<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
February 24, 1998
Date of Report (Date of earliest event
reported)
----------------------------------
WASTE MANAGEMENT, INC.
(Exact name of registrant as specified in its
charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-7327 36-2660763
(Commission File Number) (IRS Employer
Identification No.)
3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60523
(Address of principal executive offices) (Zip code)
(630) 572-8800
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
<PAGE>
Item 5. Other Events.
On February 24, 1998, the registrant issued a press release announcing,
among other things, (i) its financial results for the quarter and year ended
December 31, 1997, including a special charge and adjustments to expenses
resulting from the registrant's comprehensive examination of its operations and
accounting practices, (ii) restated earnings for the years 1992 through 1996 and
the first three quarters of 1997, (iii) new accounting policies and practices
including those related to landfill cost accounting and a new fleet management
strategy impacting vehicle and equipment depreciation, and (iv) its outlook as
to certain financial goals and operating matters. This press release included
Consolidated Selected Income Statement Data for the six years ended December 31,
1997. Certain data on this statement has been changed from the original release
that went out on February 24. The changes were to conform the 1996 amounts on
this statement to the Consolidated Statements of Income included in the release
and to reclassify 1995 amounts between "Costs and expenses" and "Asset
impairment loss" by $7.7 million.
On February 27, 1998, the registrant issued a press release providing
supplementary proforma unaudited financial data for the full year 1997.
Copies of the press releases containing these announcements are filed
herewith as exhibits and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
No financial statements or pro forma financial information are required to
be filed as a part of this report. The exhibits filed as part of this report are
listed in the Exhibit Index hereto.
2
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASTE MANAGEMENT, INC.
By: /s/ Donald R. Chappel
------------------------------------
Donald R. Chappel
Vice President and Acting Chief Financial
Officer
Dated: February 27, 1998
3
<PAGE>
WASTE MANAGEMENT, INC.
EXHIBIT INDEX
Number and Description of Exhibit*
1. None
2. None
4. None
16. None
17. None
20. None
23. None
24. None
27. None
99.1 News Release dated February 24, 1998 issued by Waste Management, Inc.
99.2 News Release dated February 27, 1998 issued by Waste Management, Inc.
- --------------------------------------
*Exhibits not listed are inapplicable.
4
<PAGE>
EXHIBIT 99.1
Analyst contact: Media contact:
Cherie Rice William J. Plunkett
(630) 218-1850 (630) 572-8898
WASTE MANAGEMENT ANNOUNCES RESULTS OF FINANCIAL AND BUSINESS
REVIEW AND REPORTS RESULTS FOR 4TH-QUARTER AND FULL-YEAR 1997
. Company revises asset valuations and implements new, more conservative
accounting policies and practices
. Records special charge and adjustments to expenses in fourth quarter and
restates prior-period earnings cumulatively totaling $3.5 billion pre-tax and
$2.9 billion after-tax
. Charge and adjustments to expenses result in loss of $1.4 billion, or $3.10
per share, for quarter and $1.2 billion, or $2.52 per share, for full-year
1997
. Goals for 1998 include EBITDA of approximately $2.5 billion
Oak Brook, Illinois, February 24, 1998 -- Waste Management, Inc. (NYSE: WMX)
today reported its financial results for the fourth quarter and twelve months of
1997 and restated earnings for 1992 through 1996 and the first three quarters of
1997. Fourth- quarter financial results reflect a special charge and adjustments
to expenses. The special charge, adjustments to expenses and restatements are
the result of the Company's comprehensive examination of its operations and
accounting practices and cumulatively total $2.9 billion after-tax and $3.5
billion pre-tax.
The Company has implemented new, more conservative accounting policies and
practices including those related to landfill cost accounting and has adopted a
new fleet management strategy impacting vehicle and equipment depreciation. The
accounting changes and fleet initiative are expected to result in an increase in
depreciation and amortization expense of approximately $165 million in 1998. The
Company expects EBITDA (earnings before interest, taxes, depreciation and
amortization) for 1998 to be approximately $2.5 billion, compared with EBITDA
(excluding special charges and unusual adjustments to expenses) of approximately
$2.5 billion in both 1996 and 1997.
"The actions we are announcing today reflect our determination to
comprehensively address and definitively resolve the financial reporting issues
affecting our Company and its credibility with
<PAGE>
investors," said Robert S. (Steve) Miller, Acting Chairman and Chief Executive
Officer. "The steps we are taking are the strong prescription we believe is
needed to acknowledge past mistakes, clarify our financial reporting picture,
and begin the process of restoring investor confidence in Waste Management and
its ability to prosper in the future. We appreciate the patience our investors
have shown us as we conducted our review. We have tackled the hard issues facing
the Company and we have confidence in the underlying financial strength of Waste
Management, the power of its asset base, and its very strong ability to generate
cash.
