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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FEBRUARY 4, 1997
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
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WHEELABRATOR TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-14246 22-2678047
(COMMISSION FILE NUMBER) (IRS EMPLOYER
IDENTIFICATION NO.)
4 LIBERTY LANE WEST, HAMPTON, NEW HAMPSHIRE 03842
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(603) 929-3000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Item 5. Other Events.
On February 4, 1997, the registrant issued a news release announcing the
election of two board members and new officers, as well as its results of
operations for the three months and year ended December 31, 1996. The news
release also discloses certain charges to 1996 earnings that were recorded
during the fourth quarter of 1996, as well as the registrant's intention to
undertake a $350 million "Dutch Auction" tender offer to repurchase its shares.
A copy of the news release is filed herewith as an exhibit and incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma and Financial Information and Exhibits.
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No financial statements or pro forma financial information are filed as
a part of this report. The exhibit filed as part of this report is listed in the
Exhibit Index hereto.
2
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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.
WHEELABRATOR TECHNOLOGIES INC.
By: /s/ Thomas A. Witt
------------------
Thomas A. Witt
Secretary
Dated: February 6, 1997
3
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WHEELABRATOR TECHNOLOGIES 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 4, 1997
_________________________
* Exhibits not listed are inapplicable
<PAGE>
FOR IMMEDIATE RELEASE
ANALYST CONTACT: MEDIA CONTACT:
Robert J. Gagalis Patti Powers
(603) 929-3493 (603) 929-3377
WHEELABRATOR TECHNOLOGIES ANNOUNCES
ELECTION OF TWO BOARD MEMBERS AND NEW OFFICERS
PLANS $350 MILLION DUTCH AUCTION
REPORTS RESULTS FOR FOURTH QUARTER AND FULL YEAR 1996
Hampton, New Hampshire, February 4, 1997 -- Wheelabrator Technologies Inc. today
announced the election of several executives to new positions, including John M.
Kehoe, Jr. as Chief Executive Officer. The Company also announced the election
of two new Board members and reported earnings for the fourth quarter and full
year 1996.
Mr. Kehoe, 63, has been President of Wheelabrator Technologies since 1993. He
served as Vice President of Wheelabrator from 1991 to 1992 and since 1990 as the
President of its Wheelabrator Environmental Systems Inc. subsidiary. Prior to
joining the Company in 1975, Mr. Kehoe held senior management positions at IBM.
Elected as Board members were Paul M. Meister and Edward J. Noha. Messrs.
Meister and Noha replace former directors William M. Daley, who resigned upon
confirmation as the Secretary of Commerce of the United States, and Paul M.
Montrone, who resigned upon his election as a director of WMX Technologies, Inc.
("WMX").
Mr. Meister, 44, is Senior Vice President and Chief Financial Officer of Fisher
Scientific International Inc. He is a director of The General Chemical Group
Inc., Power Control Technologies Inc. and Minerals Technologies Inc. He was
Executive Vice President - Finance and Administration and a Managing Director of
Wheelabrator Technologies before it became a majority-owned subsidiary of WMX in
1990. He served as a director of Wheelabrator between 1988 and 1992.
Mr. Noha, 69, has served as Chairman of the Board of CNA Financial Corporation
since 1992. He previously served as Chairman of the Board and Chief Executive
Officer of the CNA Insurance Companies since 1975. He is a director of Eagle
Financial Corporation. His career includes 20 years with Allstate Insurance
Company, which he served as Executive Vice President, Insurance Group; Executive
Vice President of Allstate Enterprises, Inc.; and a member of the Allstate Board
of Directors.
The Company also announced other executive changes.
<PAGE>
Robert J. Gagalis, 42, was elected Vice President, Chief Financial Officer and
Treasurer. Mr. Gagalis served most recently as Vice President - Finance for the
Company's energy business. He earlier served as Wheelabrator's Director of
Corporate Development and Staff Vice President of Corporate Development. He is a
certified public accountant and has held a variety of financial positions with
predecessors of the Company as well as other companies since 1982.
Lawrence W. Plitch, 46, was elected Vice President and General Counsel. Mr.
Plitch, a member of the Company's legal staff since 1986, most recently was Vice
President and General Counsel of Wheelabrator Environmental Systems Inc.
