<PAGE>
____________________________
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
___________________________
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Quarterly Period Ended March 31, 1994
--------------
Commission file number 0-14246
-------
Wheelabrator Technologies Inc.
---------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2678047
- ---------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Liberty Lane, Hampton, New Hampshire 03842
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(603) 929-3000
-----------------------------
(Registrant's telephone number,
including area code)
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
--------- ---------
Number of shares of common stock outstanding at April 30, 1994 - 189,332,206
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1994
------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Part I - Financial Information: Page No.
- ------------------------------- --------
<S> <C>
Item 1 - Financial Statements
Consolidated Statements of Income for the Three Months Ended
March 31, 1993 and 1994.................................... 1
Consolidated Balance Sheets as of December 31, 1993 and
March 31, 1994.............................................. 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1993 and 1994..................................... 3
Consolidated Statements of Changes in Stockholders' Equity for
the Three Months Ended March 31, 1993 and 1994.............. 4
Notes to Consolidated Financial Statements......................... 5 - 6
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition....................... 7 - 11
Part II - Other Information:
- ----------------------------
Item 1 - Legal Proceedings........................................... 12
Item 6 - Exhibits and Reports on Form 8-K............................ 12
SIGNATURE............................................................ 13
Exhibit Index........................................................ 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1993 AND 1994
(000's omitted, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Revenue......................................... $245,525 $281,332
Operating expenses.............................. 171,706 195,584
Selling and administrative expenses............. 23,580 25,652
Interest expense................................ 16,583 12,640
Interest income................................. (5,393) (3,404)
Equity in earnings of affiliates................ (9,415) (8,491)
Other income, net............................... (326) (1,697)
-------- --------
Income before income taxes.................... 48,790 61,048
Income tax provision............................ 15,382 20,908
-------- --------
Net income................................... $ 33,408 $ 40,140
======== ========
Weighted average common shares outstanding...... 188,300 190,200
======== ========
Earnings per common share....................... $ 0.18 $ 0.21
======== ========
Dividends declared per common share............. $ 0.02 $ -
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's omitted, except share amounts)
(unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
1993 1994
------------ -----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.......................... $ 36,719 $ 12,798
Receivables, net................................... 188,241 221,553
Costs and earnings in excess of billings........... 25,712 28,735
Other current assets............................... 84,684 89,219
---------- ----------
Total current assets............................. 335,356 352,305
Property, plant and equipment, net................... 1,653,920 1,678,494
Cost in excess of net assets of acquired businesses.. 205,886 212,534
Investments in affiliates............................ 561,045 576,653
Other assets......................................... 334,071 319,802
---------- ----------
Total assets................................. $3,090,278 $3,139,788
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term project debt....... $ 33,754 $ 28,425
Due to WMX Technologies, Inc. ..................... - 23,930
Accounts payable................................... 70,762 72,558
Accrued liabilities................................ 197,123 207,868
Advance payments on contracts...................... 28,147 30,267
---------- ----------
Total current liabilities........................ 329,786 363,048
---------- ----------
Long-term project debt............................... 776,858 772,405
---------- ----------
Deferred income taxes................................ 292,364 300,164
---------- ----------
Other long-term liabilities.......................... 404,432 365,997
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $1.00 per share,
50,000,000 shares authorized, none issued
issued or outstanding............................ - -
Common stock, par value $0.01 per share,
500,000,000 shares authorized,
188,820,322 shares outstanding in 1993,
189,117,754 shares outstanding in 1994........... 1,888 1,891
Capital in excess of par value..................... 874,580 878,261
Cumulative translation adjustments................. (33,670) (26,735)
Treasury stock; 43,127 shares in 1993 and
7,151 shares in 1994, at cost.................... (717) (140)