"These actions are the product of a recently reorganized Board of Directors, a
new Audit Committee, and a very different management team," Mr. Miller said.
"When we complete the team soon with the addition of a new CEO, we believe this
will be a profoundly changed, far stronger company, with more conservative
accounting policies and a commitment to rigorous controls. With the study now
behind us, we can once again devote our full attention to improving our business
and demonstrating our continued industry leadership to our stockholders,
customers and our employees."
Commenting on the Company's extensive reviews, Roderick M. Hills, Chairman of
the Audit Committee of the Board of Directors, said, "The Company has now
completed an exhaustive examination of our business, which began in the third
quarter and included an intensive review of Waste Management's North American
operations, assets and investments. Management conducted this comprehensive
analysis under the active oversight of the Audit Committee, assisted by a new
senior team of auditors and independent accounting advisers. It included a
comprehensive analysis of the Company's competitive and operating environment
and a review of every one of our North American disposal facilities, our
domestic fleet of approximately 14,000 collection vehicles and our containers
and other waste services equipment, as well as our accounting methods and
estimates and the Company's prior financial statements. We believe the steps we
have taken are the right ones for the Company."
The fourth-quarter charge, adjustments to expenses and restatements reduced
stockholders' equity to $1.3 billion at December 31, 1997. The Company also
noted, however, that despite a share repurchase of approximately $900 million in
1997, it also reduced debt by $900 million.
FOURTH-QUARTER AND FULL-YEAR RESULTS
The Company recorded a net loss from continuing operations of $1.5 billion, or
$3.30 per share, for the quarter ended December 31, 1997, versus a net loss from
continuing operations (as restated) of $179 million, or $.37 per share, for the
same period in 1996. (Note: All per-share numbers in this release are basic.)
<PAGE>
The loss resulted from a combination of a special charge, the effect of changes
in accounting estimates, and other adjustments to expense items including the
revaluation of impaired assets and goodwill, unsuccessful projects, various
business investments, and surplus properties, facilities and equipment. Revenue
in the fourth quarter was $2.3 billion compared with $2.4 billion in the same
period in 1996 as a result of divestitures.
Including both the restatement as well as the fourth-quarter charge and
adjustments to expenses, the Company recorded a net loss from continuing
operations of $1.3 billion, or $2.73 per share, for full-year 1997. This
compares with net income from continuing operations of $224 million, or $0.46
per share, in 1996. Revenue for full-year 1997 was $9.2 billion, essentially the
same as 1996.
The Company said that revenues for the fourth quarter from its North American
solid waste business were $1.4 billion versus $1.4 billion in the quarter a year
earlier. For the full year, despite several divestitures, solid waste revenues
were $5.7 billion, comparable to the prior year. On a "same store" basis,
excluding acquisitions and divestitures, North American solid waste revenues for
the fourth quarter rose 3.4% from the same period in 1996.
Joseph M. Holsten, Executive Vice President and Chief Operating Officer, said
the Company's North American solid waste customer count rose during the fourth
quarter and full-year 1997 as lost-customer rates in 1997 declined to
approximately 11% from 14% in the prior year. The Company said its 1997 sales
efforts emphasized gaining and retaining commercial and roll-off service
customers. The Company signed contracts with 36 new national customers in 1997,
bringing to approximately 800 the national and regional solid and hazardous
waste service customers served at about 74,000 business locations.
FOURTH-QUARTER CHARGE
The fourth-quarter special charge and adjustments to expenses of $1.8 billion
pre-tax consisted primarily of asset revaluations and, to a lesser extent,
liability accruals. Adjustments to income tax accruals (from these charges and
adjustments) and allowance for minority interest brought the after-tax charge to
$1.5 billion.
Asset Revaluations
The revaluations were recorded for impaired assets including unrealizable
goodwill and other assets, investments in waste processing and disposal
facilities, unsuccessful or abandoned development projects, facility closures,
and the carrying values of certain businesses held for sale and equity
investments. The pre-tax impact of asset revaluations totaled $1.6 billion in
the fourth quarter.
<PAGE>
The revaluations in the hazardous waste services businesses, $788 million in the
quarter, relate primarily to impaired goodwill as well as impaired values of its
thermal, land disposal and fuels recycling facilities. In the Company's solid
waste services business, asset revaluations of $580 million relate primarily to
impairment of landfills and recycling facilities, the writeoff of landfill
expansions and projects that have been abandoned, and revaluation of surplus
property, facilities or equipment held for sale. Adoption by the Company in the
fourth quarter of a new fleet management strategy, which will result in the
replacement of approximately 2,000 vehicles per year over the next three years,
also resulted in a one-time charge for anticipated loss on sale of vehicles.
