shall be deemed to be given on
the business day next following the day of the delivery of such notice for
transmission to such director. Notice to a director may also be given by telex
or facsimile transmission to such number as shall appear on the records of the
Corporation as the number of such director and shall be deemed to be given on
the day of transmission.
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the General Corporation Law of the State of Delaware,
the restated certificate of incorporation, these by-laws or the resolutions or
other governing provisions of a committee of the board of directors, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto. Attendance by a person at a meeting shall constitute a waiver of the
required notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE V
OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation
shall be chosen by the board of directors and shall be a chairman of the board,
a president, one or more vice presidents (the number and designation thereof to
be determined by the board of directors), a secretary, a treasurer, a
controller, a general counsel, and such assistant secretaries, assistant
treasurers or other officers, including, without limitation, one or more vice
chairmen of the board, as may be elected or appointed by the board of directors.
Any number of offices may be held by the same person, unless the restated
certificate of incorporation or these by-laws otherwise provide.
SECTION 2. ANNUAL ELECTION. The board of directors, at its meeting held
in conjunction with or after each annual meeting of stockholders, shall choose a
chairman of the board, a president, one or more vice presidents, a secretary, a
treasurer, a controller, a general counsel and may choose one or more vice
chairmen of the board, assistant officers or other officers as it may deem
advisable.
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SECTION 3. APPOINTMENT OF OTHER OFFICERS. The board of directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
SECTION 4. COMPENSATION. The salaries and other compensation of all
officers (other than assistant officers, unless the board otherwise determines)
and agents of the Corporation elected by the board shall be as fixed by the
board of directors.
SECTION 5. TERM, REMOVAL AND VACANCIES. The officers of the Corporation
shall hold office until their successors are chosen and qualify. Any officer or
agent elected or appointed by the board of directors may be removed at any time
by the affirmative vote of a majority of the whole board. Any vacancy occurring
in any office of the Corporation shall be filled by the board of directors.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board shall preside
at all meetings of the stockholders and the board of directors. He or she may
sign certificates for shares of the Corporation and any deeds, mortgages, bonds,
contracts or other instruments which the board of directors has authorized to be
executed, whether or not under the seal of the Corporation, except in cases
where the signing and execution thereof shall be expressly delegated by the
board of directors or by these by-laws to some other officer or agent of the
Corporation. The chairman of the board shall perform such other duties and have
such other powers as the board of directors may from time to time prescribe.
SECTION 7. VICE CHAIRMAN (OR VICE CHAIRMEN) OF THE BOARD. In the absence
of the chairman of the board or in the event of his or her inability or refusal
to act, the vice chairman of the board, if any (or in the event there may be
more than one vice chairman of the board, the vice chairman of the board, in the
order designated, or in the absence of any designation, then in the order of
their election), shall perform the duties of the chairman of the board, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the chairman of the board. He or she may sign certificates for shares of
the Corporation and any deeds, mortgages, bonds, contracts, or other instruments
which the board of directors has authorized to be executed, whether or not under
the seal
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of the Corporation, except in cases where the signing and execution thereof
shall be expressly delegated by the board of directors or by these by-laws to
some other officer or agent of the Corporation. The vice chairmen of the board
shall perform such other duties and have such other powers as the board of
directors or the chairman of the board may from time to time prescribe.
SECTION 8. PRESIDENT. The president shall be the chief executive officer
of the Corporation. He or she shall have responsibility for the general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the board of directors are carried into effect. He or
she may sign certificates for shares of the Corporation and any deeds,
mortgages, bonds, contracts or other instruments which the board of directors
has authorized to be executed, whether or not under the seal of the Corporation,
except in cases where the signing and execution thereof shall be expressly
delegated by the board of directors or by these by-laws to some other officer or
agent of the Corporation. In the absence of the chairman of the board and the
vice chairman (or, if there be more than one, the vice chairmen) of the board,
or in the event of their inability or refusal to act, the president shall
perform the duties of the chairman of the board, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the chairman of
the board. The president shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
SECTION 9. VICE PRESIDENTS. In the absence of the president or in the
event of his or her inability or refusal to act, the vice president (or in the
event there be more than one vice president, the vice presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. A vice president who is appointed as such with respect to a
particular area of responsibility or function of the Corporation shall, subject
to the authority of the chairman and the president, perform all duties and have
all authority pertaining to the general and active management of such area or
function and shall see that all orders and resolutions of the board of directors
pertaining to such area or function are carried into effect. The vice
presidents shall perform such other duties and have such other powers as the
board of directors, the chairman of the board or the president may from time to
time prescribe.
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SECTION 10. SECRETARY. The secretary shall: (a) keep the minutes of
stockholders, board of directors and board of directors committee meetings in
one or more books provided for the purpose; (b) see that all notices are duly
given in accordance with the provisions of these by-laws or as required by law;
(c) be custodian of the corporate records and of the seal of the Corporation and
see that the seal of the Corporation is affixed to all documents, the execution
of which on behalf of the Corporation under its seal is necessary or desirable;
(d) keep or cause to be kept a register of the mailing address of each
stockholder which shall be furnished to the secretary or any transfer agent of
the Corporation by such stockholder; (e) have authority to sign with the
chairman of the board, a vice chairman of the board, the president, or a vice
president, certificates for shares of the Corporation, the issue of which shall
have been authorized by resolution of the board of directors; (f) have general
charge of the stock transfer books of the Corporation; (g) attest to the
genuineness of the signature on behalf of the Corporation of any officer or
agent of the Corporation on any deeds, mortgages, bonds, contracts or other
instruments; (h) certify the authenticity of any instrument or record of the
Corporation; and (i) in general perform all duties incident to the office of
secretary and such other duties as the board of directors, the chairman of the
board or the president may from time to time prescribe.
SECTION 11. TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the board of directors shall
determine. He or she shall: (a) have charge and custody of and be responsible
for all funds and securities of the Corporation, and the deposit of all moneys
in the name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with resolutions of the board of
directors; (b) have authority to sign with the chairman of the board, a vice
chairman of the board, the president or a vice president, certificates for
shares of the Corporation, the issue of which shall have been authorized by
resolution of the board of directors; and (c) in general perform all the duties
incident to the office of treasurer and such other duties as the board of
directors, the chairman of the board or the president may from time to time
prescribe.
SECTION 12. CONTROLLER. The controller shall be the principal accounting
officer of the Corporation and shall supervise the preparation and maintenance,
on a current basis, of such accounting books, records and reports as may be
necessary for directors, officers and employees of the Corporation to discharge
their duties or as may be required by law. In general he or she shall perform
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all duties incident to the office of controller and other duties as the board of
directors, the chairman of the board or the president may from time to time
prescribe.
SECTION 13. GENERAL COUNSEL. The general counsel shall be the chief legal
adviser of the Corporation as to all matters affecting the Corporation or its
business. In general he or she shall perform all the duties incident to the
office of general counsel and such other duties as the board of directors, the
chairman of the board or the president may from time to time prescribe.
Section 14. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries as thereunto authorized by the board of directors may sign with the
chairman of the board, a vice chairman of the board, the president, or a vice
president certificates for shares of the Corporation, the issue of which shall
have been authorized by a resolution of the board of directors, may attest to
the genuineness of the signature on behalf of the Corporation of any officer or
agent of the Corporation on any deeds, mortgages, bonds, contracts or other
instruments and may certify the authenticity of any instrument or record of the
Corporation. The assistant treasurers may sign with the chairman of the board,
a vice chairman of the board, the president or a vice president, certificates
for shares of the Corporation, the issue of which shall have been authorized by
resolution of the board of directors. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine. The assistant secretaries and assistant treasurers
in general shall perform such duties as from time to time may be prescribed by
the secretary or the treasurer, respectively, or by the board of directors, the
chairman of the board or the president.
ARTICLE VI
CAPITAL STOCK
SECTION 1. CERTIFICATES. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by, the chairman or a vice chairman of the board, the president or a vice
president, and by the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the Corporation, representing the number of shares
owned by him or her in the Corporation. The board of directors may by
resolution, subject to applicable provisions of the
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General Corporation Law of the State of Delaware, determine that some or all of
any or all classes or series of stock shall be uncertificated shares.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 3. LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificates to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the board of directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or to give the Corporation bond in such sum as it may direct as
indemnity or otherwise indemnify the Corporation against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and upon delivery to the Corporation or the transfer agent of the
Corporation of proper evidence of succession, assignment or authority to
transfer any uncertificated shares of the Corporation, it shall be the duty of
the Corporation to issue a new certificate to the person entitled thereto and
cancel the old certificate, if the shares are represented by a certificate, and
record the transaction upon its books.
SECTION 5. RECORD DATES. In order that the Corporation may determine the
stockholders entitled
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to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
SECTION 6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, to vote as such owner and to receive notices in
respect of meetings of stockholders and other matters, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the General Corporation Law of
the State of Delaware.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the restated certificate of
incorporation, if any, may be declared by the board of directors at any regular
or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
restated certificate of incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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SECTION 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate or as may be
designated pursuant to procedures approved by the board of directors.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation begins on the
first day of January and ends on the last day of December in each calendar year.
SECTION 5. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
SECTION 6. INDEMNIFICATION. Each person who at any time is or shall have
been a director, officer or employee of the Corporation, or is or shall have
been serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, and his or her heirs, executors and administrators, shall be
indemnified by the Corporation in accordance with and to the full extent
authorized by the General Corporation Law of the State of Delaware, as may be
amended from time to time. The foregoing right of indemnification shall not be
deemed exclusive of other rights to which any director, officer, employee, agent
or other person may be entitled in any capacity as a matter of law or under any
by-law, agreement, vote of stockholders or directors, or otherwise. The
Corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against or incurred by him or
her in any such capacity, or arising out of his or her status as such, whether
or not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this by-law or the General Corporation Law of
the State of Delaware.
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ARTICLE VIII
AMENDMENTS
SECTION 1. These by-laws may be altered, amended or repealed, or new by-
laws may be adopted, by the stockholders or by the board of directors if such
business is properly brought before any regular meeting of the stockholders or
of the board of directors or at any special meeting of the stockholders or of
the board of directors if, in the case of a special meeting, notice of such
alteration, amendment, repeal or adoption of new by-laws is contained in the
notice of such special meeting.
ARTICLE IX
EMERGENCY BY-LAWS
SECTION 1. EMERGENCY MANAGEMENT COMMITTEE. The board of directors, by
resolution, may provide for an Emergency Management Committee and appoint or
designate the manner in which membership of the Committee shall be determined.
To the extent provided in said resolution, such Committee shall have and may
exercise the powers of the board of directors in the management of the business
and affairs of the Corporation, and shall thereby be deemed to constitute the
board of directors of the Corporation, only during any interval commencing when
the board of directors shall be unable to function by reason of vacancies
occurring due to death, incapacity or catastrophe or other similar emergency
condition and there shall be no member or members of the board remaining and
able to fill such vacancies pursuant to Section 2 of Article III hereof and
terminating when a board of directors has been elected by the stockholders of
the Corporation and shall have been duly qualified. Notwithstanding the
foregoing, such Committee shall, during the time it is authorized to function as
provided herein, have the power to appoint such temporary officers to fill
existing vacancies as the circumstances may require and to authorize the seal of
the Corporation to be affixed to all papers which may require it.
SECTION 2. MEETINGS, QUORUM AND VACANCIES. The Emergency Management
Committee shall meet as promptly as possible after the occurrence of the event
herein described which would activate the Committee and at such subsequent time
or times as it may designate until a board of directors has been duly elected by
the stockholders and qualified. Such Committee shall make its own rules of
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procedure except to the extent otherwise provided by resolution of the board. A
majority of the Committee shall constitute a quorum. Any vacancy occurring in
said Committee caused by resignation, death or other incapacity shall be filled
by a majority of the remaining members of the Committee and any member so chosen
shall serve until a board of directors has been duly elected by the stockholders
and qualified.
SECTION 3. POWERS OF CHAIRMAN. During such times as the Emergency
Management Committee shall be required to function pursuant to the provisions
hereof, the chairman of said Committee shall function as and have the powers of
the chief executive officer of the Corporation and shall preside at all meetings
of the stockholders and the Emergency Management Committee. The chairman of the
Emergency Management Committee shall have and exercise, subject to the direction
of the Emergency Management Committee, general charge and supervision over the
business and affairs of the Corporation.
SECTION 4. OTHER BY-LAW PROVISIONS. To the extent not inconsistent with
the provisions of this Article IX, all other provisions of these by-laws shall
remain in effect during the interval in which the Emergency Management Committee
shall be required to function pursuant to the provisions hereof.
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EXHIBIT 10.12
AMENDMENT NO. 1
TO THE
WMX TECHNOLOGIES, INC.
NON-QUALIFIED
PROFIT SHARING AND SAVINGS PLUS PLAN
WHEREAS, WMX Technologies, Inc., a Delaware corporation (the
"Corporation"), has maintained the Non-Qualified Profit Sharing and Savings Plus
Plan (the "Plus Plan") since January 1, 1994, and subsequently amended and
restated the Plus Plan as of January 1, 1996; and
WHEREAS, pursuant to Subsection 5.3 of Section V of the Plus Plan, the
Corporation reserves the right to amend the Plan at any time; and
WHEREAS, the Corporation now desires to amend the Plus Plan to allow
participants to elect the manner in which their voluntary deferrals are deemed
to be invested in the same funds as are available under the WMX Technologies,
Inc. Profit Sharing and Savings Plan (the "Qualified Plan").
NOW, THEREFORE, THE PLUS PLAN IS HEREBY AMENDED AS FOLLOWS:
I
Effective January 1, 1997, the Plus Plan be, and hereby is, amended as follows:
(a) Subsection 4.5(a) is amended by substituting the following subparagraph
(a);
"4.5 Deemed Investment. (a) A Participant's Profit Sharing Plus Account
-----------------
shall be deemed to be invested, as the Participant elects, in the same funds as
are available with respect to his Profit Sharing Account. 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 such a manner."
<PAGE>
(b) Subsection 4.5(b) is amended by substituting the following subparagraph
(b);
"(b) Participant's Voluntary Deferral Account shall be deemed to be
invested, as the Participant elects, in the same funds as are available with
respect to his Before-Tax Account. 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 such a manner."
II
Except as set forth herein, the provisions of the Plus Plan shall remain in
effect.
IN WITNESS WHEREOF, this Amendment has been executed on this 31th day of
December 1996, by a duly authorized officer of the Corporation.
/s/ Herbert A. Getz
---------------------------------------
Herbert A. Getz, Senior Vice President
and Secretary
<PAGE>
EXHIBIT 10.23
WMX TECHNOLOGIES, INC.