Messrs. Kehoe, Gagalis and Plitch replace Phillip B. Rooney, John D. Sanford and
Herbert A. Getz, respectively, all executives of WMX.
WHEELABRATOR EARNINGS STATEMENT
For the three months ended December 31, 1996, Wheelabrator Technologies Inc.
reported revenue of $245.7 million, loss from continuing operations of $17.9
million, or $.11 per share, and a net loss of $131.9 million, or $.81 per share.
In the fourth quarter of 1995, Wheelabrator had revenue of $226.8 million,
income from continuing operations of $10.9 million, or $.06 per share, and a net
loss of $10.2 million, or $.06 per share.
For the full year 1996, revenue totaled $952.3 million, income from continuing
operations was $109.5 million, or $.65 per share, and net income was $6.5
million, or $.04 per share. Full year 1995 revenue was $956.1 million, income
from continuing operations was $134.3 million, or $.73 per share, and net income
was $137.9 million, or $.75 per share.
Full year 1996 cash flow from operations totaled approximately $265 million,
compared to $237 million the prior year. Capital expenditures including
acquisitions for full year 1996 totaled approximately $122 million, compared to
$50 million in 1995.
During the quarter, Waste Management International plc ("WM International"),
recorded two exceptional charges. As previously announced, WM International
reached agreement in December to sell its 20% interest in Wessex Water plc back
to Wessex. The sale of the Wessex shares resulted in a total after-tax charge to
Wheelabrator of $19.4 million, or $.11 per share. In addition, during the fourth
quarter, WM International recorded a charge to write down the value of
investments in several countries in Europe. These WM International writedowns
resulted in a total after-tax charge to Wheelabrator of $28.5 million, or $.17
per share. Wheelabrator owns 12% of WM International directly, plus an
additional 4.8% indirectly through its 40% ownership of Rust International Inc.
("Rust").
Also during the quarter, Rust began implementing plans to divest its domestic
and international engineering and consulting businesses. Rust recorded a fourth
quarter provision for loss on disposal of these businesses, resulting in an
after-tax charge to Wheelabrator of $115.0 million, or $.68 per share. These
Rust businesses are recorded as discontinued operations, and the charge is
recorded as equity in provision for loss on disposal of discontinued operations.
In November, Wheelabrator completed the first step of its strategy to exit the
water business by selling its water and wastewater equipment and systems
manufacturing businesses to United States Filter Corporation ("U.S. Filter").
<PAGE>
Wheelabrator and U.S. Filter subsequently entered into a letter of intent
whereby U.S. Filter will acquire WEOS, Wheelabrator's water and wastewater
operations and maintenance subsidiary, for approximately $77 million in U.S.
Filter stock. The transaction is subject to negotiation and execution of a
definitive agreement, but is currently expected to close early in the second
quarter. This transaction will complete the water business divestiture. These
businesses have been accounted for as discontinued operations.
In addition, during the fourth quarter the Company restructured and downsized
its biosolids land application business including exiting several markets. Costs
incurred in the restructuring, totaling $8.3 million, are included in operating
expenses and reduced net income from continuing operations by $.04 per share.
FUTURE OUTLOOK
The Company indicated that during 1997 it anticipates generating approximately
$220 million of cash flow from continuing operations, with capital expenditures
estimated to be between $50 and $75 million. In light of the continued strong
cash flow and limited investment opportunities available to the Company in the
near term, the Wheelabrator Board of Directors increased the Company's existing
share repurchase authorization of 10 million shares to a total of 30 million
shares. The Company said that it anticipates initiating a "Dutch Auction" tender
offer for $350 million and announcing the tender offer price range late in the
first quarter, following the filing of the Company's 1996 10-K report.
The Company also indicated that the profitability of two of its facilities will
be adversely impacted beginning in 1998. First, the Company's Shasta project, a
50-megawatt wood-fired power plant in Anderson, California, will reach the end
of the initial 10-year fixed portion of its standard offer #4 power sales
contract with Pacific Gas and Electric and will begin to receive significantly
lower, avoided cost-based electric rates. Second, the Company's NYOFCO biosolids
pelletizer project, located in the Bronx, New York, will reach the end of its
initial five-year contract. Wheelabrator has been awarded a 15-year renewal
which is subject to final negotiations. The terms of the proposed renewal are
anticipated to result in lower operating profit margins. In addition, because
the initial contract provides for the full recovery of invested capital during
the initial five-year contract term, total revenue from the project will be
substantially reduced. The Company indicated that on a combined basis these
contract modifications will reduce consolidated revenues in 1998 and 1999 by
approximately $44 million and an additional $31 million, respectively, and will
reduce 1998 and 1999 net income by approximately $17 million and an additional
$9 million, respectively.