Liability Accruals
Results for the fourth quarter of 1997 also reflect adjustments to certain
liability reserves, primarily increased loss contract reserves, severance
reserves and self-insurance reserves. The pre-tax impact of these items totaled
$215 million in the fourth quarter.
The Company increased its loss reserves in connection with certain municipal
contracts, primarily recycling related, from which it does not reasonably
believe it can generate future profits. The increase in the Company's self-
insurance reserves reflects revised estimates of the Company's retained
liabilities for personal injury and property damage casualty claims. The Company
also recorded a pre-tax charge of $36 million for severance costs from a
previously announced workforce reduction in North American operations.
As a result of the fourth-quarter charge and adjustments to expenses, the
Company recorded an income tax benefit of $189 million, reflecting non-
deductible writedowns of goodwill and land and an additional provision to income
tax reserves.
RESTATEMENTS
During the comprehensive financial review, management and the Audit Committee
determined that certain items of expense were incorrectly reported. These
principally relate to the calculation of vehicle, equipment and container
depreciation expense and capitalized interest. In the depreciation area, the
Company employed incorrect vehicle and container salvage value assumptions, and
made mistakes in the corporate financial reporting process.
The matters reflected in prior-period restatements include earlier recognition
of asset value impairments (primarily related to land, landfill and recycling
investments) and environmental liabilities (primarily remediation and landfill
closure and postclosure expense accruals).
The Company also concluded that capitalized interest relating to landfill
construction projects was misstated. On January 1,
<PAGE>
1995, the Company adopted a more conservative accounting method for calculating
capitalized interest. However, the required cumulative accounting "catch-up"
charge was not properly reflected in the 1995 financial statements and mistakes
were made in applying the new accounting method in subsequent years. Capitalized
interest for 1995, 1996, and 1997 has accordingly been restated.
In the fourth quarter of 1997, the Company reclassified the results of certain
Rust International business units to continuing operations. These businesses had
been reported as discontinued operations in the fourth quarter of 1996 and
during the first three quarters of 1997. Accounting standards require such
reclassification because the divestitures did not occur within one year from the
date on which the businesses were first reported as discontinued operations.
Accordingly, the Company reclassified the results of operations of these
businesses to continuing operations and restated its full year 1997 and 1996
results to reflect this change.
The Company is accordingly restating its financial results for the years 1992
through 1996 and for the first three quarters of 1997. The effect of the
restatements is to reduce previously reported net income by a total of $180.9
million in the first nine months of 1997, $231.4 million in 1996, $263.8 million
in 1995, $156.9 million in 1994, $164.1 million in 1993, $110.3 million in 1992
and $208.9 million in 1991 and prior periods. The majority of the restatement
items will not materially affect future cash flows.
The following table provides details, in general categories, of the charge and
restatements described above, as well as the impact of these items on the
Company's principal business units:
<PAGE>
FOURTH QUARTER 1997 CHARGE AND PRIOR PERIOD RESTATEMENTS
--------------------------------------------------------
(in millions of dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
4th-Quarter 1997 Q1-Q3 1996 &
Total 1997 Restatement Prior Periods
- ----------------------------------------------------------------------------------------------------------------------
Asset Valuation Adjustments
- ---------------------------
<S> <C> <C> <C> <C>
Goodwill $ 536 $ 420 $ 17 $ 99
Processing & Disposal Related
Unsuccessful/Abandoned Projects 213 234 (12) (9)
Surplus Properties 128 107 (13) 34
Capitalized Interest 210 4 13 193
Realization Issues 717 575 36 106
Other Facility Value Adjustments 154 7 (2) 149
Depreciation/Amortization Adjustments
Vehicles & Equipment 716 85 131 500
Disposal Facilities 38 16 1 21
Business Investments 109 54 (1) 56
Other Assets 63 59 (19) 23
------ ------ ---- --------
Total $2,884 $1,561 $151 $ 1,172
Liabilities Adjustments
- -----------------------
Environmental Reserves 287 (30) 63 254
Self-Insurance Reserves 83 45 (1) 39
Loss Contract Reserves 137 136 1 0
Disposal Facility Closure/Post-Closure
Reserves 14 10 31 (27)
Severance 60 36 23 1
Other Reserves 73 19 (15) 69
------ ------ ---- --------
Total $ 654 $ 216 $102 $ 336
Subtotal pre-tax before minority interest $3,538 $1,777 $253 $ 1,508
Income Taxes (597) (189) (70) (338)
Minority Interest (77) (40) (2) (35)
------ ------ ---- -------
Total After Tax $2,864 $1,548 $181 $ 1,135
Line of Business Impact - Pre-tax
- ---------------------------------
Chemical & Hazardous Waste $ 904 $ 788 $(21) $ 137
Waste Mgmt International 97 97 0 0
Wheelabrator 88 52 1 35
WMI/North American Solid Waste 2,289 774 243 1,272
Rust 160 66 30 64
------ ------ ---- ------
Total $3,538 $1,777 $253 $1,508
</TABLE>
<PAGE>
Included with this press release are historical statements of consolidated
selected financial data reflecting the restatements, as well as revisions to
previous classifications of various items of income and expense, including those
previously disclosed in the Company's quarterly report on Form 10-Q for the
period ended September 30, 1997.