1992 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
As Amended and Restated as of January 1, 1997
1. STATEMENT OF PURPOSE. The principal purpose of this Stock Option Plan for
Non-Employee Directors (the "Plan") is to benefit WMX TECHNOLOGIES, INC. (the
"Company") and its subsidiaries through offering its directors who are not
officers or full-time employees of the Company or any of its subsidiaries a
favorable opportunity to become holders of stock in the Company, thereby giving
them a stake in the growth and prosperity of the Company, in order to enable
them to represent the viewpoint of other stockholders of the Company more
effectively and to encourage them to continue serving as directors of the
Company.
2. ADMINISTRATION. The Plan shall be administered by the Board of Directors,
whose interpretation of the terms and provisions of the Plan and whose
determination of matters pertaining to options granted under the Plan shall be
final and conclusive.
3. ELIGIBILITY. Options shall be granted under this Plan only to members of
the Board of Directors who are not officers or full-time employees of the
Company or any of its subsidiaries (each such director receiving options granted
under the Plan and each other person entitled to exercise an option granted
under the Plan is referred to herein as an "Optionee," provided that the term
"Optionee" shall not include "Option Transferees," as defined in Section 9
hereof). No person who is the holder of an option granted under the Waste
Management, Inc. 1981 Stock Option Plan for Non-Employee Directors, the Waste
Management, Inc. 1982 Stock Option Plan, the WMX Technologies, Inc. 1992 Stock
Option Plan or the WMX Technologies, Inc. 1997 Equity Incentive Plan or who has
purchased shares upon the exercise of such an option shall be eligible for a
grant of options under this Plan.
4. GRANTING OF OPTIONS. (a) An option under which a total of 3,000 shares of
the common stock of the Company may be purchased from the Company shall be
automatically granted to each director of the Company who is not a director of
the Company as of January 1, 1997 upon his or her initial election or
appointment as a director of the Company after January 1, 1997 and again on each
of the first four anniversaries of his or her initial election or appointment,
provided such director is eligible under the terms of the Plan to be granted
such options, and provided further no person shall be granted options to acquire
more than 15,000 shares pursuant to this Plan. The aggregate number of shares
which shall be available to be so optioned under this Plan shall be 150,000
shares. Such number of shares, and the number of shares subject to options
outstanding under the Plan, shall be subject in all cases to adjustment as
provided in Paragraph 10 hereof. No option shall be granted under the Plan
subsequent to January 1, 2002.
(b) Notwithstanding any of the foregoing to the contrary, in the event an
option expires or is terminated or canceled unexercised as to any shares, such
released shares may again be optioned. Shares subject to options may be made
available from unissued or reacquired shares of common stock.
(c) Nothing contained in the Plan or in any option granted pursuant thereto
shall in itself confer upon any Optionee any right to continue serving as a
director of the Company or interfere in any way with any right of the Board of
Directors or stockholders of the Company to remove such director pursuant to the
restated certificate of incorporation or by-laws of the Company or applicable
law.
5. OPTION PRICE. Subject to adjustment under Paragraph 10 hereof, the option
price shall be the fair market value, on the date as of which the option is
granted, of the stock subject to the option, which shall be, for purposes of
this Paragraph, the average of the closing sales prices of the Company's
<PAGE>
common stock on the New York Stock Exchange Composite Tape (as reported in The
Wall Street Journal, Midwest Edition) on each of the five trading days
immediately preceding the date as of which the option is granted.
6. DURATION OF OPTIONS. Subject to the provisions of Paragraph 8 hereof, each
option shall be for a term of ten years. Each option shall become exercisable
on the first anniversary of the date of grant.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Company, attention of the Secretary, specifying the number of
shares to be purchased, accompanied by the full purchase price for the shares to
be purchased either in cash, by check, by a promissory note in the form
specified by the Company and payable to the Company 15 business days after the
date of exercise of the option, by shares of the Company's common stock or by a
combination of these methods of payment. For this purpose, the per share value
of the Company's common stock shall be the fair market value on the date of
exercise (or if the date of exercise is not a trading day on the trading day
next preceding the date of exercise), which shall be, for purposes of this
Paragraph, the average of the highest and lowest sales prices of the Company's
common stock on the New York Stock Exchange Composite Tape (as reported in The
Wall Street Journal, Midwest Edition) on such date.
(b) At the time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the Optionee (or his
or her heirs, legatees or legal representatives, as the case may be) as a
condition upon the exercise thereof, to deliver to the Company a written
representation of present intention to purchase the shares for investment and
not for distribution. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered
to the Optionee upon his or her exercise of part or all of the option and a stop
transfer order may be placed with the transfer agent. Each option shall also be
subject to the requirement that, if at any time the Company determines, in its
discretion, that the listing, registration or qualification of the shares
subject to the option upon any securities exchange or under any state, federal
or foreign law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, the option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
8. TERMINATION--EXERCISE THEREAFTER. (a) In the event an Optionee ceases to
be a director of the Company for any reason other than death, permanent
disability, resignation or retirement, such Optionee's option, and any options
transferred to an Option Transferee by such Optionee, shall expire and all
rights to purchase shares pursuant thereto shall terminate immediately.
(b) In the event of death or permanent disability (as that term is defined
in the Social Security Act, as now in effect or as it shall be subsequently
amended), the option may be exercised in full, without regard to any times of
exercise established under Paragraph 6 hereof, by the Optionee (or, if the
Optionee is not living, by the Optionee's heirs, legatees, or legal
representatives, as the case may be,) or the Option Transferee during its
specified term. In the event of resignation or retirement, the option may be
exercised by the Optionee (or, if the Optionee dies within three years after
such termination, by the Optionee's heirs, legatees, or legal representatives,
as the case may be,) or the Option Transferee at any time during its specified
term prior to three years after the date of such resignation or retirement, but
only to the extent the option was exercisable at the date of such resignation or
retirement.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution and each
option shall be exercisable during an Optionee's lifetime only by the Optionee
or the Optionee's legal representative; provided that the Board of Directors or
any authorized committee thereof may (i) grant options that are transferable,
without payment of consideration, to immediate family members of the Optionee or
to trusts or partnerships for
2
<PAGE>
such family members or to charitable organizations (each an "Option
Transferee"), subject to such procedures as the Company deems appropriate for
administration and (ii) amend outstanding options to provide for such
transferability.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
Company's outstanding common stock is changed by any stock dividend, stock split
or combination of shares, the number of shares subject to the Plan and to
options granted thereunder shall be proportionately adjusted, (b) in the event
of any merger, consolidation or reorganization of the Company with any other
corporation or corporations, there shall be substituted on an equitable basis as
determined by the Board of Directors, for each share of common stock then
subject to the Plan and for each share of common stock then subject to an option
granted under the Plan, the number and kind of shares of stock, other
securities, cash or other property to which the holders of common stock of the
Company will be entitled pursuant to the transaction, and (c) in the event of
any other relevant change in the capitalization of the Company, the Board of
Directors shall provide for an equitable adjustment in the number of shares of
common stock then subject to the Plan and to each share of common stock then
subject to an option granted under the Plan. In the event of any such
adjustment, the exercise price per share shall be proportionately adjusted.
11. CHANGE IN CONTROL. (a) Any option granted under the Plan prior to the
date of a "Change in Control" shall be immediately exercisable in full on such
date, without regard to any times of exercise established under Paragraph 6
hereof. The term "Change in Control" shall mean the occurrence, at any time
during the specified term of an option granted under the Plan, 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 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
3
<PAGE>
directors of the Company then still in office who were directors of the
Company at the beginning of any such period.
(b) Notwithstanding any other provisions in the Plan, prior to the passage
of one year from and after any Change in Control, each Optionee or Option
Transferee shall have the right to require the Company (or, if the Company is
not the survivor of a merger, consolidation or reorganization with an Acquiror,
the Acquiror) to purchase from him or her any or all unexercised options granted
under the Plan at a purchase price equal to (i) the excess of the fair market
value per share over the option price multiplied by (ii) the number of option
shares specified by the Optionee for purchase in a written notice to the Company
(or, if the Company is not the survivor of a merger, consolidation or
reorganization with an Acquiror, the Acquiror), attention of the Secretary.
(c) For purposes of Paragraph 11(b) above, "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 higher of (A) 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, on the principal
market where such common stock is actively traded) on each of the five trading
days immediately preceding the date the Optionee so notifies the Company or (B)
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, 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 (C) 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, the
principal market where such security is actively traded) on each of the five
trading days immediately preceding the date of the Termination Merger or (D) the
amount determined pursuant to clause (c)(i)(B) of this Paragraph 11. The amount
payable to each Optionee by the Company or Acquiror, as the case may be, shall
be in cash or by certified check.
12. AMENDMENT OF PLAN. The Board of Directors of the Company or any authorized
committee thereof may amend or discontinue the Plan at any time, provided,
however, that the Plan may not be amended more than once every six months except
to comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act, or the rules and regulations under each, and provided
further, that no such amendment or discontinuance shall (a) without the consent
of the Optionee change or impair any option previously granted, or (b) without
the approval of the holders of a majority of the shares of voting common stock
of the Company which vote in person or by proxy at a duly held stockholders'
meeting, (i) increase the maximum number of shares which may be purchased by all
eligible directors pursuant to the Plan, (ii) change the purchase price, or
(iii) change the option period or increase the time limitations on the grant of
options.
13. EFFECTIVE DATE. The Plan has been adopted and authorized by the Board of
Directors for submission to the stockholders of the Company. If the Plan is
approved by the affirmative vote of the holders of a majority of the shares of
the voting stock of the Company which vote in person or by proxy at a duly held
stockholders' meeting it shall be deemed to have become effective as of January
1, 1992. Options may be granted under the Plan prior, but subject, to approval
of the Plan by stockholders of the Company and, in each such case, the date of
grant shall be determined without reference to the date of approval of the Plan
by the stockholders of the Company.
4
<PAGE>
EXHIBIT 10.34
February 17, 1997
Mr. Phillip B. Rooney
President and Chief Executive Officer
WMX Technologies, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60521
Dear Phil:
This letter will set forth our understanding with respect to the implementation
and application of the Amended and Restated Employment Agreement, dated as of
June 7, 1996 (the "Agreement"), between you and WMX Technologies, Inc. (the
"Company") in connection with your resignation as President and Chief Executive
Officer of the Company.
As a result of your resignation as President and Chief Executive Officer of the
Company on February 17, 1997, this letter constitutes written notice, pursuant
to Section 6(d) of the Agreement, of the Company's decision to terminate the
Agreement. As a result of this notice, the "Term" of the Agreement shall be a
five-year period ending February 17, 2002, unless earlier terminated in
accordance with the terms of the Agreement. Also as provided in Section 6(d),
you will immediately begin receiving cash compensation in an annual amount of
$2,500,000, which will be paid on the same bi-weekly basis as you are currently
being paid, such amounts being in lieu of all salary, bonuses, incentive or
other performance based compensation for the remainder of the Term.
It is appropriate, under the circumstances, to memorialize several additional
points of agreement which we have reached in connection with your resignation as
President and Chief Executive Officer of the Company. They are as follows:
1. Your resignation will not affect or impair your rights under the Company's
Profit Sharing and Savings Plan or its Non-Qualified Profit Sharing and
Savings Plus Plan, and the final date of the Term of the Agreement (as set
forth above) will be considered as your Termination of Employment for the
purpose of such Plans.
2. It is understood and agreed that your resignation is not, and shall not be
construed to be a "voluntary termination" of employment by you as such term
is used in Section 6(f) of the Agreement.
3. The Compensation and Stock Option Committee of the Board of Directors has
acted to (a) accelerate the vesting of any unvested Company stock
<PAGE>
Mr. Phillip B. Rooney
February 17, 1997
Page 2
options currently held by you and (b) establish that your retirement date,
for purposes of the three year continued exerciseability rights provided to
option holders who retire from the Company, shall be the final date of the
Term of the Agreement, as set forth above.
4. For purposes of calculating the benefit due you under the SERP, as such
term is defined in the Agreement, it is understood and agreed that you will
be provided with additional participation, vesting and benefit credit for
the period of time following the Term (as set forth above) during which you
comply with the non-competition covenant set forth in Section 7 of the
Agreement. It is understood and agreed, however, that in the event you
elect to exercise your rights under the SERP to begin payments prior to the
expiration of the Term of the Agreement or the expiration of the term of
the non-competition covenant set forth in Section 7 thereof, you will
receive no further vesting credit from the date on which you begin
receiving SERP benefits.
5. The phrase "employee welfare benefit plans" as used in Section 6(d) of the
Agreement is understood and agreed to refer to the Company's (a) medical,
dental and vision care benefit plans, (b) life, business travel accident
and accidental death and dismemberment insurance programs, and (c) short-
term and long-term disability benefit plans, on such terms as such plans
may from time to time be generally provided to employees of the Company.
The provisions of Section 6(d) of the Agreement to the contrary
notwithstanding, the Company will provide you, your current spouse and
eligible dependent child with continued benefits under the Company's
medical, dental and vision care benefit plans until the latest to occur of
(i) the date of your sixty-fifth birthday, (ii) the date of your current
spouse's sixty-fifth birthday or (iii) the date on which your dependent
child shall no longer be eligible for dependent coverage under such plans,
subject to the Company's rights to terminate such benefits for cause under
Section 6(b) of the Agreement.
6. It is understood and agreed that during the Term, as set forth above, you
will remain eligible to participate in the Company's matching gift
programs, on such terms as such programs may from time to time be generally
provided to employees of the Company. It is further understood and agreed
that you will remain eligible for reimbursement of financial planning,
estate planning, tax counseling and return preparation, and club dues
expense in an amount not to exceed $50,000 annually (i.e., two percent of
the annual cash compensation provided to you under the terms of the
Agreement). Reimbursement of such expenses will be made upon submission by
you of an expense report in such form as may from time to time be utilized
by other corporate office employees of the Company.
7. It is understood and agreed that in order to facilitate your provision of
consultative services as contemplated by Section 6(d) of the Agreement, the
Company will pay directly, for the Term (as set forth above), for expenses
associated with the
<PAGE>
Mr. Phillip B. Rooney
February 17, 1997
Page 2
maintenance of an office for you located outside of any Company facility,
such payment not to exceed $50,000 on an annual basis.
8. This will reconfirm our understanding that the phrase "annual bonus" as
used in the final sentence of Section 3(c) of the Agreement is not intended
to be included in the term "bonuses" as used in the second sentence of the
final paragraph of Section 6(d) of the Agreement.
I believe the foregoing accurately sets forth the understandings we have reached
with respect to the implementation and application of the Agreement following
your resignation as President and Chief Executive Officer. If such is the case,
would you please so indicate by signing the acknowledgment set forth below.