Retained earnings.................................. 444,757 484,897
---------- ----------
Total stockholders' equity....................... 1,286,838 1,338,174
---------- ----------
Total liabilities and stockholders' equity.... $3,090,278 $3,139,788
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1993 AND 1994
(000's omitted)
(unaudited)
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................ $ 33,408 $ 40,140
Adjustments to reconcile net income to cash
flows from operating activities:
Depreciation and amortization....................... 14,404 21,231
Deferred taxes...................................... 6,439 9,101
Undistributed earnings of affiliates................ (9,415) (8,491)
Changes in assets and liabilities, net of effects
of acquired and contributed businesses:
Receivables, net................................. (3,937) (31,629)
Costs and earnings in excess of billings......... (6,237) (3,023)
Other current assets............................. (30,727) 1,119
Accounts payable and accrued liabilities......... (48,514) (20,027)
Other long-term liabilities...................... (17,108) (11,840)
Other, net.......................................... (485) 471
--------- ---------
Net cash used for operating activities.............. (62,172) (2,948)
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures.................................. (44,963) (40,387)
Investments held by trustees.......................... 6,810 6,274
Cash paid for acquisitions, net of acquired cash...... (8,000) (4,509)
Other................................................. - 3,063
--------- ---------
Net cash used for investing activities.............. (46,153) (35,559)
--------- ---------
FINANCING ACTIVITIES:
Additions to long-term project debt................... - 112,985
Repayments of long-term project debt.................. (54,039) (122,854)
Net borrowings from WMX Technologies, Inc............. - 23,930
Proceeds from exercise of stock options, net.......... 3,539 4,261
Dividends paid........................................ (1,864) -
Other................................................. 168 (3,736)
--------- ---------
Net cash provided by (used for) financing activities (52,196) 14,586
--------- ---------
Decrease in cash and cash equivalents................. (160,521) (23,921)
Cash and cash equivalents at beginning of period...... 291,271 36,719
--------- ---------
Cash and cash equivalents at end of period............ $ 130,750 $ 12,798
========= =========
Supplemental disclosure:
Interest paid, net of amounts capitalized........... $ 15,300 $ 9,195
========= =========
Income taxes paid................................... $ 3,500 $ 8,179
========= =========
Significant noncash investing activities:
Net assets contributed to Rust International Inc.... $ 244,278 $ -
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1993 AND 1994
(000's omitted)
(unaudited)
<TABLE>
<CAPTION>
Capital in Cumulative
Common Excess of Translation Treasury Retained
Stock Par Value Adjustment Stock Earnings Total
------ ---------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $1,865 $758,646 $(17,785) $ - $296,617 $1,039,343
Net income - - - - 33,408 33,408
Dividends declared - - - - (3,735) (3,735)
Foreign currency translation - - (3,217) - - (3,217)
Exercise of stock options 3 2,613 - - - 2,616
Tax benefit from stock
options - 923 - - - 923
Investment in Rust
International Inc. - 77,662 - - - 77,662
------ -------- -------- ----- -------- ----------
Balance, March 31, 1993 $1,868 $839,844 $(21,002) $ - $326,290 $1,147,000
====== ======== ======== ===== ======== ==========
Balance, December 31, 1993 $1,888 $874,580 $(33,670) $(717) $444,757 $1,286,838
Net income - - - - 40,140 40,140
Foreign currency translation - - 6,935 - - 6,935
Exercise of stock options 3 2,581 - 577 - 3,161
Tax benefit from stock
options - 1,100 - - - 1,100
------ -------- -------- ----- -------- ----------
Balance, March 31, 1994 $1,891 $878,261 $(26,735) $(140) $484,897 $1,338,174
====== ======== ======== ===== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The accompanying financial statements have been prepared by Wheelabrator
Technologies Inc. ("WTI" or the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "Commission").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
The financial information presented herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. Certain prior period amounts have been reclassified to
conform with the current presentation. The results for interim periods are not
necessarily indicative of the results to be expected for the full year.
WTI is a majority-owned subsidiary of WMX Technologies, Inc. ("WMX"). WTI
and WMX are parties to an agreement which provides, among other things, for WTI
to lend excess cash to WMX at interest rates at least as favorable as those WTI
could otherwise obtain. Under the terms of this agreement, in the event WTI
requires short-term cash for the conduct of its business and operations, WMX
will make available to WTI such amounts as WTI requires, up to a total of $100
million in excess of amounts loaned by WTI to WMX. As of March 31, 1994, the
Company had $23.9 million of net borrowings from WMX under the terms of this
agreement.