ACCOUNTING CHANGES
The Company is shortening the depreciable lives of certain categories of assets
to reflect their current anticipated useful lives under a new operational
program and has eliminated salvage value for trucks and waste containers. These
changes in accounting estimates affect the depreciation of vehicles, equipment
and waste containers. Under this new depreciation schedule, vehicle and
equipment depreciation increased in the fourth quarter of 1997 by approximately
$34 million.
Additionally, the Company has revised certain components of the landfill cost
accounting process. It has adopted more specific criteria for determining
whether currently unpermitted expansions to existing landfills should be
included in the estimated capacity of sites for depreciation purposes. This
change in estimate increased landfill depreciation expense by approximately $13
million in the fourth quarter of 1997. This change also will increase the rate
of accrual for closure and post-closure care of sites. This closure and post-
closure change reduced fourth-quarter 1997 operating income by approximately $3
million.
REVIEW OF 1997
At the beginning of 1997, the Company announced a strategy of focusing solely on
core waste management services in domestic and select international markets, and
withdrawing from non-core or non-integrated markets generating unsatisfactory
returns. This strategy included a cash-driven program to monetize $1.5 billion
in non-core assets and equity investments by the end of 1998, and to reduce
capital spending to $900 million from $1.1 billion in the preceding year.
Toward the end of the year, the Company introduced a new organizational
structure and cost-control program aimed at improving customer service and
efficiency and reducing overhead in its North American waste services
operations. It also announced new purchasing and fleet management initiatives to
further reduce operating costs over the next three years.
The new organizational structure reduced by about 20%, or 1,200, the number of
operating managers and managerial support staff. It reduced the number of profit
centers from 250 to 31. The new structure brings together sales/marketing and
operations responsibility at the region level focused on specific customer
segments, including commercial, industrial and governmental accounts. The model
also places functional expertise at the
<PAGE>
region level closer to customers and will facilitate the implementation of
uniform operating standards across the Company.
The Company also expanded the re-engineering of its financial and administrative
business processes to include marketing, sales and customer service functions.
This initiative, which included the consolidation of 13 regional accounting
offices into a single center during 1997, is part of a broad program to reduce
the cost of conducting routine business processes by upgrading information
management and business processing systems through a new company-wide software
system. The Company expects to invest approximately $100 million in this effort
in 1998.
The Company successfully divested operations in a number of North American
markets, including its operations in Canada and approximately 30 other locations
where it lacked an integrated service offering. Overseas, its Waste Management
International plc subsidiary withdrew from France, Austria and Spain and, early
in 1998, completed the sale of a waste-to-energy operation in Hamm, Germany.
The Company divested equity investments in ServiceMaster for approximately $626
million, and Waste Management International sold its interest in Wessex Water
plc for $260 million. Cash derived in 1997 from monetization and divestiture
activities totaled $1.4 billion, meeting 93% of the Company's 24-month objective
in less than one year. Capital spending was $880 million for full-year 1997.
Cash flow from operations, net of capital expenditures and dividends, was $458
million for the year.
OUTLOOK FOR 1998
Mr. Miller said he expected that moderate revenue growth in the solid waste
business will be more than offset by divestitures, declines in hazardous waste
revenues and reduced pricing on two of Wheelabrator's long-term contracts. Cost
reduction efforts will be more than offset by increases in depreciation and
amortization expense, costs to implement key initiatives such as strategic
sourcing, fleet management and information systems, and costs associated with
the completion of the accounting review and related matters.
Beyond 1998, the Company expects moderate revenue growth (excluding
acquisitions) and strong margin improvement as the unusual 1998 expenses and up-
front costs of initiatives decline and initiative benefits are realized.
For 1998, the Company said that its capital expenditure budget will be $1.2 to
$1.3 billion as it accelerates the purchasing of new collection vehicles in
connection with its new fleet management strategy and as it invests in new
systems to improve its financial, administrative, marketing, sales and customer
service processes. While the decision to change its fleet management strategy
will increase expenditures for new collection
<PAGE>
vehicles by approximately $150 million in 1998 and $200 million in 1999, the
Company anticipates maintenance and operating savings in 1999 and beyond of $20
million to $40 million per year.