Very truly yours,
WMX Technologies, Inc.
/s/ Peer Pedersen
Peer Pedersen
Chairman, Compensation and Stock
Option Committee
Acknowledged and agreed this 17/th/ day of February, 1997
/s/ Phillip B. Rooney
------------------------------------------------------------
Phillip B. Rooney
<PAGE>
Exhibit 12
WMX TECHNOLOGIES, INC.
Ratio of Earnings to Fixed Charges
(Unaudited)
(millions of dollars, except ratio)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1992/(1)/ 1993/(2)(3)/ 1994/(3)/ 1995/(3)(4)/ 1996/(3)(5)/
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income From Continuing Operations
Before Income Taxes,
Undistributed Earnings from
Affiliated Companies, Minority
Interest, and Cumulative Effect of
Accounting Changes.................. $ 1,555.2 $ 778.4 $ 1,373.7 $ 1,185.3 $ 1,066.2
Interest Expense...................... 311.0 387.1 438.0 503.1 449.1
Capitalized Interest.................. (87.9) (100.6) (104.5) (81.5) (73.4)
One-Third of Rents Payable
in the Next Year.................... 44.7 48.5 53.9 56.8 51.4
Income From Continuing Operations
Before Income Taxes,
Undistributed Earnings from
Affiliated Companies, Minority
Interest, Cumulative Effect of
Accounting Changes, Interest and
One-Third of Rents.................. $ 1,823.0 $ 1,113.4 $ 1,761.1 $ 1,663.7 $ 1,493.3
=========== ========== =========== ============ ===========
Interest Expense...................... $ 311.0 $ 387.1 $ 438.0 $ 503.1 $ 449.1
One-Third of Rents Payable in the
Next Year........................... 44.7 48.5 53.9 56.8 51.4
----------- ---------- ----------- ------------ -----------
Interest Expense plus One-Third
of Rents............................ $ 355.7 $ 435.6 $ 491.9 $ 559.9 $ 500.5
=========== ========== =========== ============ ===========
Ratio of Earnings to Fixed
Charges............................. 5.13 to 1 2.56 to 1 3.58 to 1 2.97 to 1 2.98 to 1
</TABLE>
____________
/(1)/ The results for 1992 include a non-taxable gain ($240.0 million before
minority interest) resulting from the initial public offering of Waste
Management International plc ("WM International") 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.
/(2)/ 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.
("Rust") 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 ("CWM") thermal treatment business.
/(3)/ In 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. During 1996, the sale of the industrial process
engineering and construction business, based in Birmingham, Alabama, was
completed. In 1996, Wheelabrator Technologies Inc. ("WTI") sold its water
process systems and equipment manufacturing businesses, and Rust sold its
industrial scaffolding business. WTI entered into an agreement to sell its
water and wastewater facility operations and privatization business and Rust
began implementing plans to exit its remaining domestic and international
engineering and consulting business. CWM is also exiting its fuel business.
/(4)/ The results for 1995 include a special charge ($140.6 million 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 ($194.6 million before tax and
minority interest) recorded by WM 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.
<PAGE>
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 on January 1, 1993, for the discontinued
operations.
/(5)/ The results for 1996 include special charges ($107.9 million before
minority interest) related to WM International's sale of its investment in
Wessex Water Plc and a charge ($169.5 million before minority interest) to
revalue its investments in France, Austria and Spain in contemplation of exiting
all or part of these markets or forming joint ventures and to write off an
investment in a hazardous waste disposal facility. Also in 1996, Waste
Management, Inc. and CWM recorded special charges ($255.0 million before tax)
for reengineering their finance and administrative functions and increasing
reserves for certain litigation.
/(6)/ Certain amounts have been restated to conform to 1996 classifications.
<PAGE>
EXHIBIT 13.1
WMX Technologies, Inc. and Subsidiaries
Management's Discussion and Analysis (Tables in millions except per share
amounts)
- --------------------------------------------------------------------------------
Results of Operations
Consolidated Consolidated 1996 net income from continuing operations of WMX
Technologies, Inc. and its subsidiaries ("WMX" or the "Company") was $477.8
million or $0.97 per share, compared with $618.2 million or $1.27 per share in
1995 and $742.3 million or $1.53 per share in 1994. Net income was $192.1
million or $0.39 per share in 1996, $603.9 million or $1.24 per share in 1995
and $784.4 million or $1.62 per share in 1994.
Consolidated 1996 revenue from continuing operations was $9.19 billion
compared with $9.05 billion in 1995 and $8.48 billion in 1994.
Results for all periods were impacted by special charges, and for 1995 by
costs related to the early extinguishment of Liquid Yield Option Notes put to
the Company by the holders. The following table reconciles reported earnings per
share from continuing operations to earnings excluding such items:
<TABLE>
<CAPTION>
1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Reported earnings per share
from continuing operations $1.53 $1.27 $0.97
Special charges (see Note 14
to Consolidated Financial
Statements)--
Waste Management, Inc. ("WMI")
and Chemical Waste
Management, Inc. ("CWM") -- 0.19 0.34
Waste Management International plc
("WM International") -- 0.23 0.44
Costs related to early
extinguishment of debt -- 0.01 --
----- ----- -----
Earnings per share from continuing
operations excluding above items $1.53 $1.70 $1.75
===== ===== =====
</TABLE>
The Company has undergone a number of changes over the three-year period in
response to changing conditions in its markets and in the environmental services
industry. In January 1997, the Board of Directors approved a package of
strategic initiatives designed to enhance shareholder value, the centerpiece of
which is a focus solely on waste management services in domestic and selected
international markets where the Company holds or can develop a strong
competitive position. The Company plans to divest non-core and non-integrated
assets valued at approximately $1.5 billion by the end of 1998, will reduce
overhead and capital spending as well as streamline its organization, and will
return the majority of available cash to shareholders through stock repurchase
programs. To fully exploit its brand value and reflect the refocused strategy,
the Company will change its name (subject to stockholder approval) to Waste
Management, Inc.
As a result of this strategy, operations in the water and environmental and
infrastructure engineering and consulting services lines of business have been
classified as discontinued operations in the accompanying financial statements,
along with the process engineering, construction, specialty contracting and
similar businesses of Rust International Inc. ("Rust"), which were discontinued
in 1995 and sold during 1996, and certain other Company operations. Certain of
the discontinued operations have already been sold and the Company contemplates
completing the sale of those remaining by the end of 1997. See "Discontinued
Operations and Other Asset Dispositions" below. Because the Wheelabrator
Technologies Inc. ("WTI") trash-to-energy plants, with capacity to process
nearly 24,000 tons of waste per day, represent an important part of the
Company's waste disposal services network, the restructured Company will now
operate in a single industry segment (waste management services) and will report
accordingly. The discussion which follows relates to the Company's continuing
operations.
- --------------------------------------------------------------------------------
1995 Operations Compared with 1994
Revenue Consolidated revenue growth from 1994 to 1995 is shown in the table
which follows:
<TABLE>
<CAPTION>
Percent
1994 1995 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
North America
(excluding trash-to-energy) $6,147.0 $6,585.1 7.1%
North American trash-to-energy 926.9 956.1 3.2
International 1,710.9 1,865.1 9.0
Intercompany revenue (302.1) (353.3)
-------- --------
Total $8,482.7 $9,053.0 6.7%
======== ======== ===
</TABLE>
The solid waste portion of North American revenue was $5.64 billion in 1995
compared with $5.12 billion in 1994, an increase of 10.3%. North American solid
waste 1995 revenue growth by line of business is shown in the following table:
<TABLE>
<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 (2.5-3.0%) and volume (6.0-6.5%) increases,
with acquisitions accounting for 1.0%. Prices of recycled 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. Commodity prices continued downward throughout 1996 as discussed
below. Volume growth was helped by a relatively mild winter in 1995, whereas
severe weather over a large part of North America adversely affected the first
quarter of 1994. However, volumes in 1995 were adversely impacted by
8
<PAGE>
- --------------------------------------------------------------------------------
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 the Company's
marketing efforts and the acquisition and construction of additional material
recovery facilities.
North American hazardous waste revenue continued to decline in 1995 as waste
minimization, recycling, industry over-capacity and shifting governmental
regulation and enforcement continued to adversely affect the industry. Total
1995 revenue was $564.2 million compared with $587.9 million in 1994. Pricing
and volume were both negative, only partially offset by the 1995 acquisition of
a 60% interest in Advanced Environmental Technical Services, L.L.C. In addition,
unusually high revenue in the second quarter of 1994 at the Company's Barnwell,
South Carolina, low-level radioactive waste disposal facility adversely affected
1995 comparisons.
North American trash-to-energy (WTI) revenue was essentially flat from 1994 to
1995 as higher revenue from operating plants was largely offset by lower
construction revenue on the Lisbon, Connecticut, facility (which commenced
operations January 1, 1996). Approximately 78% of the 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 sales 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.
WM International revenue, in U.S. dollars, grew $154.2 million or 9.0% in 1995
compared with 1994. Components of the revenue change are as follows:
<TABLE>
Percent Change
- --------------------------------------------------------------------------------
<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 WM International's Hong Kong incinerator, resulted in volume
declines in certain waste streams, but the impact was offset with other volumes.
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 acquisition and construction of
material recovery facilities to take advantage of an emphasis on recycling as an
alternative to land disposal.
Operating Expenses, excluding special charges Operating expenses increased
$393.2 million in 1995 compared with 1994 but remained constant at 68.7% of
consolidated revenue. North American solid waste operating expenses declined as
a percentage of revenue as a result of milder weather, pricing effectiveness,
higher recyclable commodity prices, internalization of recycling processing, and
continuing productivity enhancements. However, North American hazardous waste
operating expenses increased as a percentage of revenue in 1995 as continued
pressure on prices, a lower revenue base, and a shift in revenue mix toward
lower margin services offset the benefit of headcount reductions. North American
trash-to-energy operating costs declined slightly but those of WM International
increased as a result of higher labor costs in Italy, continued pressure 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 Expenses In absolute dollars, selling and
administrative expenses increased $7.7 million from 1994 to 1995, but as a
percentage of revenue they declined from 11.8% to 11.1%. The decline as a
percentage of revenue crossed all operating groups as productivity enhancements
were instituted throughout the Company. The slight increase in absolute dollars
resulted primarily from acquisitions and pay-for-performance compensation plans.
Special Charges 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 hazardous waste market environment.
Following a thorough review of its operations and management structure by a
new management team, WM International announced a fourth quarter 1995 pretax
charge of $194.6 million, related to actions it had decided to take 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. Approximately $34.3 million of this charge represented
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, with the majority of the balance paid in 1996, although
certain rent payments on leased facilities will continue into the future.
9
<PAGE>
1996 Operations Compared with 1995
Revenue The following table sets forth changes in consolidated revenue from
1995 to 1996:
<TABLE>
<CAPTION>
Percent
1995 1996 Change
<S> <C> <C> <C>
- ---------------------------------------------------------------
North America
(excluding trash-to-energy) $6,585.1 $6,619.1 0.5%
North American trash-to-energy 956.1 952.3 (0.4)
International 1,865.1 1,913.8 2.6
Intercompany revenue (353.3) (298.2)
-------- --------
Total $9,053.0 $9,187.0 1.5%
======== ======== ====
</TABLE>
The solid waste portion of North American revenue grew 3.9% to $5.86 billion
in 1996. Revenue growth by line of business is shown in the following table:
<TABLE>
<S> <C>
Residential 5.6%
Commercial 2.0
Rolloff and industrial 2.8
Disposal, transfer and other 2.0
</TABLE>
Although the Company pursued price increases in 1996, the impact on revenue
growth was minimal as a year-long continued decline in commodity prices largely
offset the benefit of increases in the commercial and industrial markets. Volume
growth added approximately 2% to revenue and acquisitions, net of dispositions,
accounted for revenue growth of approximately 1.5%. Recycling revenue declined
13.6% from 1995 to 1996 due to the substantial commodity price decline. The
Company responded by reducing its processing of lower grades of paper, adjusting
the capacity of its recycling operations and continually striving to reduce
processing costs and improve the marketing of commodities. However, despite
these efforts, it was unable to replace the profits associated with the stronger
1995 commodity markets. North American hazardous waste revenue declined 7.7%
from 1995 as the industry problems continued.
The North American trash-to-energy revenue comparison is adversely affected by
the loss of the Lisbon construction revenue in 1996. Excluding this factor, 1996
revenue grew $33.8 million, or 3.7%, to $952.3 million. The commercial
operations of the Lisbon facility, which began in January 1996, contributed
$18.4 million of the increase. WTI acquired two industrial cogeneration plants
(so-called "inside-the-fence" facilities) during the year as part of its
strategy to leverage its energy plant operating capabilities and project finance
expertise by owning and/or operating power plants for industrial customers.
Together these acquisitions contributed $7.3 million to 1996 revenue growth.
Contractual price escalation at existing facilities, additional processing at
several trash-to-energy plants, and lower energy purchase curtailment accounted
for most of the remaining revenue growth. Overall spot pricing remained stable
during the year.
Expressed in U.S. dollars, WM International revenue increased $48.7 million or
2.6% in 1996 compared with 1995. Components of the revenue change are as
follows:
Percent Change
- -----------------------------------------
Price 1.4%
Volume (0.6)
Purchased businesses 1.2
Foreign currency translation 0.6
---
Total 2.6%
===
Although WM International was able to implement price increases for its
services despite weak economies in many of its markets, the impact of such
increases was adversely affected by commodity prices falling substantially from
their highs in 1995. Difficult economic conditions in Germany, France and Italy,
as well as the closure of a landfill in France, resulted in a volume decline,
partially offset by hazardous waste volume growth in The Netherlands and solid
waste volume growth in the United Kingdom. The Company was awarded contracts to
design, build, and operate for fifteen years, two transfer stations in Hong
Kong. Construction revenue on one of these projects contributed to revenue
growth in 1996. International acquisition activity continued to be at relatively
low levels.
Operating Expenses, excluding special charges Operating expenses increased to
$6.37 billion or 69.4% of consolidated revenue in 1996 compared with $6.22
billion or 68.7% of revenue in 1995. Higher fuel costs, depressed commodity
prices, low margin construction revenue on the Hong Kong transfer station and
volume declines in Europe more than offset continuing productivity improvements.
Selling and Administrative Expenses Selling and administrative expenses
declined in absolute dollars by $25.7 million and as a percentage of
consolidated revenue from 11.1% to 10.7% between 1995 and 1996. Improvements
were again achieved throughout the Company through a continued focus on
administrative productivity, including the WM International fourth quarter 1995
restructuring.