After taking into account the impact of these developments and assuming
completion of the share repurchases, the Company said that it anticipates
earnings per share of between $1.20 and $1.25 per share in 1997. The Company
further said that it has established an earnings per share goal of between $1.20
and $1.25 per share for 1998 and between $1.15 and $1.20 per share for 1999.
Except for historical data, the information in this press release constitutes
forward-looking statements. Forward-looking statements are inherently uncertain
and subject to risks. The 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 fluctuation in spot pricing
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for solid waste disposal services, unanticipated plant maintenance or repair
expense, adverse weather conditions, increased project development
opportunities, slowing of the overall economy, increased interest costs, the
nature and timing of electric utility deregulation, adverse flow control
developments and the timing and cost of the Company's stock repurchase programs.
The 1997, 1998 and 1999 earnings per share goals set forth above assume average
outstanding shares for 1997, 1998 and 1999 of approximately 144, 134 and 134
million, respectively.
Wheelabrator Technologies Inc., an environmental services company, is a
majority-owned subsidiary of WMX Technologies, Inc., the world's leading
international waste management services company.
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- tables to follow -
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WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 and 1996
(000s omitted, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
1995 1996
--------- ----------
<S> <C> <C>
Revenue $226,838 $ 245,723
Operating expenses 143,601 164,139
Selling and administrative expenses 14,869 11,535
Interest expense 14,634 14,753
Interest income (2,707) (1,889)
Equity in loss of affiliates (1995 and 1996
reduced by $25.6 million and $47.9 million,
respectively, related to special charges
recorded by WM International) 21,923 44,505
Other (income) or expense, net 878 (815)
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Income from continuing operations
before income taxes 33,640 13,495
Income tax provision 22,741 31,407
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Income (loss) from continuing operations 10,899 (17,912)
Discontinued operations:
Income from discontinued operations less
applicable income taxes of $3.2
million in 1995 and $1.8 million
in 1996 6,211 1,064
Equity income (loss) from Rust discontinued
operations 2,808 (100)
Equity in provision for loss on disposal of
Rust discontinued operations (30,080) (115,000)
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Net loss $(10,162) $(131,948)
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Weighted average common and common
equivalent shares outstanding 182,500 162,000
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Earnings (loss) per common and common
equivalent share:
Continuing operations $ 0.06 $ (0.11)
Income from discontinued operations 0.03 0.01
Equity loss from Rust discontinued
operations (0.15) (0.71)
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Net loss $ (0.06) $ (0.81)
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</TABLE>
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WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 and 1996
(000s omitted, except per share amounts)
<TABLE>
<CAPTION>
1995 1996
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<S> <C> <C>
Revenue $956,088 $952,312
Operating expenses 619,403 618,779
Selling and administrative expenses 55,794 43,949
Interest expense 59,916 57,514
Interest income (9,761) (6,054)
Equity in loss of affiliates (1995 and 1996
reduced by $25.6 million and $47.9 million,
respectively, related to special charges
recorded by WM International) 8,916 27,803
Other income, net (3,541) (1,081)
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Income from continuing operations
before income taxes 225,361 211,402
Income tax provision 91,078 101,948
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Income from continuing operations 134,283 109,454
Discontinued operations:
Income from discontinued operations less
applicable income taxes of $10.2
million in 1995 and $9.2 million
in 1996 13,797 8,039
Equity income from Rust discontinued
operations 19,858 4,005
Equity in provision for loss on disposal
of Rust discontinued operations (30,080) (115,000)
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Net income $137,858 $ 6,498
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Weighted average common and common
equivalent shares outstanding 185,000 169,400
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Earnings (loss) per common and common
equivalent share:
Continuing operations $ 0.73 $ 0.65
Income from discontinued operations 0.08 0.05
Equity loss from Rust discontinued
operations (0.06) (0.66)
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Net income $ 0.75 $ 0.04
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</TABLE>
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