The Company is also making progress with its move to centralize its purchasing
function at its Oak Brook headquarters, with a goal to leverage the scale of its
purchasing activity and reduce its $3 billion-a-year procurement costs by 5% to
10% by 2001. The Company has identified major areas of spending and 26 sourcing
teams are already working with suppliers to secure cost savings.
Mr. Miller said the Company will continue to seek to improve returns by
leveraging its network of assets and will also seek to enhance its position in
current markets with acquisitions that complement existing operations and
resources. At the same time, the Company will continue to dispose of non-core
and non-integrated businesses where returns are not satisfactory. The Company
has established the goal of generating approximately $400 million in 1998 from
its continuing monetization program.
SEARCH FOR NEW CHIEF EXECUTIVE OFFICER AND DIRECTORS
The Board's Search Committee, led by Mr. Miller, continues to make progress in
its efforts to recruit a new Chief Executive Officer. "As a practical matter, we
first needed to complete our business and financial reviews and disclose the
results to our stockholders," Mr. Miller said. "We are very pleased with the
caliber of the candidates with whom we have met, and we hope to announce a new
Chief Executive Officer soon. The Board believes that finding a world-class
leader is a crucial step in building shareholder value, and accordingly
completing that search is among our highest priorities."
Mr. Miller said that progress also has been made in identifying new directors to
serve on the Company's Board. "We expect to announce soon the nomination of two
experienced individuals in addition to the new Chairman and Chief Executive
Officer who will add value to our Board and help us complete the turnaround of
the Company," he said. Mr. Miller noted that in the past year five outstanding
individuals have joined the Company's Board of Directors.
Mr. Miller concluded: "We believe the strategic, operational and financial
initiatives we have been pursuing over the past several months will enable us to
better serve our customers, create competitive advantage, and thereby position
Waste Management to achieve our primary and overriding objective, which is to
build shareholder value."
Information Concerning Forward-Looking Statements
This release contains forward-looking statements as defined by federal
securities laws and such statements are inherently uncertain and subject to
risks. Such statements should be viewed
<PAGE>
with caution. Actual results or experience could differ materially from the
forward-looking statements as a result of many factors, including the Company's
ability to meet price-increase and new business sales goals, fluctuation in
recyclable commodity prices, weather conditions, slowing of the overall economy,
increased interest costs arising from a change in the Company's leverage,
failure of the Company's plans to produce the cost savings anticipated by the
Company, the timing and magnitude of capital expenditures, inability to obtain
or retain permits necessary to operate disposal or other facilities or otherwise
complete project development activities, inability to complete contemplated
dispositions of Company businesses and assets at anticipated prices and terms,
and the cost and timing of stock repurchases. 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.
Tables follow
<PAGE>
WASTE MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME *
FOR THE THREE MONTHS ENDED DECEMBER 31
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
REVENUE $2,377,417 $ 2,299,101
---------- -----------
Operating expenses $1,709,783 $ 1,943,103
Asset impairment loss 51,184 1,425,451
Special charges 370,735 126,528
Selling and administrative expenses 309,362 330,144
Interest expense 125,630 116,729
Interest income (10,244) (8,652)
Minority interest (42,976) (38,999)
Loss from continuing operations held for sale,
net of minority interest 8,045 5,885
Sundry (income) expense, net (27,428) 2,513
---------- -----------
Loss from continuing operations
before income taxes $ (116,674) $(1,603,601)
Provision for (benefit from) income taxes 62,295 (101,080)
---------- -----------
Loss from continuing operations $ (178,969) $(1,502,521)
Discontinued operations:
Income from operations of discontinued businesses,
less applicable income taxes and minority interest
of $7,458 in 1996 14,833 --
Provision for (loss) on disposal net of gain on sale, net
of applicable income taxes and minority
interest of $44,358 in 1996 and $(23,034) in 1997 (230,642) 92,157
---------- -----------
Loss before extraordinary item and cumulative
effect of change in accounting principle $ (394,778) $(1,410,364)
Extraordinary loss on refinancing of debt, net of
tax benefit and minority interest of $260 -- (516)
Cumulative Effect of change in accounting method for
business process reengineering and information
technology transformation, net of tax of $1,100 - -- (1,936)
---------- -----------
NET LOSS $ (394,778) $(1,412,816)
========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 484,668 455,411
========== ===========
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ (0.37) $ (3.30)
Income from discontinued operations (0.44) 0.20
Extraordinary item -- --
Cumulative effect of change in accounting method -- --
---------- -----------
Net loss $ (0.81) $ (3.10)
========== ===========
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ (0.37) $ (3.30)
Income from discontinued operations (0.44) .20
Extraordinary item -- --
Cumulative effect of change in accounting method -- --
---------- -----------
Net loss $ (0.81) $ (3.10)
========== ===========
</TABLE>
* Amounts have been restated as indicated in accompanying text.