Earnings per common share are calculated using the weighted average number
of shares outstanding for each period, including the effect of common stock
equivalents using the treasury stock method. Common stock equivalents consist
of unexercised stock options.
Effective January 1, 1994, WTI adopted Statement of Financial Accounting
Standards No. 112, Employer's Accounting for Postemployment Benefits ("FAS
112"). The adoption of FAS 112 did not have a significant effect on earnings
for the three months ended March 31, 1994 and is not expected to materially
impact the Company's 1994 results of operations, since WTI's accounting prior to
adoption of FAS 112 was substantially in compliance with the new standard.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------
NOTE 2 - TAXES
WTI and Koll Real Estate Group, Inc. ("KREG") are parties to a tax sharing
agreement which covers periods ending prior to December 31, 1988, during which
the Company, KREG, The Henley Group, Inc. ("Henley") and their respective
affiliates were included in the same consolidated group for federal income tax
purposes. Pursuant to a recapitalization of Henley in 1992, Abex Inc. ("Abex")
has assumed certain of Henley's obligations to KREG under a similar tax sharing
agreement.
In March 1994, WTI and the Internal Revenue Service filed a Stipulation of
Settlement with the U.S. Tax Court resolving the disputed treatment of an issue
related to the 1988 sale of a former subsidiary. On April 15, 1994, the Company
paid its approximately $30 million share of the stipulated settlement liability
pursuant to the tax sharing agreement, and Abex paid its share of the liability
pursuant to its indemnity obligations to KREG. WTI's obligation had been
previously recorded in the Company's consolidated balance sheets. Prior to
April 15, KREG advised the Company and Abex that it would not pay its
approximately $21 million share of the settlement liability. Accordingly, the
Company and Abex have filed a lawsuit against KREG seeking to require KREG to
honor its obligations under the tax sharing agreement. Although the Company may
be obligated to initially pay the portion of the settlement liability applicable
to KREG pending resolution of the lawsuit relating to the tax sharing agreement,
it does not believe the ultimate resolution of this matter will have a material
adverse effect on its financial condition or results of operations.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
On February 16, 1994, a Connecticut Superior Court judge issued a decision
on appeals of the Connecticut Department of Environmental Protection's ("DEP")
issuance of a permit to construct the Lisbon, Connecticut trash-to-energy
facility currently being built by WTI. In the ruling, the judge agreed with the
Company's position on all issues raised in the appeals but remanded the permit
back to the DEP for further proceedings on an uncontested permit condition that
requires the Lisbon facility to dispose of only Connecticut waste. The Company
intends to pursue aggressively favorable resolution of this permit remand
through appropriate judicial and regulatory procedures. Although WTI believes
that the probability of an adverse determination as a result of the judge's
remand order is remote, such a determination could result in the permanent
termination of facility construction. Through a guarantee agreement with the
Eastern Connecticut Resource Recovery Authority, the facility's owner, such a
consequence may require the Company to redeem the debt issued to finance the
facility. In the remote event this were to occur, the resulting payments
could have a material adverse impact on the Company's financial condition and
results of operations.
6
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
RESULTS OF OPERATIONS
- ---------------------
Revenues for the three month period ended March 31, 1994 increased 15
percent versus revenues in the comparable 1993 period. Approximately half of the
revenue growth reflects the impact of water quality control businesses acquired
during the last twelve months. The balance of the revenue increase reflects the
third quarter 1993 start of commercial operations at the Company's New York
Organic Fertilizer Company biosolids pelletizer facility, construction revenues
from the Lisbon, Connecticut trash-to-energy facility being built by WTI, and
the growth of existing businesses. Harsh winter weather conditions in certain
parts of the country during the first quarter of 1994 had a mixed impact on the
Company's operations. Several energy facilities benefited by selling power to
their utility customers at increased rates, while much of the biosolids land
spreading activity within the Company's clean water line of business was delayed
due to the harsh weather conditions. The Company's energy, water and air
businesses represented approximately 53 percent, 33 percent and 14 percent,
respectively, of total first quarter 1994 revenue compared with 55 percent, 28
percent and 17 percent, respectively, of first quarter 1993 revenue.