10
<PAGE>
Special Charges In the fourth quarter of 1996, WM International recorded a
charge of $169.5 million (before and after tax) to revalue its investments in
Austria, France and Spain in contemplation of exiting all or part of these
markets or forming joint ventures. This decision will allow WM International to
focus more resources on markets where it believes it has greater long-term
opportunity. In addition, the charge included the write-off of an investment in
a hazardous waste disposal facility in Germany because regulatory changes
adversely affected its volumes. WM International also recognized a provision for
loss related to the sale of its investment in Wessex Water Plc ("Wessex"). See
"Discontinued Operations and Other Asset Dispositions."
WMI and CWM recorded fourth quarter charges, aggregating $255 million before
tax, for reengineering their finance and administrative functions (primarily
related to a reduction in the carrying value of software) and increasing
reserves for certain litigation, including a dispute involving the computation
of royalties on the Emelle, Alabama, hazardous waste landfill. In December 1996,
a federal court in Memphis, Tennessee, held CWM liable for approximately $91.5
million in damages to the former owners of the Emelle site. CWM is appealing the
decision.
Other Items
Interest The following table sets forth the components of consolidated
interest expense, net:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Interest expense $ 438.0 $503.1 $449.1
Interest income (33.1) (36.9) (27.6)
Capitalized interest (104.5) (81.5) (73.4)
------- ------ ------
Interest expense, net $ 300.4 $384.7 $348.1
======= ====== ======
</TABLE>
Net interest expense increased from 1994 to 1995 as a result of an earlier
management decision to increase the leverage of the Company. Debt levels
increased in 1995, primarily a result of the acquisition of the then public
ownership of CWM and Rust. Although the Company repurchased a substantial number
of its shares in 1996, the emphasis on cash generation provided sufficient funds
that debt levels remained relatively flat, and lower interest rates helped
reduce expense. Capitalized interest has declined throughout the period as
significant capital projects were completed and the Company reduced capital
spending. See "Financial Condition Capital Structure."
Minority Interest Minority interest declined from 1994 to 1995 as a result of
the repurchase of the public shares of CWM and Rust, as well as the minority
interest (approximately $41.3 million) in the WM International special charge.
Minority interest declined from 1995 to 1996 as a result of lower earnings by
certain subsidiaries and the minority interest (approximately $63.8 million) in
the WM International special charges.
Sundry Income, Net Sundry income consists primarily of earnings recorded on
the equity method from the Company's investments in less than 50%-owned
affiliates. Subsequent to December 31, 1996, the Company sold or agreed to sell
its investments in ServiceMaster Limited Partnership ("ServiceMaster") and
Wessex, and sundry income is expected to decline in 1997.
Income Taxes The consolidated income tax rate varies between years as a result
of shifts in the source of taxable income. In addition, the inability to realize
tax benefits on a portion of the 1995 and 1996 special charges, and the 1996 tax
provided on the Subpart F income related to the sale of the investment in Wessex
increased the tax provision in those years.
Discontinued Operations and Other Asset Dispositions 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.
As the Company refined its business strategy to focus on waste management
services, other business units were discontinued or sold during 1996. Rust sold
the engineering and construction business as well as its industrial scaffolding
business, and WTI sold its water process, manufacturing and custom engineered
systems businesses. The Company plans to divest an additional $1.5 billion of
non-core assets and non-integrated businesses by the end of 1998, including the
following:
. The sale announced February 19, 1997, by WMX of its investment in
ServiceMaster for $626 million cash.
. The sale by WTI of its remaining water services business for approximately
$77 million.
. The sale by Rust of its remaining domestic and international engineering and
consulting businesses.
. The sale of approximately $400 million of non-integrated waste services
businesses in North America.
. Sale or joint venturing of the WM International businesses in France, Spain
and Austria.
The WTI water businesses and the Rust engineering and scaffolding businesses,
as well as the CWM high organic waste fuels blending business, have all been
classified as discontinued operations in the accompanying financial statements.
The Company expects to complete by the end of 1997 the sale of those businesses
not previously sold.
In addition, WM International entered into an agreement to sell its
approximately 20% interest in Wessex. In connection with this disposition, WM
International provided for a loss (including income taxes) of $77.0 million.
After additional U.S. income taxes (generated by Subpart F income) and minority
interest, this transaction reduced the Company's earnings by $88.0 million after
tax in 1996. The sale was completed in the first quarter of 1997.
11
<PAGE>
- --------------------------------------------------------------------------------
Accounting Principles
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("FAS") No. 121 - Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. The adoption of FAS 121 did not
have a material impact on the financial statements as the Company's previous
accounting was substantially in compliance with the new standard.
Also in 1996, FAS 123 - Accounting for Stock-Based Compensation - became
effective. FAS 123 provides an optional new method of accounting for employee
stock options and expands required disclosure about stock options. If the
optional method of accounting is not adopted, disclosure is to be made, if
material, of pro forma net income and earnings per share as if it were. The
impact of the optional new accounting on net income and earnings per share was
immaterial and the Company elected not to adopt the optional accounting.
In October 1996, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
96-1 - Environmental Remediation Liabilities. The SOP is effective for fiscal
years beginning after December 15, 1996, and provides that environmental
remediation liabilities should be accrued when the criteria of FAS
5 - Accounting for Contingencies - are met. Included in the SOP are benchmarks
to aid in the determination of when such criteria are met and environmental
liabilities should be recognized. It also provides that the accrual for such
liabilities should include future costs of those employees expected to devote a
significant amount of time directly to the remediation effort. The Company does
not believe that the adoption of SOP 96-1 will have a material impact on its
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, 1996, such amounts were not material. The
impact of derivatives on the Company's financial statements has not been and is
not expected to be 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 stock repurchase program.
- --------------------------------------------------------------------------------
Environmental Matters
The continuing business in which the Company is engaged is 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 tends to benefit when governmental regulation
increases, which may increase 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 103
sites listed on the Superfund National Priority List ("NPL") as of December 31,
1996. Where the Company concludes that it is probable that a liability has been
incurred, provision is made in the financial statements. See Note 7 to
Consolidated Financial Statements for additional information regarding the
Company's environmental liabilities.
Estimates of the extent of the Company's degree of responsibility for 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 industry, 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 such
adjustments 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.
12
<PAGE>
- --------------------------------------------------------------------------------
The Company spent $89.0 million, $78.8 million and $68.8 million on remedial
activity at closed sites in 1994, 1995 and 1996, respectively, and anticipates
expenditures of approximately $78.8 million in 1997.
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
potential future insurance recoveries.
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 disposal facilities which are 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 of $54.5
million at December 31, 1996, compared with a working capital deficit of $584.4
million at December 31, 1995. The Company operates in a capital intensive
service industry with neither significant inventory nor seasonal variation in
receivables, and generates substantial cash from operating activities. As a
result, working capital typically does not significantly affect operations and
emphasis is placed on minimizing working capital requirements. The increase in
working capital between 1995 and 1996 is a result of extending debt maturities,
thus reducing the current portion; strong cash flow, including the proceeds from
the sale of a portion of the WTI water business, late in 1996; and the
reclassification to current of the investment in Wessex, sold in 1997; partially
offset by increased accruals for losses on the sale of certain investments.
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.
Management has adopted a cash-driven financial strategy including reduced
capital spending and divestiture of non-core assets and non-integrated
businesses. Owners' cash flow was approximately $1.2 billion in 1996 and the
Company expects to generate an additional $3.0 billion over the next 24 months,
including the monetization of $1.5 billion of assets. The Company believes that
it has adequate liquidity and resources to meet its needs for replacement
capital and finance anticipated growth, and plans to distribute the majority of
the owners' cash to shareholders in the form of stock repurchases. See "Capital
Structure."
Acquisitions and Capital Expenditures Capital expenditures, including $56.8
million, $154.1 million and $91.8 million for property and equipment of
purchased businesses in 1994, 1995 and 1996, respectively, are shown in the
following table:
<TABLE>
<CAPTION>
1994 1995 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Land (primarily disposal sites) $ 582.3 $ 517.2 $ 467.7
Buildings and leasehold improvements 141.2 148.8 109.3
Vehicles 226.0 345.8 204.9
Containers 167.9 181.2 115.8
Other equipment 395.0 348.1 319.2
-------- -------- --------
Total $1,512.4 $1,541.1 $1,216.9
======== ======== ========
</TABLE>
During 1994, the Company and its principal subsidiaries acquired 119
businesses 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. In
1995, 136 businesses were acquired for $302.0 million in cash and debt
(including debt assumed) and 2,236,354 shares of the Company's common stock.
During 1996, 83 businesses were acquired for $144.2 million in cash and debt
(including debt assumed) and 8,210,568 shares of the Company's common stock. The
Board of Directors has approved a capital expenditure budget of $900 million
(approximately equal to depreciation and amortization) for 1997. This amount
excludes any acquisitions. The Company currently expects to finance capital
expenditures, as well as any acquisition activity, through cash flow from
operations, and believes that it has adequate resources to finance attractive
acquisitions that become available.
Capital Structure Although the Company placed increasing emphasis on
generating owners' cash during the three-year period, a substantial portion of
such cash has been returned to shareholders through stock repurchases, including
the purchase of the public shares of Rust during 1995. Debt to equity ratios
were also adversely impacted by the subordinated notes discussed below which
were issued to repurchase the public shares of CWM in 1995. The following table
shows the Company's leverage:
<TABLE>
<CAPTION>
December 31 1994 1995 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt as a percent of total capital 45.5% 46.3% 50.1%
Short-term and long-term debt as a percent
of short-term debt and total capital 49.2% 50.6% 52.1%
</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.
13
<PAGE>
- --------------------------------------------------------------------------------
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. 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 50 million
shares in the case of WMX and 30 million shares in the case of WTI) in the open
market, in privately negotiated transactions, or through issuer tender offers.
These programs extend into 1998. WTI repurchased 3.3 million, 7.2 million and
19.1 million of its shares in 1994, 1995 and 1996, respectively. WMX repurchased
14.4 million shares in 1996.
During 1994, 1995 and 1996, in conjunction with its authorized repurchase
program, WMX sold put options on 42.3 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 underlying shares, in lieu
of repurchasing the stock.
Options on 31.6 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 settled for cash in the amount of $12.0 million, which was
charged to paid-in capital. The Company repurchased 3.1 million shares for
$107.5 million and 2.9 million options expire in February 1997, at strike prices
ranging from $32.04 to $34.13 per share. The Company may sell additional put
options in the future.
In 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 composed of Company officers, the Trust will use the shares or
proceeds from the sale of the 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 from the Swedish Tax Authority of approximately 417
million Krona (approximately $60 million) plus interest from the date of the
assessment, relating to a transaction completed in 1990. WM International
believes that all appropriate tax returns and disclosures were filed at the time
of the transaction and intends to vigorously contest the assessment.
A Company subsidiary 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 subsidiary to apply to the DEP for permission to
remove all waste above the height allowed by the zoning ordinance, and the
Connecticut Supreme Court has upheld that ruling. The Company believes that the
removal of such waste is an inappropriate remedy and is seeking an alternative
resolution to the issue, but is unable to predict the outcome. Depending upon
the nature of any plan eventually approved by applicable regulatory authorities
for removing the waste, the actual volume of waste to be moved, and other
currently unforeseeable factors, the subsidiary could incur costs which would
have a material adverse impact on the Company's financial condition and results
of operations in one or more future periods.
In May 1994, the U.S. Supreme Court ruled that state and local governments may
not constitutionally restrict the free movement of trash in interstate commerce
through the use of flow control laws. Such laws typically involve a municipality
specifying the disposal site for all solid waste generated within its borders.
Since the ruling, several decisions of state or federal courts have invalidated
regulatory flow control schemes in a number of jurisdictions. Other judicial
decisions have upheld non-regulatory means by which municipalities may
effectively control the flow of municipal solid waste.
WTI's Gloucester County, New Jersey, facility relies on a disposal franchise
for substantially all of its supply of municipal solid waste. In July 1996, a
Federal District Court permanently enjoined the State of New Jersey from
enforcing its solid waste regulatory flow control system, which was held to be
unconstitutional, but stayed the injunction for as long as its ruling is on
appeal plus an additional period of two years to enable the State to devise an
alternative nondiscriminatory approach. The State has indicated that it will
continue to enforce flow control during the two-year transition period and has
filed an appeal of the Federal District Court's ruling.
The Supreme Court's 1994 ruling and subsequent court decisions have not to
date had a material adverse affect on any of the Company's trash-to-energy
operations. Federal and state legislation has been proposed, but not yet
enacted, to effectively grandfather existing flow control mandates. In the event
that such legislation is not adopted, the Company believes that affected
municipalities will endeavor to implement alternative lawful means to continue
controlling the flow of waste. However, given the uncertainty surrounding the
matter, it is not possible to predict what impact, if any, it may have in the
future on the Company's disposal facilities, particularly WTI's trash-to-energy
facilities.
14
<PAGE>
- -------------------------------------------------------------------------------
As the states and U.S. Congress have accelerated their consideration of ways
in which economic efficiencies can be gained by deregulating the electric
generation industry, some have argued that over-market power sales agreements
entered into pursuant to the Public Utilities Regulatory Policies Act of 1978
("PURPA") should be voidable as "stranded assets." WTI's 25 power production
facilities are qualifying facilities under PURPA and depend on the sanctity of
their power sales agreements for their economic viability. Recent state and
federal agency and court decisions have unanimously upheld the inviolate nature
of these contracts. While WTI believes that federal law offers strong
protections to its PURPA contracts, there is a risk that future court decisions
and/or legislative initiatives in this area will have a material adverse effect
on its business.
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 the People's Republic of China. WM International is unable to predict what
impact, if any, this change will have on its operations in Hong Kong. At
December 31, 1996, WM International had identifiable assets of $245.2 million
related to its Hong Kong operations, which generated 1996 pretax income of
approximately $15.3 million.
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 these 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 reasonably possible that 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 and commercial
disputes. 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 believes it has
adequately provided for such matters in its financial statements and does not
believe that their outcome, individually or in the aggregate, will have a
material adverse impact on its business or financial condition.
Outlook The Company believes that its current strategy and the actions it has
taken over the past two years position it for long-term growth and improved
profitability in a rapidly changing waste services market. However, a number of
challenges remain. The current low level of recyclable commodity prices
negatively impacts the solid waste business both domestically and
internationally. Continued moderate economic growth is expected to result in
relatively low levels of solid waste volume and pricing growth. WTI has no new
trash-to-energy plants expected to come on stream in the near future and two of
its facilities will be negatively impacted by the expiration of existing
contracts beginning in 1998. The North American hazardous waste industry remains
depressed. The Company is undergoing a major re-engineering of its financial and
administrative processes which will require significant cost and effort over the
next two to three years. Divestiture of discontinued businesses and monetization
of other assets must be completed.