<PAGE>
WASTE MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME *
FOR THE TWELVE MONTHS ENDED DECEMBER 31
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
REVENUE $9,225,636 $ 9,188,582
---------- -----------
Operating expenses $6,660,766 $ 7,188,326
Asset impairment loss 64,729 1,487,917
Special charges 370,735 144,229
Selling and administrative expenses 1,095,459 1,129,237
Interest expense 462,424 452,926
Interest income (27,904) (37,580)
Minority interest 41,289 45,442
(Income) loss from continuing operations held for sale,
net of minority interest (315) 9,930
Sundry income, net (102,014) (173,290)
---------- -----------
Income (loss) from continuing operations
before income taxes $ 660,467 $(1,058,555)
Provision for income taxes 436,473 215,667
---------- -----------
Income (loss) from continuing operations $ 223,994 $(1,274,222)
Discontinued operations:
Income from operations of discontinued businesses,
less applicable income taxes and minority interest
of $17,490 in 1996 and $78,400 in 1997 22,620 810
Provision for (loss) on disposal net of gain on sale, net
of applicable income taxes and minority
interest of $18,640 in 1996 and $(26,387) in 1997 (285,921) 99,760
---------- -----------
Loss before extraordinary item and cumulative
effect of change in accounting principle $ (39,307) $(1,173,652)
Extraordinary loss on refinancing of debt, net of
tax benefit and minority interest of $260 -- (516)
Cumulative Effect of change in accounting method for
business process reengineering and information
technology transformation, net of tax of $1,100 -- (1,936)
---------- -----------
NET LOSS $ (39,307) $(1,176,104)
========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 489,171 466,601
========== ===========
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.46 $ (2.73)
Income from discontinued operations (0.54) 0.21
Extraordinary item -- --
Cumulative effect of change in accounting method -- --
---------- -----------
Net loss $ (0.08) $ (2.52)
========== ===========
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.46 $ (2.73)
Income from discontinued operations (0.54) 0.21
Extraordinary item -- --
Cumulative effect of change in accounting method -- --
---------- -----------
Net loss $ (0.08) $ (2.52)
========== ===========
</TABLE>
* Amounts have been restated as indicated in accompanying text.
<PAGE>
WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF INCOME *
FOR THE PERIODS ENDED AS INDICATED
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
1996
----------------------------------------------------------------------
Three Months in 1996 Ended on Year Ended
--------------------------------------------------------- Dec. 31,
March 31 June 30 Sept. 30 Dec. 31 1996
--------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $2,144,479 $2,330,994 $2,372,746 $2,377,417 $9,225,636
---------- ---------- ---------- ---------- ----------
Operating expenses $1,532,718 $1,701,441 $1,716,824 $1,709,783 $6,660,766
Asset impairment loss 118 11,744 1,683 51,184 64,729
Special charges -- -- -- 370,735 370,735
Selling and administrative expense 261,821 259,610 264,666 309,362 1,095,459
Interest expense 108,723 111,707 116,364 125,630 462,424
Interest income (6,240) (6,421) (4,999) (10,244) (27,904)
Minority interest 26,443 29,518 28,304 (42,976) 41,289
(Income) loss from continuing operations held for
sale, net of minority interest (1,172) (3,811) (3,377) 8,045 (315)
Sundry income, net (22,685) (17,622) (34,279) (27,428) (102,014)
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations
before income taxes $ 244,753 $ 244,828 $ 287,560 $ (116,674) $ 660,467
Provision for income taxes 111,182 130,770 132,226 62,295 436,473
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations $ 133,571 $ 114,058 $ 155,334 $ (178,969) $ 223,994
Discontinued operations, net of tax and
minority interest --
Income from operations 4,377 841 2,569 14,833 22,620
Provision for (loss) on disposal net
of gain on sale 470 19,671 (75,420) (230,642) (285,921)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 138,418 $ 134,570 $ 82,483 $ (394,778) $ (39,307)
========== ========== ========== ========== ==========
Weighted average shares outstanding 489,231 494,861 489,421 484,668 489,171
========== ========== ========== ========== ==========
Basic earnings (loss) per common share
Continuing operations $ 0.27 $ 0.23 $ 0.32 $ (0.37) $ 0.46
Income (loss) from discontinued operations 0.01 0.04 (0.15) (0.44) (0.54)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 0.28 $ 0.27 $ 0.17 $ (0.81) $ (0.08)
========== ========== ========== ========== ==========
Diluted earnings (loss) per common share
Continuing operations $ 0.27 $ 0.23 $ 0.31 $ (0.37) $ 0.46
Income (loss) from discontinued operations 0.01 0.04 (0.14) (0.44) (0.54)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 0.28 $ 0.27 $ 0.17 $ (0.81) $ (0.08)
========== ========== ========== ========== ==========
</TABLE>
* All 1996 periods restated as indicated in accompanying text.