Operating expenses were 69.5 percent of revenue in the first quarter of
1994, essentially unchanged from the first quarter 1993 level of 69.9 percent of
revenue, as weather-related margin declines experienced by the Company's
biosolids land spreading operations were offset by the strong performance of the
Company's energy facilities. Selling and administrative expenses decreased as a
percent of revenues to 9.1 percent during the first three months of 1994 versus
9.6 percent for the comparable year earlier period. This decline is primarily
attributable to the integration of acquired companies into existing businesses
and to continuing Company-wide administrative cost containment activities.
First quarter interest expense declined compared to 1993 principally as a
result of the Company's early retirement of certain outstanding above-market
rate long-term debt, the March 1994 refinancing of $113 million of project debt
associated with the Company's Westchester County, New York trash-to-energy
facility, and capitalization of interest costs related to projects under
construction. The decline in interest earnings for the three month period
results from lower cash balances when compared to the prior year period. WTI's
equity in the earnings of Waste Management International plc and Rust
International Inc. ("Rust") decreased compared to the first quarter of 1993 due
to an earnings decline at Rust caused by severe weather in parts of the U.S. and
postponement of certain project awards and start-ups.
Net income in the first quarter increased 20 percent to $40.1 million, or
$0.21 per share, compared to net income of $33.4 million, or $0.18 per share, in
the year earlier period. The increase in income for the quarter reflects the
strong performance of the Company's growing network of environmental services
capabilities, including the commencement of operations at the Company's
biosolids pelletizer facility located in New
7
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition (continued)
----------------------------------------------
York City and businesses acquired in 1993.
In early May of this year, the U.S. Supreme Court ruled that residual ash
from the combustion of municipal solid waste is not exempt from federal
hazardous waste regulations. The U.S. EPA and most states had previously taken
the position that residual ash was exempt from such regulation pursuant to the
Clarification of Household Waste Exclusion contained in the Resource
Conservation and Recovery Act. While it is not known at this time how the U.S.
EPA and state regulators will react to the Supreme Court decision, the Company
believes that it is reasonably possible that regulatory agencies would require
that residual ash be tested to determine if it is hazardous and disposed of
appropriately. WTI's energy facilities in New Hampshire and New Jersey are
presently subject to such testing requirements and, after treating the ash with
the Company's patented WES-PHix(R) process are permitted to dispose of their
residual ash as non-hazardous waste. The estimated incremental expenditures
required to treat and test residual ash generated by the Company's other energy
facilities is not expected to have a material adverse impact on WTI's financial
condition or results of operations.
The majority of the businesses in which the Company is engaged are
intrinsically connected with the protection of the environment and involve the
potential for discharge of regulated materials into the environment. In
addition, the Company becomes involved, in the normal course of business, in
judicial and administrative proceedings related to alleged violations of
licenses, permits, laws or regulations or differing interpretations of
applicable requirements. WTI has instituted procedures to periodically evaluate
potential environmental exposures. When the Company concludes it is probable
that a liability has been incurred, provision is made in the financial
statements for the Company's best estimate of the liability. These estimates
are adjusted as necessary when additional information becomes available. To
date, such provisions have not been material.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The principal uses of capital during the first three months of 1994 were
investments in new projects under construction and retirement of project debt.
WTI currently has several projects in various stages of development and
construction, as discussed in more detail below. The Company also intends to
continue its diversification through selected acquisitions of air and water
quality control technologies and companies, both domestically and
internationally.
WTI believes it has access to sufficient capital resources to finance its
development and construction projects along with future acquisitions. Operating
cash flows or borrowings from WMX Technologies, Inc. ("WMX") pursuant to the
Master Intercorporate Agreement
8
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition (continued)
----------------------------------------------
between the Company and WMX may be utilized to meet short-term funding
requirements. The Company may borrow up to $100 million until September 1995
pursuant to this agreement, plus the amount of cash invested with WMX. WTI had
approximately $24 million of such net short-term borrowing with WMX outstanding
at March 31, 1994. Future needs for long-term external capital are anticipated
to be met by permanently financing certain projects.