The Company is responding to these challenges with increased management focus
on its core waste management services business, improved productivity through
the use of technology, and greater emphasis on generating owners' cash and
controlling capital expenditures. Management has also adopted Economic Value
Added ("EVA(R)") as its primary performance measurement to guide its operations
management to improve returns on invested capital, and has made EVA(R) a key
part of incentive compensation. However, in light of the risk factors
highlighted above, the Company anticipates flat revenue and earnings per share
from continuing operations of approximately $1.75 in 1997 as it concentrates on
future returns. For 1998, earnings per share from continuing operations are
expected to grow to approximately $2.05.
Forward-Looking Information Except for historical data, the information herein
constitutes forward-looking statements. Forward-looking statements are
inherently uncertain and subject to risks. Such statements should be viewed with
caution. Actual results or experience could differ materially from the forward-
looking statements as a result of many factors, including changes in the price
of recyclable commodities, severe weather conditions, slowing of the overall
economy, higher interest rates, failure of the Company's restructuring and re-
engineering plans to produce the cost savings anticipated, the inability to
complete the divestiture of discontinued businesses or the monetization of other
assets at appropriate prices and terms, and the cost and timing of the stock
repurchase programs. The Company makes no commitment to disclose any revisions
to forward-looking statements, or any facts, events or circumstances after the
date hereof, that may bear upon forward-looking statements.
15
<PAGE>
Exhibit 13.2
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
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,
1995 and 1996, and the related consolidated statements of income, cash flows,
and stockholders' equity for each of the three years in the period ended
December 31, 1996. 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, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois,
February 3, 1997
16
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the three years ended December 31, 1996
(000's omitted except per share amounts)
1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $8,482,718 $9,053,018 $9,186,970
- -------------------------------------------------------------------------------------------------------------------
Operating Expenses $5,827,626 $6,220,859 $6,372,828
Special Charges -- 335,193 471,635
Selling and Administrative Expenses 997,180 1,004,888 979,209
Interest Expense 333,550 421,572 375,758
Interest Income (33,123) (36,883) (27,637)
Minority Interest 126,961 81,938 57,587
Sundry Income, Net (64,388) (76,462) (85,248)
- -------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations Before Income Taxes $1,294,912 $1,101,913 $1,042,838
Provision For Income Taxes 552,606 483,670 565,047
- -------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations $ 742,306 $ 618,243 $ 477,791
- -------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Income from operations, less applicable income taxes and
minority interest of $64,923 in 1994, $60,835 in 1995 and $13,466 in 1996 $ 42,075 $ 48,305 $ 15,502
Provision for loss on disposal, less applicable income tax benefit and
minority interest of $34,151 in 1995 and $58,792 in 1996 -- (62,649) (301,208)
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 784,381 $ 603,899 $ 192,085
===================================================================================================================
Average Common and Common Equivalent Shares Outstanding 484,144 485,972 490,263
===================================================================================================================
Earnings (Loss) per Common and Common Equivalent Share:
Continuing Operations $1.53 $1.27 $.97
Discontinued Operations--
Income from operations .09 .10 .03
Provision for loss -- (.13) (.61)
- -------------------------------------------------------------------------------------------------------------------
Net Income $1.62 $1.24 $.39
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
As of December 31, 1995 and 1996
($000's omitted except per share amounts)
1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 169,541 $ 323,288
Short-term investments 34,156 341,338
Accounts receivable, less reserve of $61,927 in 1995 and $47,523 in 1996 1,655,533 1,681,817
Employee receivables 8,496 10,084
Parts and supplies 150,528 142,417
Costs and estimated earnings in excess of billings on uncompleted contracts 242,675 240,531
Prepaid expenses 347,156 353,749
- -------------------------------------------------------------------------------------------------------------------
Total Current Assets $ 2,608,085 $ 3,093,224
- -------------------------------------------------------------------------------------------------------------------
Property and Equipment, at cost
Land, primarily disposal sites $ 4,553,717 $ 5,019,065
Buildings 1,532,305 1,495,252
Vehicles and equipment 7,164,767 7,520,902
Leasehold improvements 84,587 85,998
- -------------------------------------------------------------------------------------------------------------------
$13,335,376 $14,121,217
Less--Accumulated depreciation and amortization (3,829,658) (4,399,508)
- -------------------------------------------------------------------------------------------------------------------
Total Property and Equipment, Net $ 9,505,718 $ 9,721,709
- -------------------------------------------------------------------------------------------------------------------
Other Assets
Intangible assets relating to acquired businesses, net $ 3,823,323 $ 3,885,293
Sundry, including other investments 1,550,672 1,452,057
Net assets of discontinued operations 876,476 214,309
- -------------------------------------------------------------------------------------------------------------------
Total Other Assets $ 6,250,471 $ 5,551,659
- -------------------------------------------------------------------------------------------------------------------
Total Assets $18,364,274 $18,366,592
===================================================================================================================
Current Liabilities
Portion of long-term debt payable within one year $ 1,088,033 $ 553,493
Accounts payable 994,164 948,350
Accrued expenses 906,121 1,324,324
Unearned revenue 204,166 212,541
- -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities $ 3,192,484 $ 3,038,708
- -------------------------------------------------------------------------------------------------------------------
Deferred Items
Income taxes $ 922,500 $ 1,011,593
Environmental liabilities 621,186 543,723
Other 648,464 641,918
- -------------------------------------------------------------------------------------------------------------------
Total Deferred Items $ 2,192,150 $ 2,197,234
- -------------------------------------------------------------------------------------------------------------------
Long-Term Debt, less portion payable within one year $ 6,390,041 $ 6,971,607
- -------------------------------------------------------------------------------------------------------------------
Minority Interest in Subsidiaries $ 1,385,301 $ 1,186,955
- -------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies $ $
- -------------------------------------------------------------------------------------------------------------------
Put Options $ 261,959 $ 95,789
- -------------------------------------------------------------------------------------------------------------------
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;
498,817,093 shares issued in 1995 and 507,101,774 in 1996 498,817 507,102
Additional paid-in capital 422,801 864,730
Cumulative translation adjustment (102,943) (79,213)
Retained earnings 4,486,877 4,363,754
- -------------------------------------------------------------------------------------------------------------------
$ 5,305,552 $ 5,656,373
Less--Treasury stock; 12,782,864 shares, at cost -- 419,871
1988 Employee Stock Ownership Plan 13,062 6,396
Employee Stock Benefit Trust (11,769,788 shares in 1995
and 10,886,361 in 1996, at market) 350,151 353,807
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $ 4,942,339 $ 4,876,299
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $18,364,274 $18,366,592
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
18
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
For the three years ended December 31, 1996
(000's omitted except per share amounts)
Additional Cumulative 1988
Common Paid-in Translation Retained Employee Stock Employee Stock
Stock Capital Adjustment Earnings Treasury Stock Ownership Plan Benefit Trust
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $496,217 $ 668,470 $(245,587) $3,693,108 $ 425,097 $27,659 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income for the 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
- ----------------------------------------------------------------------------------------------------------------------------------
Net income for the year $ -- $ -- $ -- $ 192,085 $ -- $ -- $ --
Cash dividends ($.63 per
share) -- -- -- (308,265) -- -- --
Dividends paid to Employee
Stock Benefit Trust -- 6,943 -- (6,943) -- -- --
Stock repurchase (14,390,000
shares) -- -- -- -- 473,560 -- --
Stock issued upon exercise
of stock options and grant
of restricted stock 217 (10,938) -- -- (53,323) -- (28,622)
Treasury stock received in
connection with exercise of
stock options -- -- -- -- 5,458 -- --
Tax benefit of non-qualified
stock options exercised -- 6,859 -- -- -- -- --
Contribution to 1988 ESOP
(307,041 shares) -- -- -- -- -- (6,666) --
Treasury stock received as
settlement for claims -- -- -- -- 2,513 -- --
Common stock issued upon
conversion of LYONs 111 1,905 -- -- (160) -- --
Stock issued for acquisitions 7,957 219,867 -- -- (8,177) -- --
Temporary equity related to
put options -- 166,170 -- -- -- -- --
Proceeds from sale of put
options -- 18,845 -- -- -- -- --
Adjustment of Employee Stock
Benefit Trust to market value -- 32,278 -- -- -- -- 32,278
Cumulative translation
adjustment of foreign
currency statements -- -- 23,730 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $507,102 $ 864,730 $ (79,213) $4,363,754 $ 419,871 $ 6,396 $353,807
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
WMX Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
For the three years ended December 31, 1996
Increase (Decrease) in cash ($000's omitted)
1994 1995 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income for the year $ 784,381 $ 603,899 $ 192,085
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 880,466 885,384 920,685
Provision for deferred income taxes 298,564 250,828 289,027
Minority interest in subsidiaries 149,703 138,162 121,169
Interest on Liquid Yield Option Notes (LYONs)
and WMX Subordinated Notes 33,551 23,021 11,157
Contribution to 1988 Employee Stock Ownership Plan (ESOP) 7,930 6,667 6,666
Special charges, net of tax and minority interest -- 202,492 379,415
Provision for loss on disposal of discontinued operations,
net of tax and minority interest -- 62,649 301,208
Changes in assets and liabilities,
excluding effects of acquired companies:
Receivables, net (133,506) 45,232 (845)
Other current assets (109,174) 28,724 (1,709)
Sundry other assets (42,195) (72,282) (122,777)
Accounts payable 155,254 39,669 (59,410)
Accrued expenses and unearned revenue 43,121 (227,700) 20,830
Deferred items (259,020) 61,557 (167,702)
Other, net (838) (13,044) 17,074
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 1,808,237 $ 2,035,258 $ 1,906,873
- --------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Short-term investments $ 2,755 $ (4,196) $ 1,170
Capital expenditures (1,455,628) (1,386,932) (1,125,161)
Proceeds from sale of assets and businesses 276,822 141,774 712,359
Cost of acquisitions, net of cash acquired (197,201) (224,304) (104,778)
Other investments (74,446) (44,193) (192,808)
Acquisition of minority interests (57,865) (170,854) (342,034)
- --------------------------------------------------------------------------------------------------------
Net cash used for investing activities $(1,505,563) $(1,688,705) $(1,051,252)
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
<TABLE>
<CAPTION>
1994 1995 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Cash dividends $ (290,266) $ (291,421) $ (308,265)
Proceeds from issuance of indebtedness 1,710,586 1,803,383 2,918,730
Repayments of indebtedness (1,752,552) (1,860,451) (2,933,632)
Proceeds from exercise of stock options, net 7,970 14,132 65,766
Contributions from minority interests 22,169 24,394 10,242
Stock repurchases -- -- (473,560)
Proceeds from sale of put options 29,965 21,622 18,845
Settlement of put options -- (12,019) --
- --------------------------------------------------------------------------------------------------------
Net cash used for financing activities $ (272,128) $ (300,360) $ (701,874)
- --------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents $ 30,546 $ 46,193 $ 153,747
Cash and cash equivalents at beginning of year 92,802 123,348 169,541
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 123,348 $ 169,541 $ 323,288
========================================================================================================
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 $ 307,257 $ 401,715 $ 364,601
Income taxes, net of refunds received $ 241,657 $ 283,165 $ 326,679
Supplemental schedule of noncash investing and
financing activities:
LYONs converted into common stock of the Company $ 1,594 $ 2,598 $ 2,176
Liabilities assumed in acquisitions of businesses $ 244,560 $ 245,918 $ 128,297
Fair market value of Company and subsidiary stock
issued for acquired businesses $ 4,773 $ 66,172 $ 236,001
WMX Subordinated Notes issued for acquisition
of CWM minority interest $ -- $ 436,830 $ --
21
</TABLE>
<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
waste management services to governmental, residential, commercial, and
industrial customers in the United States and in select international markets.
The Company previously provided process engineering and construction, specialty
contracting, infrastructure and environmental engineering and consulting, and
industrial scaffolding services through its Rust International Inc. ("Rust")
subsidiary, water process systems, equipment manufacturing and water and
wastewater facility operations and privatization services through its
Wheelabrator Technologies Inc. ("WTI") subsidiary, and high organic waste fuels
blending services through its Chemical Waste Management, Inc. ("CWM")
subsidiary. As of December 31, 1996, the Company has sold or plans to exit all
of these businesses, and accordingly they have been classified as discontinued
operations in the accompanying financial statements. In the future, the Company
will operate only in the waste management services industry segment.
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 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 $3,321,000, $2,231,000 and $345,000 are included
in the Consolidated Statements of Income for 1994, 1995 and 1996, 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, have historically been carried at cost. Such
investments include tax-exempt securities, certificates of deposit and Euro-
dollar time deposits. At December 31, 1996, such investments include the shares
of Wessex Water Plc ("Wessex") (see Note 14) which are carried at market value.
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 103 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, 1995 and 1996, is as follows:
<TABLE>
<CAPTION>
1995 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Costs and estimated earnings
on uncompleted contracts $1,176,601 $1,192,215
Less: Billing on uncompleted contracts (952,818) (979,918)
---------- ----------
Total contracts in process $ 223,783 $ 212,297
========== ==========
Contracts in process are included in the Consolidated Balance
Sheets under the following captions:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $242,675 $240,531
Billings in excess of costs
and estimated earnings
on uncompleted contracts
(included in unearned revenue) (18,892) (28,234)
---------- ----------
Total contracts in process $223,783 $212,297
========== ==========
</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, 1996, is $8,008,000, including $1,300,000 that is expected to be collected
after one year. At December 31, 1995, retainage was $12,846,000.
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, 1995 and
1996, was $187,689,000 and $190,276,000, respectively.
22
<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 $539,849,000 and $659,226,000 as
of December 31, 1995 and 1996, 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.
Capitalized Interest Interest has been capitalized on significant landfills,
trash-to-energy plants and other projects under construction in accordance with
Statement of Financial Accounting Standards ("FAS") No. 34. Amounts capitalized
and netted against Interest Expense in the Consolidated Statements of Income
were $104,512,000 in 1994, $81,471,000 in 1995 and $73,347,000 in 1996.
Accounting Principles Effective January 1, 1996, the Company adopted FAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The change did not have a material impact on the
Company's financial statements.
Also in 1996, FAS No. 123, "Accounting for Stock-Based Compensation" became
effective. FAS 123 provides an optional new method of accounting for employee
stock options and expands required disclosure about stock options. If the
optional method of accounting is not adopted, disclosure is to be made, if
material, of pro forma net income and earnings per share as if it were. The
impact of the optional new accounting on net income and earnings per share was
immaterial and the Company elected not to adopt the optional accounting.