<PAGE>
WASTE MANAGEMENT, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF INCOME*
FOR THE PERIODS ENDED AS INDICATED
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
1997
-------------------------------------------------------------------------
Three Months in 1997 Ended on Year Ended
---------------------------------------------------------- Dec. 31,
March 31 June 30 Sept. 30 Dec. 31 1997
---------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $2,204,985 $2,333,308 $2,351,188 $ 2,299,101 $ 9,188,582
---------- ---------- ---------- ----------- -----------
Operating expenses $1,697,528 $1,715,507 $1,832,188 $ 1,943,103 $ 7,188,326
Asset impairment loss 5,905 46,874 9,687 1,425,451 1,487,917
Special charges 15,916 916 869 126,528 144,229
Selling and administrative expense 249,816 257,106 292,171 330,144 1,129,237
Interest expense 115,055 111,143 109,999 116,729 452,926
Interest income (12,362) (10,069) (6,497) (8,652) (37,580)
Minority interest 27,075 27,943 29,423 (38,999) 45,442
(Income) loss from continuing operations held for
sale, net of minority interest (119) 4,249 (85) 5,885 9,930
Sundry (income) expense, net (135,445) (32,387) (7,971) 2,513 (173,290)
---------- ---------- ---------- ----------- -----------
Income (loss) from continuing operations
before income taxes $ 241,616 $ 212,026 $ 91,404 $(1,603,601) $(1,058,555)
Provision for (benefit from) income taxes 127,231 127,913 61,603 (101,080) 215,667
---------- ---------- ---------- ----------- -----------
Income (loss) from continuing operations $ 114,385 $ 84,113 $ 29,801 $(1,502,521) $(1,274,222)
Discontinued operations, net of tax and
minority interest --
Income from operations -- 810 -- -- 810
Provision for loss on disposal net
of gain on sale 647 6,752 204 92,157 99,760
---------- ---------- ---------- ----------- -----------
Income (loss) before extraordinary item and
cumulative effect of accounting change $ 115,032 $ 91,675 $ 30,005 $(1,410,364) $(1,173,652)
Extraordinary item -- -- -- (516) (516)
Cumulative effect of accounting change -- -- -- (1,936) (1,936)
---------- ---------- ---------- ----------- -----------
Net income (loss) $ 115,032 $ 91,675 $ 30,005 $(1,412,816) $(1,176,104)
========== ========== ========== =========== ===========
Weighted average shares outstanding 483,993 470,624 455,083 455,411 466,601
========== ========== ========== =========== ===========
Basic earnings (loss) per common share
Continuing operations $ 0.24 $ 0.18 $ 0.07 $ (3.30) $ (2.73)
Income from discontinued operations -- 0.01 -- 0.20 0.21
Extraordinary item -- -- -- -- --
Cumulative effect of accounting change -- -- -- -- --
---------- ---------- ---------- ----------- -----------
Net income (loss) $ 0.24 $ 0.19 $ 0.07 $ (3.10) $ (2.52)
========== ========== ========== =========== ===========
Diluted earnings (loss) per common share
Continuing operations $ 0.23 $ 0.18 $ 0.07 $ (3.30) $ (2.73)
Income from discontinued operations -- 0.01 -- 0.20 0.21
Extraordinary item -- -- -- -- --
Cumulative effect of accounting change -- -- -- -- --
---------- ---------- ---------- ----------- -----------
Net income (loss) $ 0.23 $ 0.19 $ 0.07 $ (3.10) $ (2.52)
========== ========== ========== =========== ===========
</TABLE>
*The quarters ended March 31, June 30 and September 30, 1997 are restated as
indicated in accompanying text.