During the first three months of 1994 construction continued on a $192
million, 1,500 ton-per-day trash-to-energy facility and associated recycling
center in Falls Township, Pennsylvania and on WTI's $78 million wood waste and
scrap tire power generating facility in Polk County, Florida. Both of these
facilities are expected to begin commercial operations in mid-1994.
Additionally, the Company is approximately 90 percent through construction on a
$36 million biosolids pelletizer facility in Baltimore, Maryland. During the
first quarter, the Company commenced commercial operations at its $5 million
biosolids composting facility in Rochester, New Hampshire. The Company also
expanded its capabilities within its water quality control line of business by
acquiring several small businesses during the quarter. To date, funding for
these projects and acquisitions has been provided from WTI's available cash and
short-term borrowings from WMX.
WTI has continued to refinance at lower interest rates, or repay prior to
maturity, certain of its existing project debt. In March 1994, the Company
completed a refinancing of the remaining $113 million of project debt associated
with the Westchester County facility. The refinancing decreased the interest
rate on this debt from approximately 10.25 percent to 5.6 percent. In
conjunction with this transaction, the Company agreed to share one-half of the
interest rate savings with Westchester County in exchange for certain agreements
relating to the County's involvement in the retrofit of the facility to meet the
requirements of the Clean Air Act Amendments of 1990 (the "CAAA") and a five-
year extension of the solid waste disposal agreement with the County.
Additionally, the County has agreed, subject to certain regulatory requirements
and other conditions, to finance 80 percent of the cost of the retrofit and, in
turn, the Company has agreed to provide the funds necessary to pay the remaining
costs for the retrofit. WTI began realizing the benefits of the refinancing in
March 1994, while the costs associated with the facility retrofit are not
expected to be incurred until the latter part of this decade. Taken together,
these activities are not expected to have a material impact on the Company's
liquidity or results of operations.
Before the turn of the century, the air pollution control systems at
certain other trash-to-energy facilities owned or leased by WTI will be required
to be modified to comply with more stringent air pollution control standards
such as those in the CAAA. Although the expenditures related to such
modifications will likely be significant, they are not expected to have a
material adverse effect on the Company's liquidity or results of operations
because
9
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition (continued)
----------------------------------------------
provisions in the impacted facilities' long-term waste supply agreements allow
the Company to recover from customers the great majority of incremental capital
and operating costs.
On February 16, 1994, a Connecticut Superior Court judge issued a decision
on appeals of the Connecticut Department of Environmental Protection's ("DEP")
issuance of a permit to construct the Lisbon, Connecticut trash-to-energy
facility currently being built by WTI. In the ruling, the judge agreed with the
Company's position on all issues raised in the appeals but remanded the permit
back to the DEP for further proceedings on an uncontested permit condition that
requires the Lisbon facility to dispose of only Connecticut waste. The Company
intends to pursue aggressively favorable resolution of this permit remand
through appropriate judicial and regulatory procedures. Although WTI believes
that the probability of an adverse determination as a result of the judge's
remand order is remote, such a determination could result in the permanent
termination of facility construction. Through a guarantee agreement with the
Eastern Connecticut Resource Recovery Authority, the facility's owner, such a
consequence may require the Company to redeem the debt issued to finance the
facility. In the unlikely event this were to occur, the resulting payments
could have a material adverse impact on the Company's financial condition and
results of operations.
WTI and Koll Real Estate Group, Inc. ("KREG") are parties to a tax sharing
agreement which covers periods ending prior to December 31, 1988, during which
the Company, KREG, The Henley Group, Inc. ("Henley") and their respective
affiliates were included in the same consolidated group for federal income tax
purposes. Pursuant to a recapitalization of Henley in 1992, Abex Inc. ("Abex")
has assumed certain of Henley's obligations to KREG under a similar tax sharing
agreement. In March 1994, WTI and the Internal Revenue Service filed a
Stipulation of Settlement with the U.S. Tax Court resolving the disputed
treatment of an issue related to the 1988 sale of a former subsidiary. On April
15, 1994, the Company paid its approximately $30 million share of the stipulated
settlement liability pursuant to the tax sharing agreement and Abex paid its
share of the liability pursuant to its indemnity obligations to KREG. WTI's
obligation had been previously recorded in the Company's consolidated balance
sheets. Prior to April 15, KREG advised the Company and Abex that it would not
pay its approximately $21 million share of the settlement liability.