In October 1996, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
96-1, "Environmental Remediation Liabilities." The SOP is effective for fiscal
years beginning after December 15, 1996, and provides that environmental
remediation liabilities should be accrued when the criteria of FAS 5,
"Accounting for Contingencies," are met. Included in the SOP are benchmarks to
aid in the determination of when such criteria are met and environmental
liabilities should be recognized. It also provides that the accrual for such
liabilities should include future costs of those employees expected to devote a
significant amount of time directly to the remediation effort. The Company does
not believe that the adoption of SOP 96-1 will have a material impact on its
financial statements.
Restatement Certain amounts in previously issued financial statements have
been restated to conform to 1996 classifications.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
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 1994
through 1996:
Income From Continuing Operations Before Income Taxes 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $1,133,281 $1,112,409 $1,037,191
International 161,631 (10,496) 5,647
---------- ---------- ----------
$1,294,912 $1,101,913 $1,042,838
========== ========== ==========
Income Tax Provision (Benefit)
- -------------------------------------------------------------------------------------------------------------------
Current tax expense
U.S. federal $ 206,247 $ 210,367 $ 265,067
State and local 47,573 46,511 63,161
Foreign 25,650 35,905 17,086
---------- ---------- ----------
Total current $ 279,470 $ 292,783 $ 345,314
---------- ---------- ----------
Deferred tax expense
U.S. federal $ 202,785 $ 175,688 $ 129,630
State and local 30,841 34,784 14,857
Foreign 42,105 (18,501) 76,025
---------- ---------- ----------
Total deferred $ 275,731 $ 191,971 $ 220,512
---------- ---------- ----------
U.S. federal benefit from amortization of deferred investment credit $ (2,595) $ (1,084) $ (779)
---------- ---------- ----------
Total provision $ 552,606 $ 483,670 $ 565,047
========== ========== ==========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
The federal statutory tax rate in 1994, 1995 and 1996 is
reconciled to the effective tax rate as follows:
1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of federal benefit 3.9 4.8 4.9
Amortization of deferred investment credit (0.2) (0.1) (0.1)
Amortization of intangible assets relating to acquired businesses 2.1 2.6 3.8
U.S. taxes on foreign income 1.2 -- 3.0
Write-down of investment in subsidiary -- -- 5.7
Federal tax credits (1.0) (1.3) (1.4)
Minority interest 3.8 3.0 2.8
Other, net (2.1) (0.1) 0.5
---- ---- ----
Effective tax rate 42.7% 43.9% 54.2%
==== ==== ====
</TABLE>
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 1995 and 1996 deferred tax (assets) liabilities are
as follows:
<TABLE>
<CAPTION>
1995 1996
- --------------------------------------------------------------------------------
Deferred tax assets
<S> <C> <C>
Reserves not deductible until paid $ (503,074) $ (495,940)
Deferred revenue (37,284) (16,158)
Net operating losses and tax
credit carryforwards (266,916) (233,008)
Other (78,474) (73,229)
---------- ----------
Subtotal $ (885,748) $ (818,335)
---------- ----------
Deferred tax liabilities
Depreciation and amortization $1,335,559 $1,384,164
Other 374,084 359,035
---------- ----------
Subtotal $1,709,643 $1,743,199
---------- ----------
Valuation allowance 98,605 86,729
---------- ----------
Net deferred tax liabilities $ 922,500 $1,011,593
========== ==========
</TABLE>
The Company's subsidiaries have approximately $11.8 million of alternative
minimum tax credit carryforwards that may be used indefinitely and capital loss
carryforwards of approximately $13.7 million with an expiration date of 1998.
Various subsidiaries have U.S. federal and foreign operating loss carryforwards
of approximately $545 million and state operating loss carryforwards of
approximately $482 million. Foreign operating losses of $286 million may be
carried forward indefinitely; the remaining loss carryforwards have expiration
dates through the year 2011. 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. During
1994 and 1995, the valuation allowance increased primarily for the uncertainty
of foreign operating loss carryforwards. The valuation allowance decreased in
1996 by approximately $11.9 million due primarily to the realization of capital
loss carryforwards and adjustments for certain operating loss carryforwards
determined to be unrealizable.
The Company has concluded that 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 1994, the Company and its principal subsidiaries acquired 119 businesses
for $197,201,000 in cash 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.
During 1995, 136 businesses were acquired for $224,304,000 in cash and notes,
$77,689,000 of debt assumed, and 2,236,354 shares of the Company's common stock.
Three of the 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.
Eighty-three businesses were acquired in 1996 for $104,778,000 in cash and
notes, $39,446,000 of debt assumed, and 8,210,568 shares of the Company's common
stock. These acquisitions were accounted for as purchases.
The pro forma effect of the acquisitions made during 1994, 1995 and 1996 is not
material.
In January 1995, the Company acquired all of the approximately 21.4% of the
outstanding shares of CWM that it did not already own for $436.8 million of
convertible subordinated notes. See Note 5 for additional information. In July
1995, the Company acquired all of the approximately 3.1 million shares of Rust
held by the public, for $16.35 per share in cash.
24
<PAGE>
- --------------------------------------------------------------------------------
NOTE 5 DEBT
The details relating to debt (including capitalized leases, which are not
material) as of December 31, 1995 and 1996, are as follows:
<TABLE>
<CAPTION>
1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper, weighted average interest
5.7% in 1995 and 5.8% in 1996 $1,119,356 $ 645,869
Tailored Rate ESOP Notes, weighted average
interest 4.74% in 1995 and 4.58% in 1996 20,000 20,000
Debentures, interest 8 3/4%, due 2018 249,085 249,085
Notes, interest 6% to 8 1/4%, due 1997-2026 3,334,170 3,834,170
Solid waste disposal revenue bonds, interest
4.63% to 7.15%, due 1998-2013 251,085 239,980
Installment loans and notes payable,
interest 5.34% to 10.6%, due 1997-2020 1,197,848 1,137,130
Project Debt, interest 3.95% to 10.64%,
due 1997-2016 735,646 833,740
Other long-term borrowings 31,532 30,187
Liquid Yield Option Notes, zero coupon -
subordinated, interest 9%, due 2001 8,945 7,439
Liquid Yield Option Notes, zero coupon -
subordinated, interest 6%, due 2012
("Exchangeable LYONs") 53,996 53,457
Liquid Yield Option Notes, zero coupon -
subordinated, interest 6%, due 2010
("CWM LYONs") 36,840 29,307
WMX Subordinated Notes, interest 5.75%,
due 2005 439,571 444,736
---------- ----------
Total debt $7,478,074 $7,525,100
Less - current portion 1,088,033 553,493
---------- ----------
Long-term portion $6,390,041 $6,971,607
========== ==========
</TABLE>
The long-term debt as of December 31, 1996, is due as follows:
<TABLE>
<S> <C>
Second year $1,088,836
Third year 1,371,779
Fourth year 1,116,061
Fifth year 556,750
Sixth year and thereafter 2,838,181
----------
$6,971,607
==========
</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 $989,238,000 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 18.75 basis points and commitment fees of
5 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 the Company's acquisition of the outstanding CWM shares it did not already
own, the CWM public stockholders received 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 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. 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. 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 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,
1996, there were 549,538 such notes outstanding with a maturity value amounting
to $549,538,000.
In connection with the transaction, CWM LYONs and Exchangeable LYONs which had
been convertible into or exchangeable for CWM shares 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.
25
<PAGE>
- --------------------------------------------------------------------------------
NOTE 6 DERIVATIVE FINANCIAL INSTRUMENTS
From time to time, the Company uses derivatives to manage interest rate,
currency and commodity risk. The amount of such instruments outstanding at any
one point in time and gains or losses from their use have not been and are not
expected to be material to the Company's financial statements.
Interest Rate Agreements Certain of the Company's subsidiaries have entered
into interest rate swap agreements to balance fixed and floating rate debt in
accordance with management's criteria. 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 agreements provide only for the
exchange of interest on the notional amounts at the stated rates, with no
multipliers or leverage. Differences paid or received are recognized as a part
of interest expense on the underlying debt over the life of the agreements. At
December 31, 1996, Waste Management International plc ("WM International") had
outstanding interest rate swaps, all of which entitle it to receive floating
rate and pay fixed rate, in the following notional amounts: Hong Kong dollars --
600 million; Italian Lire -- 122 billion; and German Marks -- 100 million.
Currency Agreements From time to time, the Company and certain of its
subsidiaries use foreign currency derivatives to seek 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. 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. There were no currency derivatives outstanding at
December 31, 1996.
Commodity Agreements The Company utilizes collars, calls and swaps to seek 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 position in crude oil derivatives
as of December 31, 1996.
<TABLE>
<CAPTION>
Type Quantity Expiration
- --------------------------------------------------------------------------------
<S> <C> <C>
Swaps 750 bbls 1997
Collars 700 bbls 1998
Swaps 2,000 bbls 1998
Collars 2,100 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, 1996, which is not material.
- --------------------------------------------------------------------------------
NOTE 7 ENVIRONMENTAL COSTS AND LIABILITIES
The continuing business in which the Company is engaged is intrinsically
connected with the protection of the environment. As such, a significant portion
of the Company's operating costs and capital expenditures could be characterized
as costs of environmental protection. While the Company is faced, in the normal
course of business, with the need to expend funds for environmental protection
and remediation, it does not expect such expenditures to have a material adverse
effect on its financial condition or results of operations because its business
is based upon compliance with environmental laws and regulations and its
services are priced accordingly. Such costs may increase in the future as a
result of legislation or regulation; however, the Company believes that in
general it tends to benefit when governmental regulation increases, which may
increase 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 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.
The Company has also established procedures to evaluate its potential remedial
liabilities at closed sites which it owns or operated, or to which it
transported waste, including 103 sites listed on the NPL. The majority of
situations involving NPL sites relate to allegations that subsidiaries of the
Company (or their predecessors) transported waste to the facilities in question,
often prior to the acquisition of such subsidiaries by the Company. The Company
routinely reviews and evaluates sites requiring remediation, including NPL
sites, giving consideration to the nature
26
<PAGE>
(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 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 $180 million higher in the aggregate than the estimate that has
been recorded in the financial statements as of December 31, 1996.
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.
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
$160 million at December 31, 1996.
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 $1.03 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>
1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Current portion, included in
Accrued Expenses $ 138,533 $ 122,209
Non-current portion 621,186 543,723
---------- ----------
Total recorded $ 759,719 $ 665,932
Amount to be provided over
remaining life of active sites,
including discount of $171 million
in 1995 and $160 million in 1996 1,118,739 1,028,437
---------- ----------
Expected aggregate undiscounted
environmental liabilities $1,878,458 $1,694,369
========== ==========
</TABLE>
Anticipated payments of environmental liabilities at December 31, 1996, are as
follows:
<TABLE>
<S> <C>
1997 $ 122,209
1998 56,000
1999 47,450
2000 33,571
2001 38,429
Thereafter 1,396,710
----------
$1,694,369
==========
</TABLE>
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. 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
potential future insurance recoveries.
27
<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 a total of 15,000 shares are to be granted,
in five equal annual installments commencing with 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 a
weighted-average price of $34.90 per share and outstanding Rust stock options
were converted into options to acquire approximately 1,976,000 Company shares at
a weighted-average price of $30.26 per share.
The status of the plans, including predecessor plans, replacement plans and
similar plans for employees generally (together "Prior Plans") under which
options remain outstanding, during the three years ended December 31, 1996, was
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 11,682 $ 33.63 13,811 $32.24 19,629 $32.04
Granted 3,729 26.49 3,117 27.29 4,106 31.90
Exercised 462 17.77 721 20.47 2,614 25.96
Cancelled:
Prior plans 312 36.74 1,111 33.22 1,042 34.76
Current plans 826 32.33 316 31.14 424 30.84
Additional shares available
for future grant 6,000 -- -- -- 515 --
Converted CWM, Rust and
other stock options -- -- 4,849 33.01 515 18.07
Shares no longer available
for future grant -- -- 2,914 -- -- --
Outstanding at end of year 13,811 32.24 19,629 32.04 20,170 32.33
Options exercisable at end of year 7,210 33.77 9,860 33.57 12,577 33.87
Options available for future grant 15,290 -- 4,726 -- 1,044 --
</TABLE>
The following table summarizes information about stock options outstanding as
of December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- -------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Price Shares Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 8.57-$17.16 133 5.9 years $15.16 119 $15.09
21.39- 29.87 6,930 6.9 years 26.68 3,539 26.52
30.64- 39.27 10,850 6.4 years 33.37 6,682 34.14
40.10- 61.03 2,257 4.0 years 45.68 2,237 45.66
------ ------
20,170 6.3 years $32.33 12,577 $33.87
====== ======
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
The Company accounts for these plans under Accounting Principles Board
Opinion 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined based on the fair value at the
grant date under the optional method in FAS 123, the impact on the Company's net
income and earnings per share would have been immaterial. Based on current and
anticipated use of stock options, it is not expected that the impact of the
accounting provisions of FAS 123 will be material in future years.
- --------------------------------------------------------------------------------
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.
The Boards of Directors of WMX and WTI have authorized their respective
companies to repurchase shares of their own common stock (up to 50 million
shares in the case of WMX and 30 million shares in the case of WTI) in the open
market, in privately negotiated transactions, or through issuer tender offers.
These programs extend into 1998. Both authorizations replaced existing common
stock repurchase programs.
During 1994, 1995 and 1996, the Company sold put options on 42.3 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 31.6 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 settled for cash at a total cost of $12,019,000. The Company
repurchased 3.1 million shares of stock at a cost of $107.5 million, and 2.9
million options expire in February 1997, at strike prices ranging from $32.04 to
$34.13 per share.
- --------------------------------------------------------------------------------
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>
1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Common shares issued, net of
Treasury Stock and Employee
Stock Benefit Trust shares per
Consolidated Balance Sheets 487,047 483,433
Effect of shares issuable under
stock options after applying
the "treasury stock" method 627 1,260
Effect of using weighted-average
common shares outstanding
during the year (1,702) 5,570
------- -------
Common shares used in
computing earnings per share 485,972 490,263
======= =======
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
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 $177,182,000 in 1994, $170,274,000 in 1995 and $164,539,000
in 1996. 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, 1996, are due as follows:
<TABLE>
<S> <C>
First year $ 154,102
Second year 139,030
Third year 128,832
Fourth year 120,918
Fifth year 110,792
Sixth through tenth years 487,927
Eleventh year and thereafter 225,757
----------
$1,367,358
==========
</TABLE>
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 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 3,690 bank letters of
credit, performance bonds and other guarantees. Such financial instruments
(averaging approximately $565,000 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.