<PAGE>
WASTE MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED SELECTED INCOME STATEMENT DATA*
FOR THE SIX YEARS ENDED DECEMBER 31
(000'S omitted except per share amounts)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------
Revenue $8,661,027 $7,827,280 $8,537,883 $9,100,225 $9,225,636 $9,188,582
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Costs and expenses $7,216,101 $6,560,716 $7,090,342 $7,606,679 $7,756,225 $ 8,317,563
Asset impairment loss 20,437 29,009 33,970 53,772 64,729 1,487,917
Special charges 219,900 524,767 -- 335,587 370,735 144,229
Gains from stock transactions of subsidiaries
and exchange of Exchangeable LYONs (374,755) (15,109) -- -- -- --
Other expense, net 322,542 175,729 299,423 232,540 373,480 297,428
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes $1,256,802 $ 552,168 $1,114,148 $ 871,647 $ 660,467 $(1,058,555)
Provision for income taxes 455,377 283,347 512,683 451,741 436,473 215,667
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 801,425 $ 268,821 $ 601,465 $ 419,906 $ 223,994 $(1,274,222)
Income (loss) from discontinued operations -- 19,886 27,324 4,863 (263,301) 100,570
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item and
cumulative effect of accounting changes $ 801,425 $ 288,707 $ 628,789 $ 424,769 $ (39,307) $(1,173,652)
Extraordinary loss on refinancing debt -- -- -- -- -- (516)
Cumulative effect of accounting changes (61,739) -- (1,281) (84,672) -- (1,936)
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 739,686 $ 288,707 $ 627,508 $ 340,097 $ (39,307) $(1,176,104)
=============================================================================================================================
Weighted Average Common Shares
Outstanding 492,534 484,885 483,748 485,346 489,171 466,601
=============================================================================================================================
Basic Earnings (Loss) per Common Share
Continuing operations $ 1.63 $ 0.55 $ 1,24 $ 0.86 $ 0.46 $ (2.73)
Income from discontinued operations -- 0.05 0.06 0.01 (0.54) 0.21
Extraordinary item -- -- -- -- -- --
Cumulative effect of accounting change (0.13) -- -- (0.17) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.50 $ 0.60 $ 1.30 $ 0.70 $ (0.08) $ (2.52)
=============================================================================================================================
Diluted Earnings (Loss) per Common Share
Continuing operations $ 1.62 $ 0.55 $ 1.24 $ 0.86 $ 0.46 $ (2.73)
Income from discontinued operations -- 0.04 0.06 -- (0.54) 0.21
Extraordinary item -- -- -- -- -- --
Cumulative effect of accounting change (0.12) -- -- (0.16) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.50 $ 0.59 $ 1.30 $ 0.70 $ (0.08) $ (2.52)
=============================================================================================================================
</TABLE>
*Amounts have been restated as indicated in accompanying text.
<PAGE>
EXHIBIT 99.2
Analyst contact: Media contact:
Cherie Rice William J. Plunkett
(630) 218-1850 (630) 572-8898
WASTE MANAGEMENT, INC. SUPPLEMENTARY FINANCIAL DATA
Oak Brook, February 27, 1998 -- Waste Management, Inc., which earlier this week
announced its financial results for the fourth quarter and year ended December
31, 1997, today provided the following supplementary proforma unaudited
financial data for the full year 1997:
PROFORMA UNAUDITED INCOME SUMMARY
Twelve Months ended December 31, 1997
(millions, except per share amounts)
<TABLE>
<CAPTION>
<S> <C>
Loss from continuing operations before income taxes - as reported $(1,059)
Proforma adjustments:
- Special charges 144
- Asset impairment loss 1,488
- Estimated other unusual items included in operating, selling and
administrative expenses(1) 525
- Minority interest impact of above items (66)
- Estimated unusual sundry income(2) (147)
-------------
Subtotal - Proforma adjustments 1,944
-------------
Proforma income before taxes from continuing operations 885
Proforma income taxes(3) 453
-------------
Proforma net income from continuing operations $432
=============
Weighted average common shares outstanding 466.6
=============
Proforma basic earnings per common share $0.93
=============
Depreciation and amortization $1,095
=============
Proforma earnings before interest, taxes, depreciation and amortization $2,490
=============
</TABLE>
1) Primarily includes revaluation of recycling assets and unusual expenses
related to loss contracts, self-insurance accruals and environmental and
legal reserves.
2) Unusual items of sundry income primarily include gains on the sale of
certain North American solid waste assets and businesses and the Company's
investment in ServiceMaster.
3) Effective tax rate exceeds the statutory rates primarily due to goodwill
amortization and other non-deductible expense.
<PAGE>
The estimates included in the foregoing supplementary data reflect management's
current judgment regarding the extent to which certain items of income or
expense recorded in the twelve month period ended December 31, 1997 are unlikely
to recur in 1998.
This release is materially dependent upon forward-looking information as defined
by federal securities laws and such information is inherently uncertain and
subject to risks. Such information should be viewed with caution. Actual results
or experience could differ materially from the forward-looking information as a
result of many factors, including the company's ability to meet price-increase
and new business sales goals, fluctuation in recyclable commodity prices,
wheather conditions, slowing of the overall economy, increased interest costs
arising from a change in the Company's leverage, failure of the company's plans
to produce the cost savings anticipated by the Company, the timing and magnitude
of capital expenditures, inability to obtain or retain permits necessary to
operate disposal or other facilities or otherwise complete project development
activities, changes in environmental laws, technological, regulatory or
enforcement developments, the results of environmental studies, inability to
complete contemplated dispositions of Company businesses and assets at
anticipated prices and terms, and the cost and time of stock repurchases. The
Company makes no commitment to disclose any revisions to forward-looking
information, or any facts, events or circumstances after the date hereof that
may bear upon forward-looking information.