Accordingly, the Company and Abex have filed a lawsuit against KREG seeking to
require KREG to honor its obligations under the tax sharing agreement. Although
the Company may be obligated to initially pay the portion of the settlement
liability applicable to KREG pending resolution of the lawsuit relating to the
tax sharing agreement, it does not believe the ultimate resolution of this
matter will have a material adverse effect on its financial condition or results
of operations.
On March 15, 1994, WTI announced that the Board of Directors had authorized
the repurchase of up to 3,800,000 shares of Common Stock from time to time over
the following
10
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition (continued)
----------------------------------------------
two years in the open market or in privately negotiated transactions. Under a
similar program initiated in 1992, WTI repurchased a total of approximately
4,160,000 shares of Common Stock over a period of two years. No shares were
repurchased during the first three months of 1994.
In April 1994, WTI filed with the Securities and Exchange Commission an
updated "shelf" registration statement covering 11.1 million shares of the
Company's common stock for issuance in connection with future acquisitions.
FINANCIAL CONDITION
- -------------------
The Company's financial condition at March 31, 1994 compared to December
31, 1993 generally reflects normal operating activities as well as the use of
funds for investments in new projects under construction and retirement and
refinancing of project debt. As a result of construction activities, offset in
part by depreciation for the quarter, net property, plant and equipment
increased by approximately $25 million as three significant projects approach
their later stages of completion. Debt retirement and successful refinancing
activities reduced total long-term debt approximately $10 million from December
31, 1993 levels and reduced interest rates on $113 million of long-term debt
expiring through July 2009.
Working capital as of March 31, 1994 decreased approximately $16 million
from year-end 1993 levels, primarily because of WTI's use of cash and short-term
borrowings from WMX to fund the uses of capital described in the "Liquidity and
Capital Resources" section. In addition, the liability for the Company's
remaining obligation under the tax sharing agreement with Abex and KREG was
reclassified during the first quarter from other long-term liabilities to
current accrued liabilities as a result of the stipulated settlement agreement
outlined above.
ACCOUNTING PRONOUNCEMENT
- ------------------------
Effective January 1, 1994, WTI adopted Statement of Financial Accounting
Standards No. 112, Employer's Accounting for Postemployment Benefits ("FAS
112"). The adoption of FAS 112 did not have a significant effect on earnings
for the three months ended March 31, 1994 and is not expected to materially
impact the Company's 1994 results of operations, since WTI's accounting prior to
adoption of FAS 112 was substantially in compliance with the new standard.
11
<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - Legal Proceedings
-----------------
Regulatory - The business in which the Company is engaged is intrinsically
connected with the protection of the environment and the potential for the
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 in which 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. At March
31, 1994, the Company was involved in two such proceedings where the Company
believes sanctions involved may exceed $100,000.
Other - In addition, there are other routine lawsuits and claims, including
certain environmental matters, pending against WTI and its subsidiaries which
are incidental to its businesses. In the opinion of the Company's management,
the ultimate liability, if any, with respect to the above proceedings and such
other lawsuits and claims will not have a material adverse effect on the
business and properties of the Company, taken as a whole, or its financial
position and results of operations.
ITEM 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
The exhibits to this report are listed on the Exhibit Index elsewhere
herein.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1994.
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<PAGE>
SIGNATURE
---------
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.
WHEELABRATOR TECHNOLOGIES INC.
May 11, 1994 /s/ John D. Sanford
-----------------------------
John D. Sanford
Vice President and
Chief Financial Officer
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<PAGE>
WHEELABRATOR TECHNOLOGIES INC.
EXHIBIT INDEX
Number and Description of Exhibit/*/
---------------------------------
2 None
4 None
10 None
11 None
15 None
18 None
19 None
22 None
23 None
24 None
99 None
- --------------------------
* Exhibits not listed are inapplicable
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