During the first quarter of 1995, WM International received an assessment from
the Swedish Tax Authority of approximately 417 million Krona (approximately $60
million) plus interest from the date of the assessment, 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 Company subsidiary 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 subsidiary to apply to the DEP for permission to
remove all waste above the height allowed by the zoning ordinance, and the
Connecticut Supreme Court has upheld that ruling. The Company believes that the
removal of such waste is an inappropriate remedy and is seeking an alternative
resolution to the issue, but is unable to predict the outcome. Depending upon
the nature of any plan eventually approved by applicable regulatory authorities
for removing the waste, the actual volume of waste to be moved, and other
currently unforseeable factors, the subsidiary could incur costs which would
have a material adverse impact on the Company's financial condition and results
of operations in one or more future periods.
In May 1994, the U.S. Supreme Court ruled that state and local governments may
not constitutionally restrict the free movement of trash in interstate commerce
through the use of flow control laws. Such laws typically involve a municipality
specifying the disposal site for all solid waste generated within its borders.
Since the ruling, several decisions of state or federal courts have invalidated
regulatory flow control schemes in a number of jurisdictions. Other judicial
decisions have upheld non-regulatory means by which municipalities may
effectively control the flow of municipal solid waste.
WTI's Gloucester County, New Jersey, facility relies on a disposal franchise
for substantially all of its supply of municipal solid waste. In July 1996, a
Federal District Court permanently enjoined the State of New Jersey from
enforcing its solid waste regulatory flow control system, which was held to be
unconstitutional, but stayed the injunction for as long as its ruling is on
appeal plus an additional period of two years to enable the State to devise an
alternative nondiscriminatory approach. The State has indicated that it will
continue to enforce flow control during the two-year transition period and has
filed an appeal of the Federal District Court's ruling.
The Supreme Court's 1994 ruling and subsequent court decisions have not to
date had a material adverse effect on any of the Company's trash-to-energy
operations. Federal and state legislation has been proposed, but not yet
enacted, to effectively grandfather existing flow control mandates. In the event
that such legislation is not adopted, the Company believes that affected
municipalities will endeavor to implement alternative lawful means to continue
controlling the flow of waste. However, given the uncertainty surrounding the
matter, it is not possible to predict what impact, if any, it may have in the
future on the Company's disposal facilities, particularly WTI's trash-to-energy
facilities.
30
<PAGE>
- --------------------------------------------------------------------------------
As the states and the U.S. Congress have accelerated their consideration of
ways in which economic efficiencies can be gained by deregulating the electric
generation industry, some have argued that over-market power sales agreements
entered into pursuant to the Public Utilities Regulatory Policies Act of 1978
("PURPA") should be voidable as "stranded assets." WTI's 25 power production
facilities are qualifying facilities under PURPA and depend on the sanctity of
their power sales agreements for their economic viability. Recent state and
federal agency and court decisions have unanimously upheld the inviolate nature
of these contracts. While WTI believes that federal law offers strong
protections to its PURPA contracts, there is a risk that future court decisions
and/or legislative initiatives in this area will have a material adverse effect
on its business.
In the ordinary course of conducting its business, the Company becomes
involved in lawsuits, administrative proceedings and governmental
investigations, including antitrust and environmental matters and commercial
disputes. 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 believes it has
adequately provided for such matters in its financial statements and does not
believe that their outcome, individually or in the aggregate, will have a
material adverse impact on 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 Waste Management, Inc. ("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 1994, 1995 and 1996, based on discount rates
of 8.5%, 8.5% and 7.75%, respectively, included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
- ------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned
during the year $ 11,075 $ 11,752 $ 14,047
Interest cost on projected
benefit obligation 11,532 13,228 14,390
Expected return on plan assets (12,335) (13,237) (13,818)
Net amortization and deferral (1,310) 33 1,751
-------- -------- --------
Net periodic pension expense $ 8,962 $ 11,776 $ 16,370
======== ======== ========
</TABLE>
Assumptions used to determine the plan's funded status as of December 31 are
as follows:
<TABLE>
<CAPTION>
1995 1996
- ---------------------------------------------------------------
<S> <C> <C>
Discount rate 7.75% 7.75%
Rate of increase in compensation levels 4.0% 3.5%
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, 1995 and
1996, for its pension plan:
<TABLE>
<CAPTION>
1995 1996
- -----------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligations,
including vested benefits
of $152,031 and $182,482 at
December 31, 1995 and 1996,
respectively $(167,287) $(199,561)
========= =========
Projected benefit obligation $(191,059) $(223,729)
Plan assets at fair value,
primarily common stocks,
bonds and real estate 167,068 199,722
--------- ---------
Plan assets less than
projected benefit obligation $ (23,991) $ (24,007)
Unrecognized net loss 29,801 46,618
Unrecognized overfunding at
date of adoption (January 1, 1985)
of FAS No. 87, net of amortization,
being recognized over 15 years (6,422) (4,855)
--------- ---------
Pension cost included in
prepaid (accrued) expenses $ (612) $ 17,756
========= =========
</TABLE>
31
<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 1994, 1995 and 1996 for
this plan was $3,418,000, $4,202,000 and $4,247,000, 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 $16,129,000, $18,308,000 and $16,519,000 for
subsidiaries' defined benefit plans were made and charged to income in 1994,
1995 and 1996, 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, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
- -------------------------------------------------------
<S> <C> <C>
Accumulated Postretirement
Benefit Obligations:
Retirees $52,255 $46,453
Other fully eligible participants 9,682 10,459
Other active participants 10,695 17,114
------- -------
$72,632 $74,026
Unrecognized:
Prior service cost 566 239
Gain 7,911 8,496
------- -------
$81,109 $82,761
======= =======
</TABLE>
For measurement purposes, a 7.5% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1997; the rate was assumed to
decrease by 0.5% per year to 6.0% in 2000 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, 1996 by approximately $6,812,000, and the aggregate of the service
and interest cost components of net postretirement health care cost for 1996 by
approximately $401,000. The weighted-average discount rate used in determining
the accumulated postretirement benefit obligation was 7.75% in 1995 and 1996.
The expense for postretirement health care benefits was $4,668,000 in 1994,
$5,359,000 in 1995 and $4,174,000 in 1996. The service and interest components
of the expense were $1,049,000 and $3,619,000, respectively, in 1994, $1,094,000
and $4,265,000, respectively, in 1995, and $723,000 and $3,451,000,
respectively, in 1996.
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>
1994 1995 1996
- --------------------------------------------------
<S> <C> <C> <C>
Expense recorded
(contribution) $7,930 $6,667 $6,666
====== ====== ======
Interest expense on
1988 ESOP debt $1,965 $1,147 $ 981
====== ====== ======
Dividends on unallocated
1988 ESOP shares used
by the 1988 ESOP $ 780 $ 555 $ 379
====== ====== ======
</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 $750 per employee ($500 prior to January
1, 1996). Charges to operations for the PSSP were $27,334,000 in 1994,
$24,882,000 in 1995 and $16,030,000 in 1996. 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 $12,050,000,
$13,603,000 and $12,362,000 during 1994, 1995 and 1996, respectively.
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.
32
<PAGE>
NOTE 13 COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHICAL AREAS
Through the third quarter of 1996, management and operations of the Company were
based on four principal global lines of business--waste services, clean energy,
clean water, and environmental and infrastructure consulting. In the fourth
quarter of 1996, Rust began implementing plans to exit its remaining engineering
and consulting businesses. In addition, WTI sold its water process,
manufacturing and custom engineered systems businesses and has entered into an
agreement to sell its water and wastewater facility operations and privatization
services. These businesses have been classified as discontinued operations and,
as a result, the Company now operates in only the waste management services line
of business.
Foreign operations in 1996 were conducted in 10 countries in Europe, seven
countries in the Asia Pacific region, and Canada, Mexico, Brazil, Israel, and
Argentina. The information relating to the Company's continuing foreign
operations is set forth in the following tables:
<TABLE>
<CAPTION>
United Other
States Europe Foreign Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Revenue $ 6,599,478 $1,322,670 $560,570 $ 8,482,718
=========== ========== ======== ===========
Income from operations $ 1,410,477 $ 184,230 $ 63,205 $ 1,657,912
=========== ========== ======== ===========
Identifiable assets $12,030,261 $3,471,012 $748,270 $16,249,543
=========== ========== ======== ===========
1995
Revenue $ 7,012,982 $1,527,291 $512,745 $ 9,053,018
=========== ========== ======== ===========
Income from operations $ 1,456,895 $ 2,415 $ 32,768 $ 1,492,078
=========== ========== ======== ===========
Identifiable assets $13,032,695 $3,682,432 $772,671 $17,487,798
=========== ========== ======== ===========
1996
Revenue $ 7,064,516 $1,539,183 $583,271 $ 9,186,970
=========== ========== ======== ===========
Income from operations $ 1,301,579 $ (12,800) $ 74,519 $ 1,363,298
=========== ========== ======== ===========
Identifiable assets $13,821,086 $3,503,014 $828,183 $18,152,283
=========== ========== ======== ===========
</TABLE>
No single customer accounted for as much as 3% of consolidated revenue in
1994, 1995 and 1996.
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 the People's Republic of China. WM International is unable to predict what
impact, if any, this change will have on its operations in Hong Kong. At
December 31, 1996, WM International had identifiable assets of $245.2 million
related to its Hong Kong operations, which generated 1996 pretax income of
approximately $15.3 million.
33
<PAGE>
NOTE 14 SPECIAL CHARGES
In the first quarter of 1995, in response to the continuing deterioration of the
chemical waste services market, CWM realigned its organization, and in
connection therewith, recorded a special charge of $140.6 million before tax
($91.4 million after tax). The charge related primarily to a write-off of the
investment in facilities and technologies that CWM abandoned because they did
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 a special charge of
$194.6 million ($152.4 million after tax) primarily related to the actions it
had decided to take 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 in 1995. The majority of the balance was paid in 1996,
although certain rent payments on leased facilities will continue into the
future.
In the fourth quarter of 1996, WM International recognized a provision of
$77.0 million after tax related to the sale of its investment in Wessex and a
charge of $169.5 million after tax to revalue its investments in France, Austria
and Spain in contemplation of exiting all or part of these markets or forming
joint ventures. The charge also included the write-off of an investment in a
hazardous waste disposal facility in Germany because regulatory changes
adversely affected its volumes. These charges reduced the Company's income by
$213.6 million after tax.
Also, in the fourth quarter of 1996, WMI and CWM recorded pretax charges of
$255.0 million ($166.4 million after tax) for reengineering their finance and
administrative functions (primarily related to a reduction in the carrying value
of software) and increasing reserves for certain litigation, including a dispute
involving the computation of royalties on the Emelle, Alabama hazardous waste
landfill. In December 1996, a federal court in Memphis, Tennessee, held CWM
liable for approximately $91.5 million in damages to the former owners of the
Emelle site. CWM is appealing the decision.
- --------------------------------------------------------------------------------
NOTE 15 DISCONTINUED OPERATIONS
In the fourth quarter of 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. During the second quarter
of 1996, the sale of the industrial process engineering and construction
businesses, based in Birmingham, Alabama, was completed.
During the fourth quarter of 1996, WTI sold its water process systems and
equipment manufacturing businesses. WTI has also entered into an agreement to
sell its water and wastewater facility operations and privatization business. As
of September 30, 1996, Rust sold its industrial scaffolding business.
In the fourth quarter of 1996, Rust began implementing plans to exit its
remaining domestic and international engineering and consulting business. CWM is
discontinuing its high organic waste fuel blending services. WMX recorded a
fourth quarter provision for loss of $360.0 million before tax and minority
interest in connection with the planned divestiture of these businesses.
The discontinued businesses have been segregated and the accompanying
consolidated balance sheets, statements of income and related footnote
information have been restated. Revenues from the discontinued businesses were
$1,614,600,000 in 1994, $1,926,330,000 in 1995 and $1,134,666,000 for 1996.
Following is a summary of the assets and liabilities as of December 31, 1995 and
1996, which are reflected on the consolidated balance sheets as net assets of
discontinued operations:
<TABLE>
<CAPTION>
1995 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Current assets $576,627 $228,109
Property and equipment
and other noncurrent assets 758,244 358,116
Current liabilities (351,150) (287,852)
Noncurrent liabilities (107,245) (84,064)
-------- --------
Net assets of
discontinued operations $876,476 $214,309
======== ========
</TABLE>
The Company expects to complete by the end of 1997 the sale of those
businesses not previously sold.
34
<PAGE>
- --------------------------------------------------------------------------------
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, 1995, and December 31, 1996. 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, 1995 December 31, 1996
- --------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonderivatives--
Assets--
Cash and cash equivalents $ 169,541 $ 169,541 $ 323,288 $ 323,288
Receivables 1,664,029 1,664,029 1,691,901 1,691,901
Short-term investments 34,156 34,156 341,338 341,338
Liabilities--
Commercial paper 1,119,356 1,120,209 645,869 646,179
Project debt 735,646 880,619 833,740 896,711
Liquid Yield Option Notes
and WMX Subordinated Notes 539,352 576,024 534,939 602,746
Other borrowings 5,083,720 5,284,472 5,510,552 5,609,979
Derivatives relating to debt -- (74) -- (4,761)
Other derivatives carried as--
Assets (in Sundry Assets) -- -- -- 2,768
Liabilities (in Accrued
Expenses) (65) (16,647) -- (82)
Letters of credit, performance
bonds and guarantees -- -- -- --
</TABLE>
Cash, Receivables and 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.
35
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NOTE 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is an analysis of certain items in the Consolidated
Statements of Income by quarter for 1995 and 1996.
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1995
Revenue $2,151,774 $2,326,334 $2,322,330 $2,252,580 $9,053,018
Gross profit 525,936 722,871 732,424 515,735 2,496,966
Income from continuing operations 91,191 203,090 220,816 103,146 618,243
Net income 101,245 219,127 233,848 49,679 603,899
Income from continuing operations
per common and common equivalent
share .19 .42 .45 .21 1.27
Net income per common
and common equivalent share .21 .45 .48 .10 1.24
1996
Revenue $2,144,479 $2,330,994 $2,372,746 $2,338,751 $9,186,970
Gross profit 649,630 711,739 742,228 238,910 2,342,507
Income (loss) from continuing
operations 180,179 217,734 240,164 (160,286) 477,791
Net income (loss) 185,178 223,042 245,206 (461,341) 192,085
Income (loss) from continuing
operations per common and common
equivalent share .37 .44 .49 (.33) .97
Net income (loss) per common
and common equivalent share /(1)/ .38 .45 .50 (.95) .39
</TABLE>
(1) Sum of quarters does not equal total for year.
See Note 14 to Consolidated Financial Statements for a discussion of the
special charges affecting the 1995 and 1996 quarters and full year results.
See Note 15 to Consolidated Financial Statements for a discussion of the
decisions to discontinue certain operations announced during 1995 and 1996.
36
<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 3, 1997. 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)
ARS - Waste Management of Central North Carolina
ARS - Waste Management of Eastern North Carolina
ARS - Waste Management of South Carolina
Arabian Cleaning Enterprise, Ltd. (Saudi Arabia)
Arkansas Valley Waste Limited Partnership (Illinois)
Ark BV (Netherlands)
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)
Belpar Chemical Services, Inc. (West Virginia)
Bensalem Power Company (Pennsylvania)
B. Holmes (Graded Paper) Ltd. (United Kingdom)
Bio-Energy Partners (Illinois)
Brand Air, Inc. (Delaware)
Brand Construction Services, Inc. (Delaware)
Brand Demolition Services, Inc. (Delaware)
Brand Insulations, Inc. (Illinois)
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)
<PAGE>
Burton, Adams, Kemp & King, Inc. (North Carolina)
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)
Trade Waste Incineration
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, L.L.C. (Delaware)
CID MRRF, Inc. (Delaware)
Clarfield Recycling Ltd. (United Kingdom)
CNS Holdings, Inc. (Delaware)
CNSI Sub, Inc. (Delaware)
Community Refuse, Limited (Pennsylvania)
Mountain View Reclamation
Compania Schreiber de Servicios (Spain)
Container Recycling Alliance, L.P. (Delaware)
Controlled Waste Materials, Inc. (Illinois)
Cord Industrienster Spykerisse BV (Netherlands)
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)
CWM Holdings, Inc. (Delaware)
CWM Resource Management, Inc. (Georgia)
CWM Resource Recovery, Inc. (Ohio)
Dan-Clean DK A/S (Denmark)
Dankompost APS (Denmark)
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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)
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)
Downfield Services Ltd (United Kingdom)
Drakesmore Development Ltd (United Kingdom)
Durachem Limited Partnership (Maryland)
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)
Edward Bros (Waste Paper) Ltd (United Kingdom)
Eksjo Renhallning AB (Sweden)
EMICA S.r.l. (Italy)
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)
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Fempack Limited (United Kingdom)
Fineco Italiana S.r.l. (Italy)
First Waste Limited (United Kingdom)
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
Rolling Hills Recycling and Disposal Facility
Waste Management of Augusta - Aiken
Waste Management of Atlanta
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)
Gruning GmbH Wertstoffaufbereitung und Containerdienst (Germany)
G.T.I. - Generale Trasporti Immondizie s.r.l. (Italy)
Gulf Disposal, Inc. (Florida)
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)
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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)
Interport Paper Company Limited (United Kingdom)
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)
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)
Karlstad Renhallnings AB (Sweden)
K. D. Scott Limited (United Kingdom)
Keene Road Landfill, Inc. (Florida)
Kennedy & Donkin Africa (Botswana) Partnership (Botswana)
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)
Klok Containers BV (Netherlands)
KNAB GmbH (Germany)
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KNAB Zwischenlager Verwaltungs- ung Betriebsgesellschaft mbH (Germany)
Lake Disposal Partners, Ltd. (Illinois)
Landskrona-Svalovs Renhallnigs AB (Sweden)
LJA Land Development Engineering & Surveying Inc. (Delaware)
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)
Megastock Ltd. (United Kingdom)
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)
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 Seal Company (Illinois)
Neptune Microfloc, Incorporated (Oregon)
New England CR Inc. (Massachusetts)
NH/VT Energy Recovery Corporation (New Hampshire)
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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)
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)
Pecol S.r.l. (Italy)
Penn-Warner Club, Inc. (Delaware)
Peterson-KNAB GmbH (Germany)
Phoenix Systems, Inc. (Maryland)
Photodigit Ltd. (United Kingdom)
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)
Practical Recycling Systems Ltd. (United Kingdom)
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)
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PWM Affiliates Superannuation Fund Pty Limited (Australia)
Questquill Limited (United Kingdom)
R A Johnson (Haulage) Ltd. (England)
Rancho Estates Properties, Inc. (Delaware)
RCC Fiber Company, Inc. (Delaware)
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
REI/CQA Inc. (Delaware)
REI Holdings, Inc. (Delaware)
Renovadan Miljoservice A/S (Denmark)
Rent-a-Weld (Wirral) Ltd. (United Kingdom)
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)
Riley Energy Systems of Lisbon Corporation (Delaware)
Riley Energy Systems of Lisbon Connecticut Corp. (Connecticut)
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 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 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)
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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 of Colorado Inc. (Delaware)
Rust Federal Services of Hanford Inc. (Delaware)
Rust Federal Services of Idaho Inc. (Delaware)
Rust Geotech Inc. (Delaware)
Rust Germany GmbH (Germany)
Rust Industrial Cleaning Inc. (Delaware)
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 MRM Limited (United Kingdom)
Rust North America Holdings Inc. (Delaware)
Rust Overseas B.V. (Netherlands)
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 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)
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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)
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)
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)
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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)
S.P.E.M. S.p.A. (Italy)
Svensk Avfallskonvertering AB (Sweden)
S. V. Farming Corp. (New Jersey)
Swindell-Dressler Energy Supply Company (Delaware)
Swindell-Dressler Leasing Company (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 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)
Tyneside Waste Paper Co Ltd. (United Kingdom)
UK Waste Management Holdings (United Kingdom)
UK Waste Management Limited (United Kingdom)
United Waste Partners, L.P. (Illinois)
Valdenza S.r.l. (Italy)
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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
Warner West
Washington Waste Hauling & Recycling, Inc. (Delaware)
Mountain Group - Northwest Office
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
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)
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Waste Management Collection and Recycling, Inc. (California)
American Waste Systems
Empire Waste Management
Great Western Reclamation
Recycle America
SAWDCO Collection
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 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
Colorado Springs Recycling and Disposal Facility
County Line Recylcing and Disposal Facility
Denver/Arapahoe Disposal Site
East Weld Sanitary Landfill
North Weld Sanitary Landfill
Waste Management of Colorado - Landfill Division
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)
High Plains Sanitary Landfill and Recycling Center
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)
Northwest Sanitary Landfill
Pottstown Landfill and Recycling Center
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)
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Waste Management Espana S.A. (Spain)
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)
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
West Camden Sanitary Landfill
Waste Management International, Inc. (Delaware)
Waste Management International, Ltd. (Bermuda)
Waste Management International plc (United Kingdom)
Waste Management International Services Limited (United Kingdom)
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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 Mexico Services, S.A. de C.V. (Mexico)
Waste Management Nederland B.V. (Netherlands)
Waste Management N.Z. Ltd. (New Zealand)
Waste Management of Alabama, Inc. (Alabama)
Recycle America - Birmingham
Valley View Sanitary Landfill
Waste Management of Alabama - Central
Waste Management of Alabama - East
Waste Management of Alabama - Mobile
Waste Management of Alabama - North
Waste Management of Alabama - Northwest
Waste Management of Alabama - South
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)
Asset Recovery Group
Butterfield Station Recycling and Disposal Facility
Industrial Services Division
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 Recylcing and Disposal Facility
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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
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
WMI Services
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 Transfer Station
Englewood Transfer Station
Port-O-Let
Waste Management of Aurora
Waste Management of Colorado - Aurora Facility
Waste Management of Colorado - North Facility
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Waste Management of Colorado - Recycle Facility
Waste Management of Colorado - South Facility
Waste Management of Colorado Springs - Recycle America 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
WMI Medical Services
Waste Management of Columbus, Inc. (Ohio)
Waste Management of Connecticut, Inc. (Connecticut)
New Milford Recycling and Disposal Facility
Waste Management of Connecticut - New Milford
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
Superior Sanitation Landfill
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 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
DeKalb County Recycling and Disposal Facility
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
17
<PAGE>
McLean County Disposal and Recycling Services
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 - Metro
Waste Management - North
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
18
<PAGE>
Waste Management of Kentucky Holdings, Inc. (Delaware)
Waste Management of Kentucky, L.L.C. (Delaware)
Blue Ridge Recycling and Disposal Facility
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 Holdings One, Inc. (Delaware)
Waste Management of Louisiana Holdings Two, Inc. (Delaware)
Waste Management of Louisiana, L.L.C. (Delaware)
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
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
19
<PAGE>
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
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)
Somerville Transfer Station
Waste Management - Container Services
Waste Management of Boston - North
Waste Management of Central Massachusetts
Waste Management of Massachusetts - Gloucester
Waste Management of Massachusetts - South Shore
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 Detroit - Residential
Waste Management - Metro Detroit
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 East Recycling Transfer Facility
Waste Management of Michigan - Detroit Transfer and Recycling Facility
Waste Management of Michigan - Detroit MRF/Transfer
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
20
<PAGE>
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
Dietman Sanitation & Recycling
Northern Waste Systems
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
21
<PAGE>
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)
Waste Management of Great Falls
Waste Management of Nebraska, Inc. (Delaware)
Douglas County Recycling and Disposal Facility
Waste Management of New Hampshire, Inc. (Connecticut)
Turnkey Recycling and Environmental Enterprises
Waste Management of New Hampshire - Londonderry
Waste Management of New Hampshire - New Hampton
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
Rio Rancho Recycling and Disposal Facility
San Juan County 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 Hudson Valley
Waste Management of New York - Albion
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
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)
22
<PAGE>
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
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 - Western Reserve
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)
Metro South Transfer Station
Port-O-Let
Waste Management of Vancouver U.S.A.
Zero Garbage
Waste Management of Orlando, Inc. (Florida)
Waste Management of Pennsylvania, Inc. (Pennsylvania)
23
<PAGE>
Alderfer & Frank
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
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
Waste Management of Wilkinsburg
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 South Carolina
Waste Management of the Low Country
Waste Management of South Dakota, Inc. (South Dakota)
24
<PAGE>
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
Atascocita Recycling and Disposal Facility
Austin Community Disposal Co.
Bluebonnet Recycling and Disposal Facility
Centex Waste Management
Coastal Plains Recycling and Disposal Facility
Comal County Recycling and Disposal Facility
Covell Gardens Landfill
DFW Recycling and Disposal Facility
Eastside Recycling and Disposal Facility
Fogle Garbage Service
Garbage Gobbler
Hillside Recycling and Disposal Facility
Kingwood Garbage Service
Lacy Lakeview Recycling and Disposal Facility
Longhorn Disposal
Northwest Transfer Station
Oak Hill Recycling and Disposal Facility
Pecan Prairie Recycling and Disposal Facility
Recycle America - Dallas Bulk Grade Division
Recycle America - Dallas High Grade Division
S & B Trucking & Sanitation
Security Landfill
Skyline Recycling and Disposal Facility
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 Fort Worth
Waste Management of Fort Worth Recylcing and Disposal Facility
Waste Management of Houston
Waste Management of Northeast Texas
Waste Management of Southeast Texas
Waste Management of Southeast Texas - Angleton
Waste Management of Southeast Texas - Dickinson
25
<PAGE>
Waste Management of South Texas
Waste Management of West 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)
Waste Management of Northern 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
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 Wisconsin, Inc. (Wisconsin)
Best Disposal
Mallard Ridge Recycling and Disposal Facility
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
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
26
<PAGE>
Waste Management of Rockford
Waste Management of Wisconsin - East
Waste Management Southwest
Waste Management of St. Croix Valley
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)
American Refuse Systems, Inc.
Ocmulgee Disposal, Inc.
Waste Management Partners of Bozeman, Ltd. (Illinois)
Waste Management Partners of Midland/Odessa (Illinois)
Waste Management Partners of Paris, Ltd. (Illinois)
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 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)
27
<PAGE>
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)
Westley Trading Ltd (United Kingdom)
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)
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)
28
<PAGE>
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 Land Resources Inc. (Delaware)
Wheelabrator McKay Bay Inc. (Florida)
Wheelabrator Mecklenburg Inc. (Delaware)
Wheelabrator Millbury Inc. (Delaware)
Wheelabrator New Hampshire Inc. (Delaware)
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 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)
29
<PAGE>
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 Kutzner GmbH Rohstoffvertung - Containerdienst (Germany)
WMD Milojoservice A/S (Denmark)
WMD Schreiber GmbH (Germany)
WMD Waste Management Deutschland Holding GmbH (Germany)
WMI Canada Divesture Sub, Inc. (Canada)
WMI Medical Services of Arizona, Inc. (Delaware)
WMI Medical Services of Indiana, Inc. (Indiana)
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 Texas, Inc. (Delaware)
WMI Medical Waste Services of North Carolina, Inc. (North Carolina)
WMI Mexico Holdings, 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 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
30
<PAGE>
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 Rive - Sud
WMI Waste Management DuCanada
WMNA Container Recycling, Inc. (Delaware)
WMNA Rail-Cycle Sub, Inc. (Delaware)
WM of New York, Inc. (Delaware)
WM Paper Recycling, Inc. (Delaware)
WM Partnership Holdings, Inc. (Delaware)
WM Portugal (Gestao De Residuos) LDA (Portugal)
WM Umwelttechnik Gmbh (Germany)
WMX Federal Services, Inc. (Delaware)
WMX Technology Center, Inc. (Delaware)
WM Ymparistopalvelut OY (Finland)
W R Pollard and Son Limited (United Kingdom)
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)
31
<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. 333-6879) and previously filed Registration Statement on
Form S-4 (registration no. 33-56891).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FOR
THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 323,288
<SECURITIES> 341,338
<RECEIVABLES> 1,729,340
<ALLOWANCES> 47,523
<INVENTORY> 0
<CURRENT-ASSETS> 3,093,224
<PP&E> 14,121,217
<DEPRECIATION> 4,399,508
<TOTAL-ASSETS> 18,366,592
<CURRENT-LIABILITIES> 3,038,708
<BONDS> 6,971,607
0
0
<COMMON> 507,102
<OTHER-SE> 4,369,197
<TOTAL-LIABILITY-AND-EQUITY> 18,366,592
<SALES> 0
<TOTAL-REVENUES> 9,186,970
<CGS> 0
<TOTAL-COSTS> 6,844,463
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 39,148
<INTEREST-EXPENSE> 375,758
<INCOME-PRETAX> 1,042,838
<INCOME-TAX> 565,047
<INCOME-CONTINUING> 477,791
<DISCONTINUED> (285,706)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 192,085
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.00
</TABLE>
